Key Decisions of the Executive Board
Concerning Conditionality

Over the years, the IMF Executive Board has taken a number of decisions regarding Fund conditionality, setting some broad principles concerning the use of conditionality in Fund-supported programs. This page provides links to a selection of key decisions in this area. (The indicated page numbers refer to the PDF files containing the 24^th issue of Selected Decisions and Selected Document (SDSD)).

• Conditionality for the use of Fund resources and for stand-by arrangements is guided by the 1979 Guidelines on Conditionality (Decision No. 6056-(79/38), March 2, 1979; SDSD, part 2, p.39).

• Extended arrangements are, in principle, subject to the decisions and policies on stand-by arrangements, except as otherwise provided in the decision on the Extended Fund Facility (Decision No. 4377-(74/114), September 13, 1974; SDSD, part 2, p. 52), or any subsequent related decisions. This exception applies, inter alia, to the last sentence of guideline 9 of the 1979 Guidelines on Conditionality, which normally limits the use of performance criteria to macroeconomic variables or the implementation of specific provisions of the Articles of Agreement or policies adopted under them. Given the purpose of extended arrangements, which are intended to support "comprehensive programs that include policies of the scope and character required to correct structural imbalances in production, trade and prices," this limitation regarding the use of performance criteria does not apply to extended arrangements.

• Financing under the Supplemental Reserve Facility is available under a stand-by or extended arrangement in addition to resources in the credit tranches or under the extended Fund facility. Such financing is available for one year to members "experiencing exceptional balance of payments difficulties due to a large short-term financing need resulting from a sudden and disruptive loss of market confidence ... if there is a reasonable expectation that the implementation of strong adjustment policies and adequate financing will result, within a short period of time, in an early correction of such difficulties." Purchases after the initial purchase, which will normally coincide with the approval of the corresponding arrangement, are subject to the conditions of the corresponding arrangement (Decision No.11627-(97/123) SRF, December 17, 1997; SDSD, part 2, p.178).

• Financing under Contingent Credit Lines (CCL) is committed to members meeting a number of preconditions. Financing is provided under a stand-by arrangement, in addition to resources in the credit tranches, if such a member "as a result of circumstances that are largely beyond [its] control ... and that stem primarily from adverse developments in international capital markets consequent upon developments in other countries, ... is experiencing exceptional payments difficulties ... , if there is a reasonable expectation that adequate financing and the implementation of any necessary adjustment policies will result, within a short period of time, in an early correction of such difficulties." (Decision No.11627-(97/123) SRF, as amended by Decision No.11942-(99/48) SRF/CCL, April 23, 1999; SDSD, part 2, p.181; further amended by Decision No. 12340-(00/117) SRF/CCL, November 28, 2000). Under the CCL, an initial small amount is available upon approval. The amount to be released upon completion of the activation review (which would verify that the member's own policies did not contribute to the development of the crisis) would be determined at the time of commitment of the CCL resources (and would normally amount to one third of the total amount committed), with the remainder subject to phasing and conditionality as determined appropriate by the Fund during a post-activation review (Summing Up by the Acting Chairman of the IMF Executive Board, Contingent Credit Lines, November 17, 2000).

• The use of conditionality in arrangements approved under the Poverty Reduction and Growth Facility (PRGF) is guided by the decision on the Establishment of the Enhanced Structural Adjustment Facility Trust (Decision No. 8759-(87/176), December 18, 1987, Annex; SDSD, part 1, p.70) and the decision on the Transformation of the Enhanced Structural Adjustment Facility (Decision No.12087-(99/118), October 21; SDSD, supplement). According to the latter decision, the purpose of the PRGF is to provide "loans on concessional terms ... to low-income developing members ... in order to support programs to strengthen substantially and in a sustainable manner their balance of payments position and to foster durable growth, leading to higher living standards and a reduction of poverty."