Mar 26, 2009 (LBO) – The International Monetary Fund has announced changes to itslending framework lowering emphasis on structural adjustments for countries in trouble, offering precautionary lending for country’s who want to be prepared for a crisis. Major structural changes are usually part of Poverty Reduction and Growth Facilities (PRGF) that are designed to push the country to a higher growth path but are not always needed to rescue a country that has got itself into trouble.
Bailouts, or standby arrangements (SBAs) need quick acting measures. Deep structural changes which trims excessive government, relaxes controls or practices of the state that holds productive citizens down, usually take time to deliver results.
But they are useful in preventing a repeat crisis.
IMF is also introducing a precautionary standby arrangement for far-thinking countries who think they may head for balance of payments trouble and want to be prepared ahead of time.
IMF has also extended repayments of a new short term liquidity facility for countries that have good policies, but can get into temporary troubled due to a high degree of openness
Reproduced below is a Q & A from IMF explaining its new stance.