Statement (II) : The Extended Fund Facility (EFF) was created in 1984 to help the developing countries over longer period upto 3 years.
Solution Analysis: IMF Extended Fund Facility (EFF) Statements
The question evaluates understanding of the International Monetary Fund's (IMF) Extended Fund Facility (EFF).
Statement (I) Analysis: Borrowing Under EFF
Statement (I) suggests that developing countries can borrow more than their quota under the EFF. The EFF is designed to provide financial assistance to countries facing serious balance of payments problems, typically requiring more substantial and longer-term support than standard arrangements. Access limits under EFF are generally higher relative to quotas, allowing countries to borrow amounts exceeding standard limits to address deep-seated economic issues.
Therefore, Statement (I) is considered correct as EFF arrangements allow for borrowing significantly larger than typical limits, reflecting the scale of the economic challenges addressed.
Statement (II) Analysis: EFF Creation and Duration
Statement (II) claims the EFF was created in 1984 for periods up to 3 years. This statement contains factual inaccuracies:
- Establishment Year: The Extended Fund Facility (EFF) was actually established in 1974, not 1984.
- Duration: EFF arrangements typically provide support for a medium term, often up to 4 years, rather than being limited to 3 years.
Due to these inaccuracies in the year of creation and the specified duration, Statement (II) is incorrect.
Conclusion
Based on the analysis:
- Statement (I) is correct.
- Statement (II) is incorrect.
Thus, the correct option is the one stating that Statement (I) is correct and Statement (II) is not correct.
Important Questions from IMF
- IMF provides __________ assistance to correct the Balance of payment disequilibrium of member countries.
- Which one among the following is not correct ?
Match the items of List – I with those of List – II with regard to international monetary fund’s various schemes :
List – I List – II a. Extended Fund Facility (EFF) i. Repayment period 4 to 10 years b. Stan Arrangements ii. Repayment period 3 to 5 years c. Supplemented Reserve Fund (SRF) iii. Repayment period 2 to 5 years d. Poverty Reduction and Growth Facility (PRGF) iv. Repayment period 10 years Codes :
