Extended Credit Facility Programs

675 WordsJan 30, 20183 Pages
Extended Credit Facility (ECF) provides sustained economic aid engagement over the medium to long term, in case of protracted balance of payments problems. It offers flexibility on program extensions, the timing of structural reforms, and formal poverty reduction strategy document requirements. ECF aims to move countries toward stable macroeconomic growth and reduce poverty. ECF programs last three to five years with zero interest and high flexibility on repayment. As a result, this program is ideal for countries with severe balance of payments issues. Since the end of the Guatemalan Civil War, Guatemala has recovered from its extreme balance of payments deficit and is experiencing a growing economy through increased exports and production. While poverty is still an issue in the country, emphasis must be placed on the distribution of wealth and the efficiency of government, instead of programs like ECF which attempt to catalyze foreign direct investment. Guatemala is relatively stable and thus not a candidate for ECF. Standby Credit Facility (SCF) targets countries that do not face prolonged balance of payments problems but which may need help from time to time. SCF provides flexible support to developing and poor nations with short-term financing and adjustment needs caused by domestic or external shocks, or policy slippages. SCF is the best option for Guatemala. The nation does not face a balance of payments crisis and is relatively developed already. Short term
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