1. This chapter describes how the IMF’s policies
with respect to prolonged use have evolved over
time. It shows that these policies have moved gradu-
ally toward greater acceptance of the need to finance
adjustment over a longer time period, especially in
low-income countries, and that this has increased the
probability of prolonged use. However, the implica-
tions of some of these changes both for the extent of
prolonged use and possible adverse consequences
may not have been fully and explicitly recognized. It
also describes how some elements of a strategy for
dealing with prolonged use were adopted by the
IMF’s Executive Board at various times; however,
the country case studies and other evidence suggest
that these strategies were not fully implemented.1
Evolution of the IMF’s View of
Prolonged Use
Prolonged use of the IMF’s general resources
2. The official interpretation of the mandate of the
IMF was initially unambiguous on the temporary na-
ture of its assistance, and policies on the use of Fund
resources (UFR) reflected that interpretation. How-
ever, in the 1970s it became clear that even difficul-
ties of a “temporary” nature could require a lengthy
period of adjustment and this led in 1974 to the deci-
sion to create the Extended Fund Facility (EFF). Al-
though the EFF recognized the need for a longer ad-
justment period, it was nevertheless expected that
the economic program supported by an extended
arrangement should be “adequate for the solution of
the member’s problem.”2 A further step was taken in
1981, with the institution of the enlarged access pol-
icy (EAP). This policy was intended to help mem-
bers address balance of payments problems whose
solution required “a relatively long period of adjust-
ment and a maximum period for repurchase longer
than the three to five years under the credit tranche
policies.”3
3. The creation of concessional facilities (the SAF
in 1986 and the ESAF in 1987) reflected further en-
dorsement of the idea that the adjustment process in
low-income countries required a