A brief mention may be made of the following other main developments in regard the International Monetary Fund:
Compensatory Financing Facility:
Compensatory Financing Facility was established in February 1963.
It is designed to extend the Funds’ balance of payments short-term support to such member-countries (particularly primary producing countries) as suffer from fluctuations in their export receipts due to circumstances beyond their control, e.g. natural disasters.
The $ three-billion oil facility was set up in 1974 to mitigate the hardship of the oil-importing developing countries arising from the unprecedented oil price-hike. The developing countries could get a loan from this fund at a low rate of interest (2.5 per cent) to enable them to pay their enhanced oil bills and meet balance of payments difficulties arising therefrom.
Extended Facility was set up in October 1974. Its object is to provide medium-term assistance for member-countries that need to make structural adjustments in order to correct adverse balance of payments.
It was agreed on August 31, 1975 to establish a trust Fund out of the profits made from the sale of the Fund’s gold. This fund is utilized to provide balance of payments assistance on concessionary terms to members with low per capita income.
A subsidy account was established by the IMF in August, 1975 to assist member countries most seriously affected by the recent price hike. It was designed to provide subsidy to such members in meeting the cost of using the resources made available to them through the 1975 Oil Facility.
A Substitution Account administered by the IMF accepts deposits of U.S. dollars in exchange for equivalent amounts of SDRs (Special Drawing Rights). In this way, the members are enabled to exchange their unwanted dollars for funds denominated in SDRs.
Buffer Stock Financing Facility:
This is a recent facility provided to the member countries of the Fund in order to help them overcome serious balance of payments difficulties arising from building up buffer stocks of scarce essential commodities.
This Fund was established in June 1980 to promote the stabilization of commodity prices under international agreement.
In recent years, the Fund has started attaching conditions to the use of its resources by the member countries. Such conditions were imposed, for example, on India when the Fund granted a loan of Rs. 5000 crores in November, 1981. Instruments of the loan were released on the fulfillment of certain conditions e.g. curbing inflation, reduction in the amount of deficit financing, reduction in the net bank credit to the government sector. The object is to safeguard the revolving character of the Fund’s resources and to meet the genuine needs of the borrowing members.