The Angolan Government will begin negotiations with the International Monetary Fund (IMF) in Washington next week for a financial assistance package under the Fund’s Extended Fund Facility (EFF).

Under the EFF, the IMF helps to support adjustment processes in countries faced with medium-term balance of payment problems caused by structural deficiencies whose solution requires time. This is the case of Angola, sub-Saharan Africa’s second largest oil exporter behind Nigeria, which has lost a substantial part of its revenues as a result of the fall in oil prices.

Compared with the assistance extended within the context of the IMF’s Stand-By Accord, under which Angola received aid in the past, an extended accord involves a longer lasting programme to help countries implement medium-term structural reforms and has longer refund terms.

The EFF was instituted in 1974 to help countries experiencing serious imbalances involving relatively long refund terms caused by structural hurdles, as these imbalances restrict the access to private capital, and where there is a strict structural reform programme to solve the institutional or economic weaknesses.

The programme is also useful in economies characterised by low growth and weaknesses concerning the balance of payment. As structural reforms designed to correct deep imbalances normally take considerable time to produce effects, EFF has a longer duration than the other IMF accords.

Extended programmes are normally adopted for periods not longer than three years, extendable to a year. However, they can last as long as four years from approval, affected, among other factors, by the need for balances of payment beyond three years, by the long lasting nature of the adjustment needed to restore the macro-economic stability, and by the existence of enough guarantees concerning the member country’s capacity and availability to implement deep and sustainable structural reforms.

The refund time is also longer — four to 10 years — with 12 equal six-monthly tranches. On the other hand, the Stand-By Accord (SBA) has a shorter duration and refund term of three to five years.

When a country gets an IMF loan, it (country) agrees to adopt policies designed to solve economic and structural problems. The expectation is that the commitment puts a great emphasis on the structural reforms, as well as on policies that preserve the macroeconomic stability.