IMF plans to simplify loans, relax conditions

The International Monetary Fund (IMF) announced on Tuesday a simplification of its lending procedures, with fewer conditions attached to loans, in a bid to more easily help countries suffering from the global economic crisis.The International Monetary Fund on Tuesday announced a major overhaul of its lending practices to distressed countries, including launching a credit line without a cap or conditions."These reforms represent a significant change in the way the Fund can help its member countries -- which is especially needed at this time of global crisis," said IMF managing director Dominique Strauss-Kahn."More flexibility in our lending along with streamlined conditionality will help us respond effectively to the various needs of members. This, in turn, will help them to weather the crisis and return to sustainable growth," he said.The main innovation in the overhaul is the creation of a new lending instrument, dubbed the Flexible Credit Line, which is designed for member countries the IMF views as having well-managed economies, "with very strong fundamentals, policies, and track records of policy implementation."The Flexible Credit Line (FCL), without conditions required after the loan is granted or a limit on the amount of money that can be borrowed, will allow countries to obtain the credit line as a "precautionary instrument" and will be available to be drawn on at any time.The FCL replaces the Short-Term Liquidity Facility, which since its creation in late October has never been used.Under the terms of the FCL, the credit line initially could be for six months or 12 months with a review of eligibility at the six-month mark. The repayment period is extended to between three years and three months to five years.