Compensatory Financing Facility

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Compensatory Financing Facility

Summary of Compensatory Financing Facility

A special lending facility of the International Monetary Fund designed to aid developing nations confronted with temporary payment imbalances. The facility was established in 1963 to provide shortterm financing to nations dependent upon primary products for export income, and where that income had declined temporarily as a result of a falloff in market prices for the export commodity. In those cases where the payments imbalance is attributable to factors other than a decline in the price paid for the export commodity, e.g., excessive imports, the IMF may require that corrective financial policies be adopted as a condition of compensatory financing.

(Main Author: William J. Miller)

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