All EFSD loans are repayable, have finite maturities, and carry interest. The Fund does not extend grants. To receive an EFSD loan, a borrower should have no debt arrears to the EFSD itself, to any of its member countries, or to other IFIs. All EFSD loans are extended within country access limits, set in proportion to GNI per capita.
Lending decisions are based on the assessment of:
- the urgency of a country’s financing needs;
- the country's long-term debt sustainability;
- the borrower’s institutional capacity to achieve targets established by the EFSD’s programmes and projects;
- the quality of governance and effectiveness of a borrower’s anti-corruption framework (taking into account assessments made by the World Bank, the IMF, and other IFIs).
Financial credits are extended only to governments, in support of anti-crisis and stabilization programs formulated and implemented by the borrower.
A programme supported by a financial credit should help to achieve macroeconomic stability, to improve the business climate, and to foster financial and economic cooperation among member states, ensure long-term development and preserve fiscal and debt sustainability. Policy implementation is measured by specific indicators and is evaluated by the Fund’s Council on the basis of reports from the EFSD Manager.
The minimum amount of financial credits is US$ 10 million.
Regulation on the use of ACF funds for Providing Financial Credits establishes procedures for the issue of financial credits.
Investment loans are extended primarily to support interstate investment projects that spur integration among member states, e.g., in the power and infrastructure sectors, and big national investment projects. Investment loans are granted either to governments or to companies implementing such projects;
The EFSD only supports projects that cannot be financed from the market on financial terms that are suitable for a given project and at acceptable risk levels.
The procedure for granting investment loans comprises two stages of approval:
- preliminary, when a Concept Note and resources for a feasibility study are considered;
- final, when the granting decision is made.
Minimum sizes of investment loans are:
- US$ 30 million for countries with GNI per capita over US$ 5,000;
- US$ 10 million for countries with GNI per capita under US$ 5,000.
Regulation on the use of ACF funds for Providing Investment Loans establishes procedures for the issue of investment credits.