Statement (I): Developing countries can borrow more than their quota under Extended Fund Facility (EFF) of IMF.
Statement (II): The Extended Fund Facility (EFF) was created in 1984 to help the developing countries over longer period upto 3 years.
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Correct option is A

The correct answer is (a) Statement (I) is correct but (II) is not correct.
Statement (I) is correct. Under the Extended Fund Facility (EFF), the IMF allows member countries (primarily developing ones) to borrow amounts that typically exceed their standard quota. This is because the EFF is designed for countries facing serious medium-term balance of payments problems due to structural weaknesses that require more time and larger sums to correct than a standard Stand-By Arrangement (SBA) allows.
Statement (II) is incorrect for two historical reasons. First, the EFF was established in 1974, not 1984. Second, while the initial repayment period was longer than standard credits, the duration of an EFF arrangement is usually 3 to 4 years (to support structural reforms), with repayments stretching over 4.5 to 10 years.
Information Booster
· Purpose of EFF: It is specifically aimed at correcting structural imbalances in production, trade, or the economy at large.
· Conditionality: Borrowing under the EFF comes with "strong conditionality." The borrowing country must commit to specific economic policies and structural reforms (like tax changes or privatization).
· Repayment: Because structural changes take time, the repayment period for EFF is much more flexible ( 4 ½ to 10 years) compared to the Stand-By Arrangement ( 2 ¼ to 5 years).
· Quota Limits: While limits exist, the IMF can grant "Exceptional Access" under the EFF for countries in severe crises, allowing them to exceed normal annual and cumulative limits.
Additional Knowledge
· The IMF's SDR (Special Drawing Rights) serves as the unit of account for these loans, rather than a specific national currency.
· The Narasimham Committee reforms in India were partly influenced by the conditionalities associated with the IMF's assistance to India during the 1991 Balance of Payments crisis.