The Intermediate Financing Facility Account (IFF) was designed as a convertible currency account for interest subsidies. It is used to defray part of the interest payments for which certain borrowers are liable on loans from the Ordinary Capital (OC). Under the Agreement Establishing the Bank, it can only be financed by transfers from the Fund for Special Operations (FSO) net income or general reserve. As of January 2007, the IDB has discontinued approval of new OC loans with IFF assistance.
Previously, the FSO funded the IFF through annual transfers out of its general reserves. There were two types of transfers to the IFF: mandated transfers and additional transfers. Mandated transfers correspond to those approved by the Board of Governors and the Board of Directors. Additional transfers correspond to those needed to meet the program of activities approved in the 1998 Agreement on Concessional Resources, which established a 9-year program of activities for the FSO, IFF and TC.
The IFF is also funded from income earned on its own investments. At the end of 2009, the IFF had a total fund balance of US$221 million. It is expected that over time, the Bank will use all of the resources of the IFF to subsidize part of the interest payments on Ordinary Capital loans.