The Executive Board of the International Monetary Fund (IMF) has completed its annual review of the Fund’s income position for the financial year ending April 30, 2014 (FY 2014) and set the margin for the lending rate for IMF credit for FY 2015 and FY 2016.
FY 2014 Income Position
Total FY 2014 net income, including income from surcharges applied to higher access borrowing from the IMF, is estimated at SDR 2.7 billion (US$ 4.2 billion). This net income will be added to the IMF’s precautionary balances which are projected to reach SDR 12.8 billion (US$ 19.7 billion) at end-FY2014. The net income position for FY 2014 also reflects the adoption by the IMF of the amended International Accounting Standard 19, as required by International Financial Reporting Standards. Under this amended standard, annual actuarial gains or losses on post-employment benefit plans and associated plan assets are fully recognized in the current year, rather than being amortized over a longer period.
FY 2015–16 Lending Rate and Income Position
The IMF charges member countries a basic rate of charge on the use of IMF credit, which is determined as the SDR interest rate plus a margin expressed in basis points. The Executive Board agreed to maintain the margin for this rate of charge unchanged at 100 basis points for financial years FY 2015 and FY 2016. The margin was adopted under a new rule for setting the margin (see Press Release No. 11/485). Under the rule, the margin is set to cover the IMF’s lending related intermediation costs and allow for a buildup of reserves. The rule also requires a cross-check of the margin to long-term credit market conditions. The margin is set for a period of two financial years, in line with the Board-endorsed principle that the margin should be stable and predictable.
Projections for FY 2015 and FY 2016 point to annual net income of SDR 2.4 billion (US$3.7 billion) and SDR 2.1 billion (US$3.2 billion), respectively. The projections are subject to a high degree of uncertainty and are sensitive to the timing and amounts of disbursements under approved arrangements included in the projections, possible new arrangements, and the performance of the Fund’s investment portfolio. The projected net income will allow the IMF to further build its precautionary balances, in line with the Executive Board’s recent decision to maintain the indicative medium-term target for precautionary balances at SDR 20 billion (see Press Release No. 14/75).