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, 2012 (FY 2012) and set the margin for the lending rate for IMF credit for FY 2013 and FY 2014.

FY 2012 Income Position

Total FY 2012 net income, including income from surcharges applied to higher access borrowing from the Fund, is estimated at SDR 1.5 billion (US$2.3 billion). This net income will be added to the IMF’s precautionary balances which are projected to reach SDR 9.5 billion at end-FY 2012. The Executive Board recently agreed to increase the indicative medium-term target for precautionary balances from SDR 15 billion to SDR 20 billion in light of the increase in total Fund credit and commitments (Press Release No. 12/132).

FY 2013-14 Lending Rate and Income Position

The IMF charges member countries a basic rate of charge on 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 2013 and FY 2014.

A new rule for setting the basic rate of charge was adopted by the Executive Board in December last year, effective for FY 2013 onwards. The new rule is an important step in fully implementing the new income model, under which the margin is set so as to cover the IMF’s lending related intermediation costs and allow for a buildup of reserves. Consistent with the Board-endorsed principle that the margin should be stable and predictable, under the new rule the margin is set for a period of two financial years (see Press Release No. 11/485).

Projections for FY 2013 and FY 2014 point to annual net income of SDR 2.3 billion (US$3.5 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 add to needed precautionary balances.

The Executive Board also adopted a number of other decisions that have a bearing on the Fund’s finances including the transfer of amounts attributable to net operational income and surcharges in FY 2012 to the Fund’s investment account, placement of net income to the Fund’s reserves, and to continue special charges on certain overdue obligations.

For related Board papers click the following links:

Consolidated Medium Term Income and Expenditure Framework Paper

Review of the Fund’s Income Position for FY 2012 and FY 2013-14