Calculation of Grant Element

On October 11, 2013, the Executive Boards of the Fund and of the Bank adopted a new methodology setting a single, unified discount rate to calculate the grant element of individual loans (see Unification of Discount Rates Used in External Debt Analysis for Low-Income Countries). The new unified discount rate is set at 5 percent and will remain unchanged until the completion of the next review of the LIC DSF, set for 2015. More

    Use of the new methodology will be phased in:
  • For countries, without a Fund-supported program in place, the unified discount rate methodology already applies to concessionality assessments;
  • For countries with a Fund-supported program in place, the unified methodology will only apply once modification of the related conditionality (as laid out in the Technical Memorandum of Understanding) has been approved by the Fund’s Executive Board. Such modifications are usually achieved in the context of program reviews. Pending these modifications, the old methodology based on currency-specific and maturity-dependent discount rates will apply to concessionality assessments.

The concessionality calculator has been modified to reflect these transitional arrangements. The new discount rate (“unified discount rate (5%)”) has been added to the list of available rates. The list of countries where the new unified discount rate is in effect is provided below; it will be regularly updated as the new methodology is phased in.

Updated as of December 31, 2014

Table 1 - CIRR1    
Gambia   Guinea-Bissau
1/ Member countries currently in a Fund program will continue using the CIRR methodology and will be moved from the CIRR category to the Unified Discount Rate (5%) category when their revised TMUs are approved by the Board .

Table 2 - Unified Discount Rate (5%)  
Bangladesh Haiti Rwanda
Benin Honduras Samoa
Bhutan Kenya Sao Tome and Principe
Bolivia Kiribati Senegal
Burkina Faso Kyrgyz Republic Sierra Leone
Burundi Lao, PDR Solomon Islands
Cambodia Lesotho Somalia
Cameroon Liberia South Sudan
Cape Verde Madagascar St. Lucia
Central African Republic Malawi St. Vincent and the Grenadines
Chad Maldives Sudan
Comoros Mali Tajikistan
Congo, Republic of Marshall Islands Tanzania
Congo,Democratic Republic of Mauritania Timor-Leste
Cote d'Ivoire Micronesia Togo
Djibouti Moldova Tonga
Dominica Mongolia Tuvalu
Eritrea Mozambique Uganda
Ethiopia Myanmar Uzbekistan
Ghana Nepal Vanuatu
Grenada Nicaragua Vietnam
Guinea Niger Yemen
Nigeria Zambia
Guyana Papua New Guinea Zimbabwe

Repayment profile
Face value of loan 1
Grant (as part of financing package) 1
Upfront commission (in percent)  %
Management fees  
Interest rate ( in percent)  %
Maturity (in years)
Payments per annum
Grace period (in years)
Discount rate (in percent)  %

Grant element (in percent)


1 Values should be entered in the following format: ###,###.00

Technical definitions

1. Currency – This field is the currency of repayment indicated in the loan contract. The unified discount rate methodology is not currency-specific, i.e. the unified discount rate is used for all concessionality assessments, regardless of the currency of the loan.

2. Repayment profile – This field selects the repayment characteristics of the loan (or a financing package). There are five options to choose from: Equal principal payment, Annuity (repayment with fixed total annual amortization amount), Lump sum principal (the entire principal or nominal amount is paid on the last repayment date while the interest is paid throughout the repayment period), Lump sum principal & interest (both principal and the interest are paid on the last repayment date), Lump sum principal & compounded interest (both principal and interest are paid on the last repayment date, however the interest is capitalized over the repayment period).

3. Face value – Nominal amount in the selected currency of the loan contract (or a financing package) that needs to be repaid to the creditor. The face value of a loan (or financing package) should not include the interest paid nor should it include any grants included in the financing package. The calculator assumes an upfront disbursement of a hundred percent.

4. Grant (as part of financing package) – This is the nominal amount granted as a part of a financing package that will not be repaid to the creditor.

5. Upfront commission (in percent) – These are amounts paid as commissions for contracting the loan or financing package. Typically these commissions are quoted as percent of the contracted nominal amount. Upfront commissions (and/or management fees) throughout the lifetime of the loan constitute a cost of contracting/managing the loan and therefore an implicit interest cost, which should be included in calculating the level of concessionality.

6. Management fees – These are fees paid per payment period and are quoted in the contract as either a fixed nominal amount or a percent of the outstanding nominal amount.

7. Interest rate (in percent) – This is negotiated rate of interest on the loan. The calculator only allows for fixed rates of interest and cannot accommodate variable rates of interest.

8. Maturity (in years) – The numbers of years required to service the loan. The maturity period includes the grace period.

9. Payments per annum – The number of payments made on an annual basis while servicing the contracted loan (or financing package).

10. Grace period (in years) – The grace period is defined as the period during which only the interest and no principal payments are payable by Borrower to the creditor.

11. Discount rate (in percent) – The Discount rate is used to calculate the present value (PV) of the loan (or financing package). PV calculations are used to compute the grant element of individual loans and to assess observance with concessionality requirements.

12. Grant element (in percent) - The grant element measures the concessionality of a loan. It is defined as the difference between its nominal value (face value) and the sum of the discounted future debt-service payments (net present value) to be made by the borrower, expressed as a percentage of the face value of the loan. Whenever the interest rate charged for a loan is lower than the discount rate, the resulting present value of the debt is smaller than its face value, with the difference reflecting the grant element of the loan.

1 Under the previous methodology, discount rates were based on currency-specific Commercial Interest Rates of Reference (CIRRs), calculated b the OECD for 15 currencies. Under this methodology, if a loan is contracted in a non-OECD currency (i.e., no CIRR is available), the SDR rate should be used. Please note that by choosing “other” as the currency, the calculator automatically selects the SDR rate.