## ppea2024046

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---

### EXECUTIVE SUMMARY
- Background and objectives
  - Borrowing costs for members have increased considerably owing to a sharp rise in global interest rates, which have pushed up the basic rate of charge through the floating SDR interest rate while surcharge rates and margin have remained stable.
  - Fund credit outstanding returned to the record levels reached during the Global Financial Crisis, boosting lending income.
  - The Fund’s Precautionary Balances (PBs) reached their medium-term target of SDR 25 billion in late FY2024.
  - Purpose: Review of charges and the surcharge policy of the General Resources Account (GRA) to ensure continued fitness for purpose amid the current global context; part of broader effort to ensure IMF lending policies meet membership needs.
  - Guiding principles (Executive Directors’ feedback): meaningfully lower the cost of borrowing for members in a balanced manner; sustain effective incentive mechanisms; preserve adequate income generation capacity; maintain policy simplicity.

- Proposed reform package (main parametric changes)
  - Reduce the margin for the basic rate of charge by 40 basis points from 100 basis points to 60 basis points; the proposed margin of 60 basis points is presented as consistent with Rule I-6(4).
  - Increase the level-based surcharge threshold from 187.5 percent of quota to 300 percent of quota.
  - Align commitment fee thresholds to the overall annual and cumulative access limits under the GRA (currently 200 and 600 percent of quota).
  - Reduce the time-based surcharge rate by 25 basis points from 100 basis points to 75 basis points.
  - Implementation and reserve allocation proposals:
    - Conduct reviews of the surcharge policy on regular five-year cycles going forward (with earlier reviews possible if warranted).
    - Continue to set the margin for the rate of charge every two years, with an intervening review after one year under Rule I-6(4).
    - Strengthen disclosures on charges and the surcharge policy, including earlier provision of more granular data on the cost of Fund borrowing and improved capacity-to-repay projections to authorities when discussing new GRA financing.
    - Align the level of the Special Reserve with the minimum floor of the PBs (SDR 20 billion) by allocating net income after distributions exclusively to the Special Reserve until the Special Reserve (net of pension adjustments and the endowment) reaches the PB floor.

- Implementation timing and decisions
  - Effective date for the package: November 1, 2024.
  - Formal decisions to place net income after distributions to the Special Reserve to be taken by the Board at the annual reviews of the Fund’s income position starting at end-FY2025.

- Risk assessment and mitigation (summary)
  - Enterprise risks associated with the proposed reforms are judged to be limited and lower than those from inaction.
  - Key mitigants: continuous close monitoring of the Fund’s finances by staff; regular reviews of PBs, margin, and surcharge policy; strengthened disclosures and operational procedures.

### Expected impacts, income, and incidence
- Borrowing cost reduction and borrower incidence
  - The package would meaningfully reduce the cost of borrowing for all GRA borrowers.
  - The estimated reduction in the Fund’s annual lending income is about SDR 880 million (FY2026 basis) compared to the status quo.
  - The package would reduce by about 36 percent the payments of borrowers on account of the margin for the basic rate of charge and of surcharges.
  - Projected number of members subject to surcharges in FY2026 would decline from twenty to thirteen.

- Income and reserves (assumptions maintained through FY2029)
  - The package would retain substantial income generation capacity after accounting for the estimated lending income loss of about SDR 880 million annually (on a FY2026 basis).
  - Estimated cumulative lending income loss of about SDR 4 billion during FY2025‒29 relative to a no-policy-change scenario.
  - Aligning the Special Reserve with the PB floor is intended to further strengthen the backstop provided by PBs for loss absorption.
  - At end-FY2024, the Special Reserve (net of pension adjustments and the endowment) was approximately SDR 10 billion; the PB floor is SDR 20 billion and the PBs medium-term target reached SDR 25 billion in late FY2024.

- Simplicity and incentives
  - The package is designed to broadly preserve the pricing structure and effectiveness of price-based incentives while addressing erosion from changes in global macroeconomic and financial metrics.

### Updated baseline projections and assumptions
- Projections reflect impact of the proposed margin (assumed maintained through FY2029), commitment fee, and surcharge reform package on lending income assuming unchanged policies throughout the projection horizon.
- Projections illustratively incorporate GRA-relevant policy proposals and assumptions from the Review of the Poverty Reduction and Growth Trust Facilities and Financing—Reform Proposals, including:
  - Suspension of the GRA’s reimbursement of PRGT administrative expenses for another five years beyond FY2026, which reduces non-lending income.
  - Cumulative distributions of net income totaling SDR 6.9 billion over FY2025‒29 (around SDR 1.38 billion each year).
- Specific projection adjustments:
  - The reform package includes a reduction in the margin for the basic rate of charge from 100 to 60 basis points (10 basis points lower than the reduction assumed in the September baseline), lowering lending income by about SDR 86 million annually (FY2026 basis) and about SDR 0.4 billion cumulatively over FY2025-29. The projection assumes the 60 basis points margin will be maintained through FY 2029, subject to review every 2 years (and in the interim if warranted).
  - Commitment fee projections for FY2029 updated to reflect a more realistic projection of precautionary arrangements.
  - Assumed annual payout rate from the Endowment Subaccount (EA) to the GRA adjusted to 1.75 percent (midpoint of expected range 1.5 to 2 percent) from 1.5 percent. The cumulative positive five-year income impact of these adjustments is about SDR 0.1 billion each.

### Lending income and surcharge payer metrics (FY2025–29)
- A. No policy changes (Margin income / Commitment fee income / Surcharge income / Total lending income / Number of surcharge payers) — values (SDR million where shown):
  - Margin income (SDR million): 903 859 873 866 823 4,324
  - Commitment fee income (SDR million): 143 159 106 140 86 634
  - Surcharge income (SDR million): 1,502 1,537 1,582 1,585 1,495 7,701
  - Total lending income (SDR million): 2,627 2,600 2,605 2,622 2,433 12,887
  - Number of surcharge payers: 23 20 21 21 20

- B. Proposed Package (Margin income / Commitment fee income / Surcharge income / Total lending income / Lending income loss vs A. / Number of surcharge payers / Share of lending income loss attributable to top three surcharge payers) — values (SDR million where shown):
  - Margin income (SDR million): 722 515 524 520 494 2,775
  - Commitment fee income (SDR million): 142 144 96 112 76 570
  - Surcharge income (SDR million): 1,248 1,015 1,043 1,043 946 5,295
  - Total lending income (SDR million): 2,191 1,719 1,707 1,706 1,545 8,868
  - Lending income loss compared with A. (SDR million): 436 882 897 915 888 4,019
  - Number of surcharge payers: 23 13 15 16 15
  - Share of lending income loss attributable to top three surcharge payers (percent): 60.7 54.2 53.5 52.3 52.4

### Impact on net operational income, distributions, and precautionary balances
- Operational Income (SDR millions):
  - No policy changes: 4,008 3,776 3,838 4,028 3,990 19,640
  - Proposed reform package: 3,563 2,842 2,814 2,894 2,783 14,896
- Lending income (SDR millions):
  - No policy changes: 2,627 2,600 2,605 2,622 2,433 12,887
  - Proposed reform package: 2,191 1,719 1,707 1,706 1,545 8,868
- Investment income (SDR millions):
  - No policy changes: 1,279 1,118 1,179 1,351 1,504 6,431
  - Proposed package: 1,279 1,087 1,080 1,162 1,215 5,823
- Interest-free resources (SDR millions): 90 45 40 41 39 25 58 12 31 31 29 13 8 (presented in source table as lines; retained as displayed)
- Expenses (SDR millions): 1,229 1,258 1,281 1,306 1,332 6,406 (both scenarios)
- Net administrative budget (SDR millions): 1,128 1,159 1,184 1,202 1,226 5,899 (both scenarios)
- Net Operational Income (SDR millions):
  - No policy changes: 2,779 2,518 2,557 2,722 2,658 13,234
  - Proposed package: 2,334 1,584 1,533 1,588 1,451 8,490
- Less: Distribution (SDR millions): 000000 -1,380 -1,380 -1,380 -1,380 -1,380 -6,900 (cumulative distributions of SDR 6.9 billion over FY2025‒29)
- Net Operational Income after distribution (SDR millions) — Proposed package: 954 204 153 208 71 1,590
- Net Operating Income Loss compared with No Policy Change without distribution (SDR millions): -1,825 -2,314 -2,404 -2,514 -2,587 -11,644
- Precautionary Balances as of end-FY (SDR billions) — No policy changes without distribution / Proposed reform package with distribution: 27.9 30.4 32.9 35.7 38.3 26.0 26.2 26.4 26.6 26.7 (table displays end-FY PBs leading to projected PBs of around SDR 26.7 billion at end-FY2029 under the proposed package with distribution)

### Medium-term outcomes and robustness to adverse shocks
- Baseline outcome (FY2025-29):
  - Projected cumulative net operating income for FY2025-29 would reach about SDR 8.5 billion, leaving room for further reserve accumulation of about SDR 1.6 billion (after illustrative cumulative distributions of SDR 6.9 billion) and resulting in projected PBs of around SDR 26.7 billion at end-FY2029.
- Robustness to adverse scenarios:
  - Low-lending or low investment return scenarios: cumulative net income (after the projected distributions of SDR 1.38 billion each year) would decline by about SDR 1 billion over FY2025-29, with PBs reaching about SDR 25.7 to 25.8 billion in FY2029, still above the current medium-term target.
  - Joint shock of low lending and low investment returns: net income would be about SDR 1.9 billion lower than under the baseline, leaving PBs at end-FY2029 at about SDR 24.8 billion, marginally below the medium-term target.

### Risk assessment and mitigants (detailed)
- Risk characterization:
  - Proposed reforms: reduce business, strategic, and reputational risks arising from inaction but moderately increase financial, business, operational, and reputational risks.
  - Risks to adequacy and liquidity of GRA lending resources could increase but would be limited by the relatively price-inelastic demand for Fund credit of large borrowers.
  - Credit outstanding could rise due to slightly higher borrower demand and reduced early repurchases, typically from smaller economies, but credit risks would be mitigated by an improved capacity to repay due to lower borrowing costs.
  - Income risks are contained as projected income and PB accumulation paths after reform implementation are broadly resilient to adverse lending and investment return shocks.
- Key mitigants:
  - Continuous close monitoring of the Fund’s finances by staff.
  - Regular reviews of the adequacy of PBs (every two years or less if warranted).
  - Margin for the basic rate of charge review every two years (with possibility of interim adjustment if warranted).
  - Surcharge policy review every five years or less if warranted.

### Implementation and formal decisions
- Implementation requires three formal decisions (may be adopted by 70 percent majority of the total voting power) that become effective on November 1, 2024:
  - Proposed Decision 1: Set the margin for the basic rate of charge at 60 basis points for the remainder of FY2025 and FY2026.
  - Proposed Decision 2: Increase thresholds for the level-based surcharges and reduce the time-based surcharge rate; proposed threshold for surcharges set at 200 percent of quota (down from 300 percent), with additional surcharge rates and aging-related surcharges specified.
  - Proposed Decision 3: Amend Rule I-8 to align thresholds for commitment fees with those under the GRA access limits; proposed thresholds for commitment fees at 133.33 percent and 400 percent of quota (lower and upper thresholds respectively) when triggered by the 16th GRQ implementation mechanics.
- Proposed Decisions 2 and 3 define automatic adjustments triggered by the implementation of the 16th GRQ: thresholds for surcharges and commitment fees would be mechanically divided by 1.5 for each member when the member pays its quota increase under the 16th GRQ or 35 days after the general conditions for the effectiveness of the 16th GRQ have been met, whichever is earlier.
- Additional implementation guidance (Summing Up) would reflect:
  - Move to regular five-yearly review cycles for the surcharge policy if supported by Directors.
  - Strengthening operational procedures for disclosure of charges and surcharges in negotiation of financial arrangements.
  - Guidance to align the level of the Special Reserve (net of pension adjustments and the endowment) with the minimum floor of the PBs (SDR 20 billion).
  - Operational proposal that all net income after distributions be allocated to the Special Reserve until it reaches SDR 20 billion (after pension adjustments and excluding the endowment).

### Annex I — Redline excerpts (selected modifications shown as in source)
- Surcharge on Purchases in Credit Tranches and Under Extended Fund Facility and SLL:
  - The rate of charge on combined holdings in excess of 187.5300 percent of the member’s quota resulting from purchases in the credit tranches, under the Short-Term Liquidity Line and under the Extended Fund Facility shall be 200 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing; and for combined holdings resulting from purchases in the credit tranches and under the Extended Fund Facility, it shall also include an additional 10075 basis points per annum on such holdings in any case where they are outstanding for more than 36 months in the case of purchases in the credit tranches, or 51 months in the case of purchases under the Extended Fund Facility.
  - The relevant threshold in paragraph 1 shall change to 200 percent instead of 300 percent for any member from the first occurring of (i) its quota increase under the Sixteenth General Review of Quotas becoming effective; or (ii) 35 days after the Executive Board has determined that the general effectiveness conditions for the Sixteenth General Review of Quota have been met.
  - Elections and transitional provisions relating to members with arrangements in effect on February 17, 2016 are retained as shown in the redline text.

- Rule I-8 (selected redline provisions):
  - Charge payable at the beginning of each twelve-month period with thresholds and rates presented with amended numeric thresholds (e.g., 15/100 of 1 percent per annum on amounts of up to 115200 percent of the member’s quota; 3/10 of 1 percent per annum on amounts in excess of 115200 percent and up to 575600 percent; 3/5 of 1 percent per annum on amounts in excess of 575600 percent) and transitional thresholds substituting 200133.33 percent and 1000400 percent in certain conditions.
  - Provisions for refunds on purchases, cancellation repayments, elections for members with arrangements in effect on February 17, 2016, and special SLL arrangement charge of 8/100 of 1 percent per annum are shown in the redline language.

*Source: IMF staff calculations as presented in the chapter titled "8.      The proposed package would preserve a considerable net income generation capacity."*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Background and objectives
- Context
  - Borrowing costs for members have increased considerably owing to a sharp rise in global interest rates, which have pushed up the basic rate of charge through the floating SDR interest rate while surcharge rates and margin have remained stable.
  - Fund credit outstanding returned to the record levels reached during the Global Financial Crisis, boosting lending income.
  - The Fund’s Precautionary Balances (PBs) reached their medium-term target of SDR 25 billion in late FY2024.
- Purpose of the review
  - Review of charges and the surcharge policy of the General Resources Account (GRA) to ensure continued fitness for purpose amid the current global context.
  - Review forms part of a broader effort to ensure IMF lending policies meet membership needs.
- Guiding principles for policy changes (as reflected in Executive Directors’ feedback)
  - Meaningfully lower the cost of borrowing for members in a balanced manner.
  - Sustain effective incentive mechanisms.
  - Preserve adequate income generation capacity.
  - Maintain policy simplicity.

### Proposed reform package (main parametric changes)
- Margin for the basic rate of charge
  - Reduce the margin by 40 basis points from 100 basis points to 60 basis points.
  - The proposed margin of 60 basis points is presented as consistent with Rule I-6(4).
- Level-based surcharge threshold
  - Increase the level-based surcharge threshold from 187.5 percent of quota to 300 percent of quota.
- Commitment fee thresholds
  - Align commitment fee thresholds to the overall annual and cumulative access limits under the GRA (currently 200 and 600 percent of quota).
- Time-based surcharge rate
  - Reduce the time-based surcharge rate by 25 basis points from 100 basis points to 75 basis points.
- Other implementation and reserve allocation proposals
  - Conduct reviews of the surcharge policy on regular five-year cycles going forward (with earlier reviews possible if warranted).
  - Continue to set the margin for the rate of charge every two years, with an intervening review after one year under Rule I-6(4).
  - Strengthen disclosures on charges and the surcharge policy, including earlier provision of more granular data on the cost of Fund borrowing and improved capacity-to-repay projections to authorities when discussing new GRA financing.
  - Align the level of the Special Reserve with the minimum floor of the PBs (SDR 20 billion) by allocating net income after distributions exclusively to the Special Reserve until the Special Reserve (net of pension adjustments and the endowment) reaches the PB floor.

### Implementation timing and decisions
- Effective date for the package: November 1, 2024.
- Formal decisions to place net income after distributions to the Special Reserve to be taken by the Board at the annual reviews of the Fund’s income position starting at end-FY2025.

### Expected impacts, income, and incidence
- Borrowing cost reduction and borrower incidence
  - The package would meaningfully reduce the cost of borrowing for all GRA borrowers.
  - The estimated reduction in the Fund’s annual lending income is about SDR 880 million (FY2026 basis) compared to the status quo.
  - The package would reduce by about 36 percent the payments of borrowers on account of the margin for the basic rate of charge and of surcharges.
  - Projected number of members subject to surcharges in FY2026 would decline from twenty to thirteen.
- Income and reserves
  - Assuming the proposed policies are maintained through FY2029:
    - The package would retain substantial income generation capacity after accounting for the estimated lending income loss of about SDR 880 million annually (on a FY2026 basis).
    - Estimated cumulative lending income loss of about SDR 4 billion during FY2025‒29 relative to a no-policy-change scenario.
  - Aligning the Special Reserve with the PB floor is intended to further strengthen the backstop provided by PBs for loss absorption.
  - At end-FY2024, the Special Reserve (net of pension adjustments and the endowment) was approximately SDR 10 billion; the PB floor is SDR 20 billion and the PBs medium-term target reached SDR 25 billion in late FY2024.
- Simplicity and incentives
  - The package is designed to broadly preserve the pricing structure and effectiveness of price-based incentives while addressing erosion from changes in global macroeconomic and financial metrics.

### Risk assessment and mitigation
- Enterprise risks associated with the proposed reforms are judged to be limited and lower than those from inaction.
- Key mitigants
  - Continuous close monitoring of the Fund’s finances by staff.
  - Regular reviews of the adequacy of PBs, the margin for the basic rate of charge, and the surcharge policy.
  - Strengthened disclosures and operational procedures to ensure authorities have adequate information on the cost of Fund borrowing during negotiations of GRA financing.

*Prepared by the Finance Department and Strategy, Policy, and Review Department; approved by Bernard Lauwers (FIN) and Ceyla Pazarbasioglu (SPR).*

### 8.      The proposed package would preserve a considerable net income generation capacity.

### 8.      The proposed package would preserve a considerable net income generation capacity.

### Updated baseline projections and assumptions
- Projections reflect the impact of the proposed margin (assuming that it is maintained through FY 2029), commitment fee, and surcharge reform package on lending income assuming unchanged policies throughout the projection horizon.
- Projections illustratively incorporate all GRA-relevant policy proposals and assumptions made by staff in the context of the ongoing Review of the Poverty Reduction and Growth Trust Facilities and Financing—Reform Proposals, including:
  - The suspension of the GRA’s reimbursement of PRGT administrative expenses for another five years beyond FY2026, which reduces non-lending income.
  - Cumulative distributions of net income totaling SDR 6.9 billion over FY2025‒29 (around SDR 1.38 billion each year).
- The reform package includes a reduction in the margin for the basic rate of charge from 100 to 60 basis points (10 basis points lower than the reduction assumed in the September baseline), lowering lending income by about SDR 86 million annually (FY2026 basis) and about SDR 0.4 billion cumulatively over FY2025-29. The projection assumes the 60 basis points margin will be maintained through FY 2029, subject to review every 2 years (and in the interim if warranted).
- Projections include modest revisions to investment income and commitment fee assumptions relative to the September informal meeting paper, including:
  - Commitment fee projections for FY2029 updated to reflect a more realistic projection of precautionary arrangements.
  - Assumed annual payout rate from the Endowment Subaccount (EA) to the GRA adjusted to 1.75 percent (midpoint of expected range 1.5 to 2 percent) from 1.5 percent. The cumulative positive five-year income impact of these adjustments is about SDR 0.1 billion each.

### Lending income and surcharge payer metrics (FY2025–29)
- A. No policy changes
  - Margin income (SDR million): 903 859 873 866 823 4,324
  - Commitment fee income (SDR million): 143 159 106 140 86 634
  - Surcharge income (SDR million): 1,502 1,537 1,582 1,585 1,495 7,701
  - Total lending income (SDR million): 2,627 2,600 2,605 2,622 2,433 12,887
  - Number of surcharge payers: 23 20 21 21 20
- B. Proposed Package
  - Margin income (SDR million): 722 515 524 520 494 2,775
  - Commitment fee income (SDR million): 142 144 96 112 76 570
  - Surcharge income (SDR million): 1,248 1,015 1,043 1,043 946 5,295
  - Total lending income (SDR million): 2,191 1,719 1,707 1,706 1,545 8,868
  - Lending income loss compared with A. (SDR million): 436 882 897 915 888 4,019
  - Number of surcharge payers: 23 13 15 16 15
  - Share of lending income loss attributable to top three surcharge payers (percent): 60.7 54.2 53.5 52.3 52.4

### Impact on net operational income, distributions, and precautionary balances (Table 3 highlights)
- Operational Income (SDR millions) — No policy changes: 4,008 3,776 3,838 4,028 3,990 19,640
- Operational Income (SDR millions) — Proposed reform package: 3,563 2,842 2,814 2,894 2,783 14,896
- Lending income (SDR millions) — No policy changes: 2,627 2,600 2,605 2,622 2,433 12,887
- Lending income (SDR millions) — Proposed reform package: 2,191 1,719 1,707 1,706 1,545 8,868
- Investment income (SDR millions): 1,279 1,118 1,179 1,351 1,504 6,431 (No policy changes) and 1,279 1,087 1,080 1,162 1,215 5,823 (Proposed package)
- Interest-free resources (SDR millions): 90 45 40 41 39 25 58 12 31 31 29 13 8 (presented in source table as lines; retain source values as displayed)
- Expenses (SDR millions): 1,229 1,258 1,281 1,306 1,332 6,406 (both scenarios)
- Net administrative budget (SDR millions): 1,128 1,159 1,184 1,202 1,226 5,899 (both scenarios)
- Net Operational Income (SDR millions): 2,779 2,518 2,557 2,722 2,658 13,234 (No policy changes) and 2,334 1,584 1,533 1,588 1,451 8,490 (Proposed package)
- Less: Distribution (SDR millions): 000000 -1,380 -1,380 -1,380 -1,380 -1,380 -6,900 (cumulative distributions of SDR 6.9 billion over FY2025‒29)
- Net Operational Income after distribution (SDR millions) — Proposed package: 954 204 153 208 71 1,590
- Net Operating Income Loss compared with No Policy Change without distribution (SDR millions): -1,825 -2,314 -2,404 -2,514 -2,587 -11,644
- Precautionary Balances as of end-FY (SDR billions) — No policy changes without distribution / Proposed reform package with distribution: 27.9 30.4 32.9 35.7 38.3 26.0 26.2 26.4 26.6 26.7 (table displays end-FY PBs leading to projected PBs of around SDR 26.7 billion at end-FY2029 under the proposed package with distribution)

### Medium-term outcomes and robustness to adverse shocks
- Under the baseline, projected cumulative net operating income for FY2025-29 would reach about SDR 8.5 billion, leaving room for further reserve accumulation of about SDR 1.6 billion (after illustrative cumulative distributions of SDR 6.9 billion) and resulting in projected PBs of around SDR 26.7 billion at end-FY2029.
- Robustness to adverse scenarios:
  - In low-lending or low investment return scenarios, cumulative net income (after the projected distributions of SDR 1.38 billion each year) would decline by about SDR 1 billion over FY2025-29, with PBs reaching about SDR 25.7 to 25.8 billion in FY2029, still above the current medium-term target.
  - Under a joint shock of low lending and low investment returns, net income would be about SDR 1.9 billion lower than under the baseline, leaving PBs at end-FY2029 at about SDR 24.8 billion, marginally below the medium-term target.

### Risk assessment and mitigants
- Enterprise risks associated with the proposed reforms are limited and lower than those from inaction.
  - Inaction could undermine the Fund’s ability to facilitate economic recovery, trigger member disengagement, and increase business, strategic, and reputational risks.
  - The proposed reforms would reduce those risks but moderately increase financial, business, operational, and reputational risks.
  - Risks to adequacy and liquidity of GRA lending resources could increase but would be limited by the relatively price-inelastic demand for Fund credit of large borrowers.
  - Credit outstanding could rise due to slightly higher borrower demand and reduced early repurchases, typically from smaller economies, but credit risks would be mitigated by an improved capacity to repay due to lower borrowing costs.
  - Income risks are contained as projected income and PB accumulation paths after reform implementation are broadly resilient to adverse lending and investment return shocks.
- Key mitigants:
  - Continuous close monitoring of the Fund’s finances by staff.
  - Regular reviews of the adequacy of PBs (every two years or less if warranted).
  - Margin for the basic rate of charge review every two years (with possibility of interim adjustment if warranted).
  - Surcharge policy review every five years or less if warranted.

### Implementation and formal decisions
- Implementation requires three formal decisions (may be adopted by 70 percent majority of the total voting power) that become effective on November 1, 2024:
  - Proposed Decision 1: Set the margin for the basic rate of charge at 60 basis points for the remainder of FY2025 and FY2026.
  - Proposed Decision 2: Increase thresholds for the level-based surcharges and reduce the time-based surcharge rate; proposed threshold for surcharges set at 200 percent of quota (down from 300 percent), with additional surcharge rates and aging-related surcharges specified.
  - Proposed Decision 3: Amend Rule I-8 to align thresholds for commitment fees with those under the GRA access limits; proposed thresholds for commitment fees at 133.33 percent and 400 percent of quota (lower and upper thresholds respectively) when triggered by the 16th GRQ implementation mechanics.
- Proposed Decisions 2 and 3 define automatic adjustments triggered by the implementation of the 16th GRQ: thresholds for surcharges and commitment fees would be mechanically divided by 1.5 for each member when the member pays its quota increase under the 16th GRQ or 35 days after the general conditions for the effectiveness of the 16th GRQ have been met, whichever is earlier.
- Additional implementation guidance (Summing Up) would reflect:
  - Move to regular five-yearly review cycles for the surcharge policy if supported by Directors.
  - Strengthening operational procedures for disclosure of charges and surcharges in negotiation of financial arrangements.
  - Guidance to align the level of the Special Reserve (net of pension adjustments and the endowment) with the minimum floor of the PBs (SDR 20 billion).
  - Operational proposal that all net income after distributions be allocated to the Special Reserve until it reaches SDR 20 billion (after pension adjustments and excluding the endowment).

*Source: IMF staff calculations as presented in the chapter titled "8.      The proposed package would preserve a considerable net income generation capacity."*

### Annex I. Redline Version: Proposed Modification to Existing

### Annex I. Redline Version: Proposed Modification to Existing Decisions

### Surcharge on Purchases in Credit Tranches and Under Extended Fund Facility and SLL

- Subject to paragraphsparagraph 2 and 3 below, the rate of charge under Article V, Section 8(b) on the Fund’s combined holdings of a member’s currency in excess of 187.5300 percent of the member’s quota in the Fund resulting from purchases in the credit tranches, under the Short-Term Liquidity Line and under the Extended Fund Facility shall be 200 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing; and for the Fund’s combined holdings resulting from purchases in the credit tranches and under the Extended Fund Facility, it shall also include an additional 10075 basis points per annum on such holdings in any case where they are outstanding for more than 36 months in the case of purchases in the credit tranches, or 51 months in the case of purchases under the Extended Fund Facility.

- The relevant threshold in paragraph 1 shall change to 200 percent instead of 300 percent for any member from the first occurring of (i) its quota increase under the Sixteenth General Review of Quotas becoming effective; or (ii) 35 days after the Executive Board has determined that the general effectiveness conditions for the Sixteenth General Review of Quota have been met. be 300 percent instead of 187.5 percent: (i) for all members until February 17, 2016; and (ii) for members whose quota increase under the 14th Review was not effective on February 17, 2016 until the date their quota increase under the 14th General Review becomes effective, or February 26, 2016, whichever is earlier. If, during the period of February 1 through February 16, 2016, the Fund’s combined holdings of a member’s currency resulting from purchases in the credit tranches and under the Extended Fund Facility fell below 300 percent of the member’s quota, such interruption shall not be taken into account for purposes of calculating the 36 and 51 month periods.

- A member with credit outstanding in the credit tranches or under  the Extended Fund Facility, or with an arrangement in effect on February 17, 2016, may notify the Fund by February 25, 2016 that it elects to have the rate of charge on such existing holdings of the member’s currency, and on holdings of the member’s currency arising from future purchases under such an effective arrangement, to be based on the threshold of 300 percent member’s quota in effect prior to its quota increase under the 14th General Review of Quotas, instead of the threshold of 187.5 percent under paragraph 1 above. Absent such notification, the rate of charge shall be computed pursuant to paragraphs 1 and 2 above. If a member has made an election under this paragraph 2, such

- election shall cease to apply as of the date of the Fund’s approval of any new access to the Fund’s general resources for that member, including an augmentation of an arrangement in effect on February 17, 2016, and the rate of charge under this Decision shall be computed for all holdings of the member’s currency in the credit tranches or under the Extended Fund Facility pursuant to paragraph 1 above.

- This Decision shall be reviewed on an as needed basis in accordance with Decision No. 13814-(06/98), adopted November 15, 2006, and Decision No. 15764-(15/39), adopted April 23, 2015, on implementing streamlining of policy reviews.

### Rule I-8

- I- 8. The following provisions (a) – (fe) shall apply to all General Resources Account (“GRA”) arrangements, except Short-Term Liquidity Line (“SLL”) arrangements, in which case provision (gf  ) shall apply:

- (a) Subject to paragraphs (e) and (f) below, a charge shall be payable at the beginning of each twelve-month period (“the relevant period”) of an arrangement as follows:
  - (i) 15/100 of 1 percent per annum on amounts of up to 115200 percent of the member’s quota that could be purchased during the relevant period; and
  - (ii) 3/10 of 1 percent per annum on amounts in excess of 115200 percent and up to 575600 percent of the member’s quota that could be purchased during the relevant period; and
  - (iii) 3/5 of 1 percent per annum on amounts in excess of 575600 percent of the member’s quota that could be purchased during the relevant period.

- (b) When a purchase is made under an arrangement, the amount of the charge paid under subparagraph (a) above shall be reduced, and a refund equal to the reduction shall be made, as follows:
  - (i) to the extent that purchases during the relevant period do not exceed 115200 percent of the member’s quota, the portion of the charge calculated in accordance with subparagraph (a)(i) above shall be reduced by the proportion that the amount of the purchase bears to the amount of the arrangement not exceeding 115200 percent of the member’s quota that could be purchased during the relevant period;
  - (ii) to the extent that purchases during the relevant period exceed 115200 percent but do not exceed 575600 percent of the member’s quota, the portion of the charge calculated in accordance with subparagraph (a)(ii) above shall be reduced by the proportion that the amount of the purchase bears to the amount of the arrangement exceeding 115200 percent but not exceeding 575600 percent of the member’s quota that could be purchased during the relevant period; and
  - (iii) to the extent that purchases during the relevant period exceeds 575600 percent of the member’s quota, the portion of the charge calculated in accordance with subparagraph (a)(iii) above shall be reduced by the proportion that the amount of the purchase bears to the amount of the arrangement exceeding 575600 percent of the member’s quota that could be purchased during the relevant period.

- (c) If a member notifies the Fund that it wishes to cancel an arrangement, the Fund shall repay to the member a portion of the charge. The portion repaid shall represent the charge for the period remaining unexpired at the date of cancellation for the amount that could still be purchased under the arrangement at the date of cancellation for which the member has paid a charge.

- (d) Refunds for reductions under subparagraph (b) above and repayments under subparagraph (c) above of a charge paid for an arrangement shall be made in the media selected by the Fund

- (e) Instead of the thresholds of 115200 percent and 575600 percent referred to in subparagraphs (a) and (b) above, the thresholds of 200133.33 percent and 1000400 percent, respectively, shall be used in computing charges and refunds for a member untilfrom the earlierfirst occurring of (i) the effective date of that member’s quota increase under the 14thSixteenth General Review of Quotas, or (ii) February 26, 201635 days after the Fund determines that the general effectiveness conditions for the Sixteenth General Review of Quotas have been met.

- (f) A member with an arrangement in effect on February 17, 2016 may notify the Fund by February 25, 2016 that it elects to have the charges and refunds applicable to such arrangement to be based on the thresholds of 200 percent and 1000 percent of the member’s quota in effect prior to the effectiveness of the quota increase for that member under the 14th General Review of Quotas, instead of the thresholds of 115 percent and 575 percent, respectively, under subparagraphs (a) and (b) above. Absent such notification, the relevant charges and refunds shall be determined under subparagraphs (a), (b), (c) and (d) above. If a member has made an election under this subparagraph (f), such election shall cease to apply as of the date of the Fund’s approval of any augmentation of

- an arrangement in effect for that member on February 17, 2016. The member shall then be subject to the relevant charges and refunds as determined under subparagraphs (a), (b), (c) and (d). New arrangements approved by the Fund after February 17, 2016 are not eligible for the election under this subparagraph (f).

- (gf  ) With respect to SLL arrangements, a charge of 8/100 of 1 percent per annum on the total amount of access approved by the Fund for a member under a SLL arrangement shall be payable at the beginning of the arrangement. This charge shall not be refunded against purchases made during the course of the arrangement. If the member notifies the Fund that it wished to cancel an SLL arrangement, the Fund shall repay to the member a portion of the charge. The portion repaid shall represent the prorated amount of the charge that corresponds to the period remaining unexpired at the date of cancellation. Such repayment shall be made in the media selected by the Fund.

*IMF — Annex I. Redline Version: Proposed Modification to Existing Decisions (ppea2024046).*

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_Source: https://www.imf.org/-/media/files/publications/pp/2024/english/ppea2024046.pdf_