## The Fund’s Income Position for FY 2013—Midyear Update

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### Introduction
- Projected net income for FY 2013 is now SDR 2.1 billion, slightly lower than the earlier projection of SDR 2.3 billion at the beginning of the year.
- Changes reflect: lower projected disbursements under approved arrangements (rephasing and expirations with undrawn balances), expectation that funding of the gold endowment will not begin until FY 2014, and lower implicit returns on interest-free resources owing to the prevailing interest rate environment.
- The Executive Board set the margin for the basic rate of charge for FY 2013–14 at 100 basis points.

### Updated FY 2013 income position — key drivers and impacts
- Net income position now projected: SDR 2,069 million (down from initial projection SDR 2,322 million).
- Aggregate change in projected net income: -SDR 253 million (breakdown below).

- Lending income
  - Projected lending income (excluding surcharges) lower by about SDR 125 million.
  - Reflects a SDR 7 billion decline in projected purchases.
  - Average credit outstanding for FY 2013 now projected at SDR 93.3 billion (previously SDR 100.6 billion).
  - Projected commitment fees lower following cancellation of a Flexible Credit Line (FCL) arrangement prior to expiration.

- Investment Account (IA) income
  - Investment income from the two IA portfolios now projected about SDR 73 million (initial estimate SDR 130 million).
  - Gold profits portfolio now projected to earn about SDR 6 million (initial estimate SDR 65 million) reflecting revised timeline for implementation of the gold endowment; gold profits portfolio assumed invested in short-term deposits for the remainder of FY 2013.
  - Non-gold portfolio projected earnings broadly unchanged at SDR 67 million.

- Implicit returns on interest-free resources
  - Projected to be lower by some SDR 10 million as a result of the current low interest rate environment.
  - Average SDR interest rate for FY 2013 now projected at 0.10 percent (previously 0.30 percent).

- Surcharges
  - Projections lower by about SDR 61 million compared with initial projections.
  - Time-based surcharges (levied since August 2012) amounted to SDR 36 million to end-October 2012 for members with credit outstanding in excess of 300 percent of quota for more than three years.

### Consolidated numerical summary (from Table 1 and Table 2)
- Net income position (initial projection, EBS/12/51): 2,322 (millions of SDRs)
- Income variances (A+B+C+D): -253
  - A. Lending income: -125
    - Service charges: -35
    - Margin: -73
    - Commitment fees: -17
  - B. Investment Account returns: -57
  - C. Income from interest-free resources: -10
  - D. Surcharges: -61
- Net income position now projected (1+2): 2,069 (millions of SDRs)

Selected operational and memorandum items (Actual to end-Oct 2012 | Initial Projections | Current Projections)
- Operational income (A): 540 | 1,789 | 1,597 (millions of SDRs)
  - Lending income: 490 | 1,577 | 1,452
    - Margin for the rate of charge: 468 | 1,006 | 933
    - Service charges: 19 | 106 | 71
    - Commitment fees: 34 | 65 | 48
  - Investment income: 45 | 130 | 73
    - Non-gold portfolio: 42 | 65 | 67
    - Gold profits portfolio: 3 | 65 | 6
  - Interest free resources: 3 | 15 | 5
    - SCA-1 and other: 1 | 7 | 2
    - Gold book value: 2 | 8 | 3
  - Reimbursements: 2 | 6 | 7
- Expenses (B): 416 | 683 | 683
  - Net administrative expenditures: 400 | 643 | 643
- Net operational income position (A–B): 124 | 1,106 | 914
- Surcharges: 62 | 1,216 | 1,155
- Net income position: 74 | 2,322 | 2,069

Memorandum items (Actual through end-October 2012 | Initial Projections | Current Projections)
- Fund credit (average stock, SDR billions): 92.7 | 100.6 | 93.3
- SDR interest rate (in percent): 0.10 | 0.30 | 0.1
- US$/SDR exchange rate: 1.52 | 1.55 | 1.55
- Precautionary balances (end of period, SDR billions): 10.2 | 11.8 | 11.6

### Precautionary balances and reserves
- Precautionary balances projected to reach SDR 11.6 billion at end-FY 2013.
- The estimated FY 2013 net income of SDR 2.1 billion will contribute to accumulation of precautionary balances; the floor of SDR 10 billion will be reached during the year.
- Updated projections with respect to the medium-term target of SDR 20 billion will be provided in background materials for the next Committee of the Budget meeting in February 2013.

### Annex I — Decisions in effect affecting FY 2013 income position
- Rate of Charge
  - Margin for calculating the basic rate of charge in FY 2013 was set at 100 basis points for a period of two years (FY 2013–14).
  - Decision adopted under the exceptional circumstances clause of Rule I-6(4).
- Burden Sharing for Deferred Charges
  - Income losses from unpaid charges are shared equally between debtor and creditor members under the burden sharing mechanism largely pursuant to a 2000 decision; the mechanism continues for as long as overdue obligations to the Fund exist.
- Note: The waiver for the reimbursement to the General Resources Account from the Reserve Account of the PRGT for FY 2013 is yet to be taken (waiver expired at end-FY 2012).

### Annex II — Key assumptions underlying FY 2013 projections (selected)
- Average balances subject to charges: 92.7 | 100.6 | 93.3 (SDR billions) (Actual through end-October 2012 | Initial Projections | Current Projections)
- Average investment account assets — reserves: 7.8 | 8.3 | 8.3 (SDR billions)
- Average SDR interest rate and basic rate of remuneration: 0.10 | 0.30 | 0.10 (percent)
- Basic rate of charge: 1.10 | 1.30 | 1.10 (percent)
- Margin on the rate of charge: 1.00 | 1.00 | 1.00 (percent)
- Notes on gold endowment assumptions:
  - Initial projections assumed the gold endowment to be established in the second half of FY 2013; current projections assume implementation phased-in gradually starting in FY 2014.
  - Some entries in the Annex reflect assumptions about distributions of windfall gold sale profits and timing; the updated projections assume the gold profits portfolio remains invested in short-term deposits for the remainder of FY 2013.

*Prepared by the Finance Department in consultation with the Legal Department and the Office of Budget and Planning; approved December 21, 2012.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_122112.pdf_