Frequently Asked Questions on the Fund’s Charges and the Surcharge Policy
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Context and purpose
- The 2024 Review of Charges and the Surcharge Policy is part of a continuous effort to ensure that the IMF’s lending policies remain fit for purpose in a changing global economy and at a time of high borrowing costs.
- The Review considered options for lowering the cost of borrowing from the General Resources Account (GRA) while preserving appropriate incentives and the IMF’s financial strength that underpins its role at the center of the global financing safety net.
- The Executive Board approved a comprehensive package of reforms that will take effect on November 1, 2024.
Aggregate impact and fiscal projection
- Based on projections for fiscal year 2026, the reforms are expected to lower borrowing costs by about SDR 880 million (US$1.2 billion) annually for all GRA borrowers.
- The approved package will substantially lower the cost of IMF borrowing on account of the margin of charge and surcharges by 36 percent, or about US$1.2 billion annually.
Changes to basic charges, surcharges, and commitment fees
- Basic charges:
- The margin on the basic rate of charge will decline to 60 basis points from 100 basis points currently.
- Basic charges consist of the SDR interest rate plus a margin (the margin has been 100 basis points since May 1, 2012 prior to this reform).
- Level-based surcharges:
- Applied at 200 basis points on the outstanding portion of GRA credit over a fixed threshold.
- The level-based threshold will be raised to 300 percent of quota from 187.5 percent of quota currently.
- This new threshold will reduce the number of countries expected to pay surcharges in fiscal year 2026 from 20 to 13 (staff projection).
- Time-based surcharges:
- Applied on the portion of credit exceeding the level-based threshold for more than 36 months (51 months in case of borrowing under the Extended Fund Facility).
- The time-based surcharge rate will be reduced to 75 basis points from 100 basis points currently.
- Commitment fees:
- Thresholds for commitment fees will be increased to align with annual and cumulative access limits under the GRA: 200 percent of quota annually and 600 percent cumulative, from current levels of 115 and 575 percent of quota.
- The fee schedule is upward sloping:
- 15 basis points for committed amounts up to 200 percent of quota;
- 30 basis points for committed amounts above 200 percent and up to 600 percent of quota;
- 60 basis points for committed amounts exceeding 600 percent of quota.
- Commitment fees apply to the undisbursed portion of a loan and are refunded in proportion to amounts borrowed; if a country borrows the entire amount, the fee is fully refunded.
Expected distributional effects and country coverage
- Immediate effect on number of surcharge payers:
- Out of 52 member countries currently borrowing from the GRA, 19 are subject to surcharges as of the source text.
- Once the reform becomes effective on November 1, 2024, the number of countries paying surcharges will fall from 19 to 11, with eight countries not subject to surcharges because their credit outstanding will be below the new threshold (300 percent of quota): Benin, Côte d’Ivoire, Gabon, Georgia, Moldova, Senegal, Sri Lanka, and Suriname.
- Fiscal year 2026 projection:
- Staff projects that 20 countries would have been subject to surcharges prior to this Review; with the approved reforms, the number of countries paying surcharges is expected to fall to 13.
Rationale and retained functions of charges and surcharges
- Charges, surcharges, and commitment fees are retained as essential components of the IMF’s cooperative lending and risk management framework.
- These instruments:
- Cover lending intermediation expenses;
- Help accumulate reserves to protect against financial risks;
- Provide price-based incentives for prudent and temporary borrowing;
- Support the IMF balance sheet to enable provision of balance of payments support when needed.
Exemptions and trust financing
- Loans under the Poverty Reduction and Growth Trust (PRGT) are concessional and do not pay charges or surcharges.
- Loans under the Resilience and Sustainability Trust (RST) that help low-income and vulnerable middle-income countries build resilience also do not pay surcharges (or charges) as described.
Additional governance and operational measures approved
- Reviews of the surcharge policy will be conducted on a regular five-year cycle, or earlier if circumstances warrant, to allow timely assessments and enhance predictability for members and markets.
- Disclosures and operational procedures will be strengthened to give authorities more information about the cost of Fund borrowing during GRA financing negotiations.
- Net income after distributions will be exclusively allocated to the IMF’s Special Reserve until it reaches the precautionary balances floor of SDR 20 billion, to further strengthen the backstop provided by precautionary balances for the absorption of possible losses.
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