Press Release: IMF Managing Director de Rato Appoints Committee of Eminent Persons to Study Sustainable Long-Term Financing of IMF Running Costs

May 18, 2006

Press Release No. 06/100

IMF Managing Director Rodrigo de Rato today announced the appointment of a committee of eminent persons to provide the Fund with an independent view of the available options for ensuring that it has a sustainable and durable income base with which to finance its running costs over the long term.

The committee will be chaired by Andrew Crockett, President of JP Morgan Chase International and former General Manager of the Bank for International Settlements. Its members are Mohamed A. El-Erian, President and Chief Executive Officer of Harvard Management Company; Alan Greenspan, Chief Executive Officer of Greenspan Associates and former Chairman of the Federal Reserve Board; Tito Mboweni, Governor of the Reserve Bank of South Africa; Guillermo Ortíz, Governor of the Bank of Mexico; Hamad Al-Sayari, Governor of the Saudi Arabian Monetary Agency; Jean-Claude Trichet, President of the European Central Bank; and Zhou Xiaochuan, Governor of the People's Bank of China.

Mr. de Rato said, "I am delighted to announce the appointment of this committee and to thank, on behalf of the Fund's membership, these eminent persons for agreeing to bring their experience, expertise and wisdom to this important issue for the international community. I look forward to their offering recommendations that can command the support of the membership for a new financing model for the IMF that will allow us to continue to play our central role in the international monetary system, including through our surveillance activities and by providing technical assistance."

The main task of the committee—whose creation was envisaged by the Managing Director in his Review of the Fund's Medium-Term Strategy (MTS)—will be to identify and assess the full range of options available and to make specific recommendations for a sustainable long-term financing of the IMF's running costs. The committee will report to the Managing Director in the first quarter of 2007 and its work will be supported by staff of the IMF.


The Fund's current financing model relies chiefly on the income derived from its lending operations to meet the costs of running the Fund, including its surveillance and technical assistance activities. This has generated adequate income as long as member countries have needed to resort to Fund financing, but a financing model where the Fund's surveillance and technical assistance activities are financed by the borrowing members is out of date in a world where members rely increasingly on private capital flows. As a multilateral institution set up to promote global financial stability and crisis prevention, the Fund welcomes this development but, as noted by the Managing Director in the MTS, it also points to the need for the Fund to broaden its income base and secure a predictable and stable source of income to finance its central role in the global financial system.

The focus of the committee's work is on long-term changes to the way the Fund finances its core activities such as surveillance and technical assistance. The Fund has a strong balance sheet, and its current level of reserves of SDR 5.9 billion (about US$ 8.8 billion) can finance budgetary shortfalls well into the next decade. However, as a result of declining lending, the Fund faces in the coming years a potential annual income shortfall on its current administrative budget.

The committee will not examine the financing of the Fund's lending operations to its member countries. Fund loans are financed by contributions from its membership, chiefly in the form of quotas, and the Fund's lending capacity is currently at an all-time high of about SDR 135 billion (US$200 billion).

The Fund's Executive Board has twice recently discussed the Fund's finances. In March, the Board agreed on a two-pronged strategy in response to the change in the Fund's income outlook. This will first involve immediate steps to address a projected income shortfall in FY 2007, and then lead to the development and assessment of a full range of options available to close projected medium-term financing gaps and to place the Fund's income position on a sustainable footing (see Press Release No. 06/43). Following this discussion, on April 28, the Board completed its annual review of the IMF's income position for the fiscal year ending April 30, 2006 (FY 2006), set the rate of charge for FY 2007, and approved the establishment of an Investment Account as a first step to broaden the IMF's income base (see Press Release No. 06/90).


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