Press Release No. 08/160

Press Release: IMF Executive Board Reviews Fund's Income Position and Sets Lending Rate for FY2009

July 3, 2008

On April 28, 2008 the Executive Board of the International Monetary Fund (IMF) completed its annual review of the IMF's income position for the financial year ended April 30, 2008 (FY 2008) and set the lending rate for IMF credit for the financial year ending April 30, 2009 (FY 2009).

FY 2008 Income Position

The Fund's overall FY 2008 income position was projected at a shortfall of SDR 55 million (US$89 million) after accounting for organizational restructuring (see Press Release No. 08/94) and other non-operational costs.

Net operational income for FY 2008 before restructuring and other non-operational costs was projected at SDR 2 million (US$3 million), compared with initial projections of an income shortfall of SDR 145 million (US$234 million). This improvement stemmed primarily from the strong performance of the Fund's investment portfolio comprising primarily fixed-income securities, the one-time income effects associated with the settlement of overdue charges following Liberia's arrears clearance, and lower expenditures.

FY 2009 Lending Rate and Income Position

The Executive Board agreed to set the rate of charge—the interest rate the IMF charges member countries for non-concessional IMF credit—at 100 basis points above the SDR interest rate for FY 2009 (108 basis points in FY 2008). The decision marks an important step toward implementation of the new income model and is consistent with the key principles for setting the rate of charge recommended by the Crockett Committee. These principles include a rate of charge that should cover the IMF's intermediation costs and the build up of reserves, rather than the full range of the Fund's activities, and that should be broadly aligned with long-term credit market conditions.

Other key components of the new income model, which the Board of Governors overwhelmingly approved on May 5 (see Press Release No. 08/101), include a broadening of the Fund's investment authority and creation of an endowment funded by limited gold sales.

The projections for FY 2009, which do not assume any income from the above two measures, indicate a net operational income shortfall of about SDR 150 million (US$242 million).

The Executive Board also adopted a number of other decisions that have a bearing on the IMF's finances, including with respect to the use of FY 2008 investment income to meet expenses of conducting the business of the Fund during FY 2008, and the continuation of special charges on certain overdue obligations.