Press Release No. 06/15

Press Release No. 06/15

The Executive Board of the International Monetary Fund (IMF) has completed its mid-year review of the Fund's income position for the financial year ending on April 30, 2006 (FY 2006) and has been informed of plans by staff for a more detailed review of the institution's financial position, according to the mid-year review released today.

The Board conducts an annual mid-year review of the Fund's income position, usually by the end of each December; the latest review was updated on January 5, 2006 to include analysis of the large repayments by Brazil and Argentina that were completed on December 27, 2005 and January 4, 2006, respectively. The review states that the repayments "are a welcome sign" of Brazil and Argentina's "success in strengthening their external positions." In addition, it notes that the repayments underline the revolving nature of the Fund's resources, which is a central element of the IMF's financial structure.

The Brazil and Argentina repayments have no immediate impact on the FY 2006 margin over the Special Drawing Right interest rate that the IMF charges its borrowers, which remains fixed through the end of the current financial year. According to the report submitted to the Executive Board, advance repayments "add to the Fund's already comfortable liquidity position."

The main measure of IMF liquidity, the one-year forward commitment capacity of the Fund, is already at a record high, and has risen further to about SDR 112 billion (about US$162 billion), according to the mid-year review. Fund credit outstanding in the General Resources Account has declined from SDR 39.1 billion (about US$56 billion) at end-November 2005 to SDR 21.7 billion (about US$31 billion) in early January 2006. Apart from a short period in 1990, this is the lowest level of Fund credit outstanding since the early 1980s.

No immediate action is required by the Executive Board according to income safeguard rules in place. However, the mid-year review prepared by staff notes that the Fund's income position "depends heavily on the future path of Fund credit," and that "a comprehensive examination of the options for handling the Fund's income position in FY 2007 and beyond is needed." The IMF's Finance Department will be circulating a paper to the Executive Board that will consider the financing issues facing the Fund. The paper will discuss various combinations of measures that could be considered, with the aim of facilitating a consensus on the appropriate approach for FY 2007, before the end of the current financial year.

ANNEX

Updated Projected Income and Expense
Financial Year 2006

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1/ Projections based on assumptions set out in The Fund's Income Position for FY 2006-Midyear Review.
2/ Updated projections based on assumptions set out in The Fund's Income Position for FY 2006-Midyear Review, except for credit outstanding following the advance repurchases by Argentina and Brazil.
3/ Initial Projections made at the beginning of FY 2006 are based on assumptions set out in Review of the Fund's Income Position for FY 2005 and FY 2006.
4/ The IAS 19 expense for FY 2006 was not available when the income projections for FY 2006 were prepared.