Public Information Notice No. 05/69

Public Information Notice: IMF Executive Board Approves the FY2006 Administrative and Capital Budgets

May 27, 2005

On April 22, 2005, the Executive Board of the International Monetary Fund (IMF) approved the IMF's administrative and capital budgets for FY2006. In keeping with the policy of informing the public of the IMF's financial activities, the staff paper "The FY2006 Budget and the Medium-Term Budgetary Framework," prepared for the Board's discussion, has been published via the IMF's website.

Background

The IMF's financial year runs from May 1 through April 30. The IMF's administrative budget provides funds for personnel costs, travel, and other recurrent expenses. It is approved by the Board on a gross and a net basis. The gross budget includes expenditures that are funded from receipts—mainly external donor contributions for capacity building (technical assistance and training of member country officials) and other revenues, including from the sale of IMF's publications. The net budget is funded from the net income of IMF operations (see "Review of the Fund's Income Position for FY2005 and FY2006.")

The Executive Board sets limits on the gross and the net expenditures and a ceiling on full-time (i.e., open-ended and limited-term) staff positions. The Executive Board also sets a three-year ceiling on expenditures for capital projects starting in the forthcoming financial year. Any funds not spent within this time frame lapse, unless re-appropriated by the Executive Board. Capital projects comprise building facilities, including regulatory-mandated and security-related upgrades, and information technology (IT) projects.

Executive Board Decisions on the FY2006 Budget

On April 22, the IMF Executive Board approved:

• a gross budget of US$937 million (US$876.1 million net of estimated receipts);

• an unchanged ceiling of 2,802 full-time staff (FTS) positions; and

• an appropriation for capital projects beginning in FY2006 in the total amount of US$52.5 million applied to the following project categories:

I. Building facilities US$28.5 million

II. Information technology US$24 million

The Administrative Budget for FY2006

The administrative budget for FY2006 has been formulated as a transitional budget, pending completion of the IMF's medium-term strategic review and two other major reviews—of employment, compensation, and benefits, and information technology, respectively. The latter two cover areas of expenditure that account for more than 75 percent of the total administrative budget. Within a zero-real growth top-down constraint, the FY2006 budget provides additional resources to further enhance the effectiveness of surveillance, and to strengthen the IMF's support for low-income member countries. To accommodate these priorities, resources are to be redeployed, principally from support to primary activities.

Accordingly, the FY2006 budget increases resources devoted to surveillance, with emphasis on the financial sector and low-income countries, and to work on Fund programs. A broadly stable allocation of resources for the delivery of technical assistance and training to member country officials is also planned. However, the IMF's ability to deliver these services is increasingly dependent on the availability of external funding from donors.

In terms of input costs, the FY2006 administrative budget allows for a 3.6 percent structural salary adjustment and incorporates a decline in real terms—for the second successive year—in the dollar provisions for travel and building and other expenses categories; reductions to some budget items that have not been fully used in recent years; and provision for additional expenses on strengthening security measures, based on recommendations of the U.S. Secret Service.

The Medium-Term Capital Plan and the Capital Budget for FY2006

The medium-term capital plan for FY2006-FY2008, totaling US$148.3 million, is also of a transitional nature, pending the above-mentioned reviews. Within the medium-term plan, the Executive Board approved the FY2006 capital budget of US$52.5 million, of which US$28.5 million is for building facilities and US$24 million for IT projects. The highest priority in the capital plan is new security-related projects, totaling about US$30 million over the next three years, which have been approved, following a report by the U.S. Secret Service. For IT, the highest priority is the creation of back-up facilities to ensure availability of all critical systems in the case of a serious disruption.

The Medium-Term Budgetary Framework (MTBF)

The MTBF reflects the cost of all existing policies, including the new policy initiatives, assuming the same price/cost increases for personnel, travel, and other categories as those approved in the current budget and an unchanged ceiling on staff positions. Pending completion of the IMF's medium-term strategy, the MTBF for FY2007 and FY2008 has been formulated mainly for illustrative purposes. The application of the assumed price increases for the Fund's main inputs and, after allowing for the extra costs of holding the next Annual Meetings in Singapore (US$5 million), yields annual increases in gross and net administrative budgets of 4.4 percent and 3.3 percent in FY2007 and FY2008, respectively.