Press Release No. 09/226

Press Release: IMF Executive Board Reviews Fund's Income Position and Sets Lending Rate for FY 2010

June 22, 2009

The Executive Board of the International Monetary Fund (IMF) has completed its annual review of the IMF's income position for the financial year ended April 30, 2009 and set the lending rate for IMF credit for the financial year ending April 30, 2010.

FY 2009 Income Position

The Fund's overall FY 2009 net income position is projected at SDR 82 million (about US$126 million) after accounting for organizational restructuring (see Press Release No. 08/94). The positive outturn compared with an initial projection of a shortfall of about SDR 190 million (about US$292 million). It stemmed primarily from higher than expected income on the Fund’s investment portfolio, which is made up largely of fixed-income securities, and an increase in lending income reflecting greater demand from members for Fund financing in light of global economic conditions.

In addition, net administrative expenditures for FY 2009 are projected to be US$50 million below budget—a temporary consequence of the restructuring process—although this will be more than offset by the depreciation of the SDR, the Fund’s unit of account, against the U.S. dollar.

FY 2010 Lending Rate and Income Position

The Fund’s net operational income is projected to increase in FY 2010. Although investment income is projected to fall in the absence of capital gains seen during FY 2009 from the sharp decline in interest rates, lending income is expected to rise in the near-term given the recent significant demand for Fund financing. A baseline scenario that includes arrangements already approved gives a projected FY 2010 net operational income position of about SDR 290 million (US$446 million). Under a high-lending scenario based on possible new loans under discussion, a net operational income position of about SDR 738 million (US$1,136 million) is projected. These projections are subject to a higher than usual degree of uncertainty given the difficulty of predicting future demand for Fund financing and the evolution of the financial crisis.

The Executive Board also agreed to maintain the margin on the rate of charge—the interest rate the IMF charges member countries for non-concessional IMF credit—unchanged at 100 basis points above the SDR interest rate for FY 2010, which is consistent with the key principles agreed last year for setting the rate of charge (see Press Release No. 08/160).

The Fund’s near-term income outlook does not alter the need for timely implementation of a sustainable income model agreed by the Executive Board in April 2008 to reduce the Fund’s reliance on temporary lending income. The FY 2010 projections assume a key element of this new income model (see Press Release No. 08/74), an endowment created with the profits from a limited sale of gold, would be initiated in the second half of FY 2010 and evenly phased over three years. The proposed gold sales have not yet been formally approved.