On April 27, 2020, the Executive Board of the International Monetary Fund (IMF) completed its annual review of the Fund’s income position for the financial year ending April 30, 2020 (FY 2020) and set the margin for the lending rate for IMF credit for FY 2021 and FY 2022.
FY 2020 Income Position
Net operational income, of about SDR 1.4 billion (US$1.9 billion), mainly comprising income from lending and investments, remained strong for FY 2020, broadly in line with the April 2019 estimate. Robust income from lending reflects the ongoing elevated use of Fund credit.
Net operational income, mainly comprising income from lending and investments, remained strong for FY 2020 and is expected to remain so in FY 2021–2022.
Robust income from lending reflects the ongoing elevated use of Fund credit that is expected to remain high, reflecting the Fund’s support to members to help address the COVID-19 pandemic.
An unrealized pension-related accounting adjustment that is projected in FY 2020 offsets net operating income and the resulting loss will be absorbed through the Fund’s reserves, which remain sizeable.
The Executive Board agreed to maintain the margin for the rate of charge on IMF lending unchanged at 100 basis points for financial years FY 2021 and FY 2022.
An unrealized pension-related adjustment in FY 2020, stemming mainly from the actuarial remeasurement of staff retirement plan assets and liabilities, as required by the accounting standard IAS 19, is expected to offset the Fund’s net operational income, substantially contributing to a net loss of about SDR 1.1 billion (US$1.6 billion) for the year.
The net loss will reduce the IMF’s precautionary balances, which are projected to amount to SDR 16.5 billion (US$22.6 billion) at end‑FY 2020.
The Executive Board also adopted other decisions that have a bearing on the Fund’s finances. These included decisions to transfer income from the Fixed-Income Subaccount of the Fund’s Investment Account (IA) to the General Resources Account (GRA) and to reimburse costs to the GRA.
Projections of the Fund’s income are currently subject to larger than normal uncertainties related to the impact of the COVID-19 pandemic on key assumptions.
Uncertainties associated with the discount rate used to measure the Fund’s retirement plan obligations and asset returns can have a large impact on the actual outcome, given the heightened volatility in financial markets in the wake of the pandemic.
The FY 2020 annual financial statements will update for the impact of changes in key assumptions made at the time of the April projections.
FY 2021–2022 Lending Rate and Income Position
The IMF’s basic lending rate for member countries’ use of IMF credit is the SDR interest rate plus a fixed margin. The Board sets the margin for a period of two financial years, in line with the principle that the margin should be stable and predictable.
In April 2020 the Executive Board agreed to maintain the margin for the rate of charge unchanged at 100 basis points for financial years FY 2021 and FY 2022.
As noted above, operational income for FY 2021 and FY 2022 is expected to remain strong, with projections pointing to annual net income of SDR 1.4 billion (US$1.9 billion) and SDR 1.7 billion (US$2.4 billion), respectively.
However, these projections are subject to a high degree of uncertainty related to the scale of new lending associated with the COVID-19 economic fallout, as well as the timing and amounts of disbursements under approved arrangements included in the projections.
Additional key uncertainties relate to actuarial assumptions such as the discount rate and the performance of the Fund’s investment and retirement plan asset portfolios in the wake of the pandemic.
Continued positive projected net income will allow the IMF to continue to accumulate precautionary balances.