Press Release No. 07/2

Press Release: IMF Executive Board Completes Mid-Year Review of Fund's FY 2007 Income Position

January 8, 2007

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 April 30, 2007 (FY 2007). The Board conducts an annual mid-year review of the Fund's income position, usually in December each year. The latest mid-year income review was completed on a lapse of time basis on January 3, 2007.

The FY 2007 income shortfall is now projected at about SDR 70 million (US$105 million) compared to initial projections of about SDR 60 million (US$90 million). The review found that advance repayments during FY 2007 by Indonesia, Serbia, and Uruguay worsened the income picture in the short run, but have not fundamentally changed the medium-term outlook as they merely bring forward some of the shortfalls built into the previous medium-term projections.¹ Advance repayments increased the projected FY 2007 income shortfall by over SDR 45 million (US$67 million), but this was offset by higher global interest rates resulting in higher-than-projected income in the newly established Investment Account (see Press Release No. 06/90), and also by lower-than-expected administrative expenditures in SDR terms—the IMF's unit of account.

The Board decided to suspend contributions to the special contingent account by IMF debtor and creditor countries in the second half of FY 2007 to alleviate the impact on debtor countries whose contributions were projected to sharply increase as a result of the overall low credit levels. According to the report to the Executive Board, the decline in Fund credit outstanding has increased the burden on debtor countries under the burden sharing mechanism, since contributions are based on relative credit levels. Burden sharing contributions are collected from both IMF debtor and creditor countries in equivalent amounts by increasing the rate of charge on Fund credit outstanding and reducing the rate of remuneration to creditor countries. The Fund maintains precautionary balances, comprising its reserves and the special contingent account, to provide protection against the risk of an income shortfall and losses of a capital or general nature. The IMF's total precautionary balances at midyear totaled SDR 7.6 billion (US$11.4 billion) with the special contingent account balance amounting to SDR 1.7 billion (US$2.6 billion). Suspension of contributions will reduce the Fund's FY 2007 target for precautionary balances by SDR 30 million (US$45 million).

¹ The Philippines announced on December 28, 2006 (see Press Release No. 06/302) that it will fully repay its outstanding financial obligations to the IMF of SDR146 million (about US$220 million). The advance repayment does not have a significant impact on the income projections.