Press Release No. 24/385

IMF Executive Board Concludes the Review of Charges and the Surcharge Policy, and Approves Reforms

October 21, 2024

• The IMF Executive Board reached consensus on reforms of charges, surcharges, and commitment fees that will substantially reduce the cost of borrowing from the General Resources Account (GRA) at a time of high global interest rates, while safeguarding the IMF’s financial capacity to support its members in need.
• The reform package is expected to lower IMF borrowing costs for members by about US$1.2 billion annually and reduce payments on the margin of charges and surcharges on average by 36 percent. The number of surcharge payers is expected to decline from 20 to 13 countries (in FY2026).
• The IMF will reduce the margin paid over the SDR interest rate and the time-based surcharge rate, and increase the borrowing thresholds above which level-based surcharges and commitment fees apply. These changes will take effect on November 1, 2024.

Washington, DC – October 21, 2024: The Executive Board of the International Monetary Fund (IMF) on October 11, 2024 concluded the Review of Charges and the Surcharge Policy, which for the first time jointly covered charges, surcharges, and commitment fees. The review is part of a continuous effort to ensure the IMF’s lending policies remain fit for purpose and the IMF is able to support its members in a challenging global environment.

The Executive Board reached consensus on a comprehensive package of measures to meaningfully reduce the cost of borrowing for members, preserve incentive mechanisms for prudent and temporary borrowing, and safeguard the strength of the IMF’s balance sheet.

The reform package is expected to lower borrowing costs by about US$1.2 billion (SDR 880 million) annually. It will reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of surcharge payers is expected to decline from 20 to 13 countries (in FY2026).

Charges and surcharges are important elements of the IMF’s cooperative lending and risk management framework. They provide incentives for prudent and temporary borrowing that help underpin the revolving nature of IMF resources and allow for the accumulation of reserves to mitigate financial risks. This supports the IMF’s financial foundation, enabling it to play its role as a lender at the center of the global financial safety net.

The Executive Board approved the following changes:

• Lowering the margin paid over the SDR interest rate by 40 percent, to 60 basis points from 100 basis points;
• Increasing the borrowing threshold above which surcharges apply by 60 percent, to 300 percent of quota from 187.5 percent of quota;
• Aligning the thresholds above which commitment fees apply to the overall annual and cumulative access limits under the GRA (200 and 600 percent of quota, respectively); and
• Reducing the time-based surcharge rate by 25 percent, to 75 basis points from 100 basis points.

These changes will become effective on November 1, 2024.

The Board also approved the following: (i) setting a regular review cycle for the surcharge policy to allow for timely assessments and updates to the surcharge policy framework, every five years or earlier if warranted; (ii) strengthening disclosures and operational procedures to ensure that the authorities have adequate information on the cost of Fund borrowing earlier in negotiations of GRA financing; and (iii) allocating net income after distributions to the Special Reserve until it reaches the Precautionary Balances (PB) floor of SDR 20 billion. The formal decision to place net income after distributions to the Special Reserve is to be taken by the Board at the annual reviews of the Fund’s income position starting at end-FY2025.

Executive Board Assessment[1]

Executive Directors welcomed the Review of Charges and the Surcharge Policy. They considered that charges and the surcharge policy are integral parts of the Fund’s multilayered risk management framework, providing price-based incentives for prudent and temporary borrowing, helping to accumulate reserves to protect the Fund’s balance sheet against financial risks, and thus preserving the Fund’s cooperative lending model at the center of the global financial safety net. They noted that the review is an important part of a broader ongoing effort to ensure that the Fund’s lending policies continue to meet the needs of the membership in the current complex global context and agreed that the proposed reforms will meaningfully contribute to these efforts. 

Directors noted that borrowing costs for members have increased considerably. The sharp rise in global interest rates in recent years pushed up the floating SDR interest rate and, as a result, the basic rate of charge. Meanwhile, Fund lending income increased notably, driven by an expansion of credit to near historical peaks, and the Fund reached its medium-term target for Precautionary Balances of SDR 25 billion in late FY2024, buttressing the strength of its balance sheet. 

Directors agreed that policy changes should be guided by four principles: (i) meaningfully lowering the cost of borrowing for members; (ii) sustaining effective incentive mechanisms; (iii) preserving adequate income generation capacity; and (iv) maintaining policy simplicity. They broadly agreed that the proposed reforms were consistent with these four guiding principles. 

Directors broadly supported the reform package outlined in the staff report. They noted that the package balances the interests of creditors and debtors by meaningfully reducing borrowing costs while preserving the price-based incentive mechanism and income generation capacity. They welcomed the expected 36 percent average reduction in borrowers’ costs on account of the lowering of the margin for the basic rate of charge and surcharges, which would help create additional policy space and improve their capacity to repay the Fund. At the same time, they noted that the income outlook after implementation of the proposed measures remained robust, providing for a continued capacity to accumulate reserves, even after possible income distributions to members and under adverse lending and/or investment income scenarios.  

Directors broadly supported the proposal to reduce the margin for the basic rate of charge from 100 basis points to 60 basis points under Rule I 6(4). A number of Directors expressed their preference for a larger reduction in the margin to further lower the cost for GRA borrowers while being consistent with the relevant rules. A few others would have favored a smaller reduction to safeguard the Fund’s strong financial position, which underpins its capacity to support member countries. 

On surcharges, Directors agreed with the proposed approach of making parametric adjustments to the current policy framework, although a few would have preferred more fundamental changes to the surcharge architecture. Directors concurred with the proposal to increase the level-based surcharge threshold from 187.5 percent of quota to 300 percent of quota. 

Directors supported the proposal to reduce the time-based surcharge rate from 100 basis points to 75 basis points. Some Directors, however, saw scope for further reductions in the time-based rate, including in future reviews, while a few others would have preferred to maintain the current rate. 

Directors welcomed the proposal to align the commitment fee thresholds to the overall annual and cumulative access limits under the GRA (200 and 600 percent of quota, respectively). They noted that these alignments would broadly offset the erosion in recent years and simplify the overall GRA lending policy framework.  

Directors welcomed the proposal to conduct reviews of the surcharge policy on a regular five-year cycle going forward, which would allow for more timely assessments and updates to the surcharge policy framework and help enhance predictability for members and markets. They noted that reviews could be conducted earlier than every five years if warranted, for instance, by unexpected developments in the Fund’s income and reserves outlook. Some Directors would have preferred to agree now for the next review to take place in three years, followed by reviews on a five-year cycle. 

Directors welcomed the proposed strengthening of procedures to ensure an earlier and more comprehensive disclosure of charges and surcharges in the negotiation of financial arrangements, to better inform country authorities’ borrowing decisions.    

Directors stressed the importance of a strong balance sheet to support the IMF’s lending to members with financing needs. To further strengthen the backstop provided by Precautionary Balances for the absorption of possible losses, they agreed with the staff proposal, going forward, to align the level of resources placed in the Special Reserve of the General Resource Account (net of pension adjustments and the endowment) with the SDR 20 billion floor of the Precautionary Balances. Directors noted that this could be achieved by allocating net income after any distributions in future financial years exclusively to the Special Reserve until it reaches the level of the Precautionary Balances floor. Decisions to this effect would be taken by the Board at the annual reviews of the Fund’s income position starting at end FY2025. 

Directors underscored the need to carefully communicate to a wide range of stakeholders the purpose of the policies, the reform measures, and their impact on member countries and the IMF.

Additional links:

FAQs on the Review of Charges and the Surcharge Policy

Factsheet on IMF Lending

[1] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.