IMF sets up investment fund to bolster revenue
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The IMF has taken the first steps toward adapting its financing model-essentially unchanged for the past 25 years-to current circumstances and expected future needs, Finance Department Director Michael Kuhn says in an interview with IMF Survey. In an initial move, the IMF announced on May 4 the creation of an $8.7 billion investment account, expected to boost IMF income over the medium term. A committee of experts will examine future funding options.
Page 131
The IMF has taken the first steps toward adapting its financing model-essentially unchanged for the past 25 years-to current circumstances and expected future needs, Finance Department Director Michael Kuhn said in an interview with the IMF Survey. In an initial move, the IMF announced on May 4 the creation of an $8.7 billion investment account expected to boost IMF income over the medium term.
Like other financial institutions, the IMF earns income from interest charges and fees levied on its loans and uses the income to meet funding costs, pay administrative expenses, and build up precautionary balances. But income has fallen short of target recently because of a significant decline in the level of IMF credit outstanding, reflecting the global financial stability of recent years, the pattern of global imbalances, and the easy access of countries to private capital markets.
The Fund's credit outstanding fell to its lowest level in 25 years, to SDR 19.4 billion ($29 billion) in March this year, following the early repayment of large loans by Argentina and Brazil. Credit outstanding had reached a peak of over SDR 70 billion ($105 billion) in 2003. The SDR, or Special Drawing Right, is the Fund's unit of account-a basket of four major currencies.
The early repayments have been welcomed by the IMF as a sign of progress in countries recovering from economic crisis. "The recent decline in credit outstanding to the IMF is a very welcome development," said Kuhn in the interview. "It has given added impetus to ongoing efforts to develop other sources of funding because our primary job should not be lending, and we cannot live off the margin on lending alone," he added.
Reflecting changes associated with globalization, Managing Director Rodrigo de Rato has outlined a new medium-term...
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