The Executive Board of the International Monetary Fund (IMF) has announced a Review of the Charges and Surcharge Policy which reduces the cost of borrowing to countries at a lower rate.
The new rates would take effect from November 1st 2024 according to the statement released yesterday.
The Managing Director of the IMF, Kristalina Georgieva, said the global economy is challenging for many countries, and the Fund has to slash its lending rates by 36 per cent or $1.2 billion equivalent annually to support them.
According to the statement, “In a challenging global environment and at a time of high interest rates, our membership has reached consensus on a comprehensive package that substantially reduces the cost of borrowing, while safeguarding the IMF’s financial capacity to support countries in need.
“The approved measures will lower IMF borrowing costs for members by 36 per cent or about $1.2 billion annually. The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.
“This is achieved by reducing the margin over the SDR interest rate, raising the threshold for level-based surcharges, lowering the rate for time-based surcharges, and increasing the thresholds for commitment fees. The approved package will take effect on November 1, 2024.
“While substantially lowered, charges and surcharges remain an essential part of the IMF’s cooperative lending and risk management framework, where all members contribute and all can benefit from support when needed. Together, charges and surcharges cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent borrowing.
“This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most,” she said.
The International Monetary Fund is a major financial agency of the United Nations and is regarded as the global lender of last resort to National governments. Through a quota system, countries contribute funds to a pool from which countries can borrow if they experience balance of payments problems.
The IMF works to stabilize and foster the economies of its member countries by its use of the fund, as well as other activities such as gathering and analyzing economic statistics and surveillance of its members’ economies.
