The International Monetary Fund (IMF) has announced that it is reducing the costs for countries that borrow money from it by up to 36%, which is projected to yield annual savings of approximately $1.2 billion for these nations.
In a statement issued by the IMF Press Centre regarding the review of the charge and surcharge policy, the fund stated that the difficult global environment and elevated interest rates required the reduction.
According to the statement, the reduction will primarily impact a smaller number of countries, decreasing from 20 currently to 13 by 2026. The fund specified that these changes involve lowering additional fees on loans and increasing the threshold at which these fees apply. However, some charges will persist to ensure that the IMF can adequately support countries in need and manage associated risks.
Following the outcome of the meeting, Ms Kristalina Georgieva, Managing Director of the IMF, issued the following 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 dollars 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 Special Drawing Rights (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″.
She further added “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.”
The IMF Managing Director stated that the reforms would enable the organization to continue effectively serving its members in an evolving global landscape. The statement also noted that charges and surcharges do not apply to borrowing from the IMF’s Poverty Reduction and Growth Trust, which provides concessional financial support to low-income member countries.
