On December 12, 2008, the Executive Board of the International Monetary Fund (IMF) completed the midyear review of the Fund's income position for the financial year ending April 30, 2009 (FY 2009). The Fund's income outlook for FY 2009 has improved, mainly as a result of new lending activity associated with the turmoil in global financial markets, and-to a lesser extent-as a result of stronger-than-projected returns in the Fund's Investment Account.
The updated outlook for FY 2009 now projects net income of about SDR 7 million (about US$11 million), compared with a shortfall of about SDR 190 million (about US$294 million) envisaged at the beginning of the financial year. However, the actual outcome for FY 2009 remains subject to considerable uncertainty related to the timing and amounts of disbursements under current arrangements with member countries, as well as potential new arrangements and the performance of the Investment Account.
The improved income outlook reflects new lending activity that is estimated to generate additional Fund income of around SDR 160 million (about US$247 million), assuming all disbursements under the recently approved arrangements are made as scheduled. Income from returns in the Investment Account was higher than expected at SDR 173 million (about US$267 million) in the first half of the year, bolstered by the flight-to-quality in global financial markets. The initial projection for the full year for income from the Investment Account had been SDR 194 million (about US$300 million).
Net administrative expenditures are projected to be lower by SDR 22 million (about US$35 million) than set out in the budget. However, the projected budget underrun is broadly expected to be offset, in SDR terms, by the effects of the U.S. dollar appreciation vis-à-vis the SDR during FY 2009.
In completing the midyear review, the Executive Board decided to leave the rate of charge-the interest rate the IMF charges member countries for non-concessional IMF credit-unchanged at 100 basis points above the SDR interest rate for FY 2009.
The changes in the Fund's near-term income outlook do not affect the plans for implementing a new sustainable income model that is independent of the Fund's lending activities-a key element of ongoing Fund reforms. The new income model, which includes a broadening of the Fund's investment authority and the creation of an endowment funded by limited gold sales, was overwhelmingly approved by the Board of Governors on May 5, 2008, and the approval process by member countries' domestic legislatures is in progress.
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