The Executive Board of the International Monetary Fund (IMF) on Friday concluded its review on IMF Charges and Surcharge Policy to substantially reduce the cost of borrowing by members of the Fund. The new policy which takes effect on November 1, 2024 reduces basic charges on SDR interest rate by 60 basis points previously 100; raise the threshold for level-based surcharges by 300% at quota; lower the rate for time-based surcharges by 75 basis points; and increase the thresholds for commitment fees by 200% and 600% of quota from 115% and 575% respectively.

According to IMF boss, Kristalina Georgieva, the move will lower the cost of borrowing for member countries by 36 percent while preserving the IMF’s financial capacity to support countries in a challenging global environment.

She said, “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 percent, or about US$1.2 billion annually. The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.”

The last time IMF reviewed its surcharge policy was in 2016. At the time, global interest rates had risen sharply, pushing up borrowing costs for member countries while facing successive shocks that led to record levels of IMF lendings. The 2024 review however is part of a continuous effort to ensure IMF’s lending policies remain fit for purpose in a changing global economy, and at a time of high borrowing costs.

The loans that all IMF members have access to are paid through a General Resources Account (GRA). These loans are subjected to charges (SDR interest rate + a small margin), surcharges (for loans above a certain threshold and duration), and commitment fees (for precautionary/non-disbursing arrangements). The charges, surcharges, and commitment fees levied on GRA loans are an essential part of the IMF’s cooperative lending and risk management framework. All members contribute and all can benefit from financial support when needed.

It is noteworthy that charges and surcharges do not apply to borrowing from low-income countries who receive concessionary loans under the IMF’s Poverty Reduction and Growth Trust. Ms Georgieva was therefore optimistic the reform would help to ensure that IMF continues to serve its members in a changing world.