By Member countries will be relieved from the high cost of borrowing from the International Monetary Fund (IMF) from 1 November 2024. The Fund is said to reduce the costs by 36 percent.
It is no doubt that the global economic environment is facing a storm with high interest rates; though the trend around the world shows that Central Banks in developed economies including the United States, Europe and England are lowering their rates, the environment still remains uncertain.
The Executive Board of the IMF in its meeting on 11 October 2024, in Washington DC to review Charges and Surcharges Policy, resolved to lower the borrowing costs for members.
According to the Managing Director of the IMF, Kristalina Georgieva, IMF’s 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.
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 1 November 2024,” said Kristalina Georgieva.
“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.
This reform helps ensure that the IMF can continue serving our members in a changing world,” she concluded.
