Chapter

General Department

Author(s):
International Monetary Fund
Published Date:
October 2008
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General Department: Consolidated balance sheets as at April 30, 2008, and 2007

(In thousands of SDRs)

20082007
Assets
Usable currencies163,072,460160,989,914
Credit outstanding (Notes 6 and 14)5,896,0747,333,633
Other currencies40,822,66140,766,433
Total currencies (Note 5)209,791,195209,089,980
SDR holdings1,852,2782,597,564
Interest and charges receivables (Note 11)76,416141,762
Investments (Note 7)6,786,2296,536,292
Gold holdings (Note 8)5,851,7715,851,771
Other assets (Notes 9 and 18)645,682674,838
Structural Adjustment Facility loans (Note 6)8,8408,840
Total assets225,012,411224,901,047
The accompanying notes are an integral part of these consolidated financial statements.These consolidated financial statements were approved by the Managing Director and the Director of Finance on June 25,2008.
20082007
Liabilities (including quotas)
Remuneration payable44,32488,427
Investment trades payable206,06995,311
Other liabilities140,29471,553
Accrued MDRI-I Trust grants (Note 10)189,003299,024
Special Contingent Account (Note 15)1,188,0191,713,019
Quotas, represented by (Note 5)
Reserve tranche positions13,481,53514,995,543
Subscription payments203,891,165201,752,257
Total quotas217,372,700216,747,800
Total liabilities (including quotas)219,140,409219,015,134
Reserves of the General Resources Account.5,750,6005,877,073
Retained earnings of the Investment Account
Resources of the Special Disbursement Account121,4028,840
Total liabilities, reserves, and resources.225,012,411224,901,047
The accompanying notes are an integral part of these consolidated financial statements.These consolidated financial statements were approved by the Managing Director and the Director of Finance on June 25,2008.
The accompanying notes are an integral part of these consolidated financial statements.These consolidated financial statements were approved by the Managing Director and the Director of Finance on June 25,2008.
/s/ Michael G. Kuhn/s/ Dominique Strauss-Kahn
Director, Finance DepartmentManaging Director

General Department: Consolidated income statements for the years ended April 30, 2008, and 2007

(In thousands of SDRs)

20082007
Operational income
Interest and charges (Note 11)511,990686,974
Interest on SDR holdings88,445124,444
Net income from investments (Note 7)328,980193,330
Other charges and income (Note 11)9,53316,421
938,9481,021,169
Operational expenses
Remuneration (Note 16)374,682483,991
Administrative expenses (Note 17)680,762608,539
1,055,4441,092,530
Net operational loss(116,496)(71,361)
MDRI grant assistance (Note 10)102,586(11,157)
Transfers to the Special Disbursement Account (Note 12)30,705195
Contribution from the Special Disbursement Account to the PRGF-ESF Trust (Note 12)(30,706)(195)
Net income/(loss)(13,911)(82,518)
Net income/(loss) of the General Department comprises
Net loss of the General Resources Account(443,170)(262,437)
Net income of the Investment Account316,697179,919
Net income of the Special Disbursement Account112,562
(13,911)(82,518)
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

General Department: Consolidated statements of changes in reserves, resources, and retained earnings for the years ended April 30, 2008, and 2007

(In thousands of SDRs)

General Resources AccountSpecial

Disbursement
Investment

Account
SpecialGeneralTotalAccountretained
reservesreservesreservesresourcesearnings
Balance at April 30, 20062,439,3193,520,2725,959,5918,840
Net (loss)/income(262,437)(262,437)179,919
Transfers179,919179,919(179,919)
Balance at April 30, 20072,356,8013,520,2725,877,0738,840
Net (loss)/income(443,170)(443,170)112,562316,697
Transfers316,697316,697(316,697)
Balance at April 30, 20082,230,3283,520,2725,750,600121,402
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

General Department: Consolidated statements of cash flows for the years ended April 30, 2008, and 2007

(In thousands of SDRs)

20082007
Usable currencies and SDRs from operating activities
Net loss(13,911)(82,518)
Adjustments to reconcile net income/(loss) to usable resources generated by operations
Depreciation and amortization22,40621,793
Interest and charges(511,990)(686,974)
Interest on SDR holdings(88,445)(124,444)
Interest income from investments(224,247)(193,330)
Remuneration374,682483,991
(441,505)(581,482)
Changes in interest and charges receivables and other assets195,802(81,815)
Changes in remuneration payable and other liabilities63,47958,107
Changes in accrued MDRI-I Trust grants(110,021)(81,174)
Increase in the Special Contingent Account(525,000)30,000
(817,245)(656,364)
Usable currencies and SDRs from credit to members
Purchases in currencies and SDRs, including reserve tranche purchases(1,467,229)(2,272,461)
Repurchases in currencies and SDRs2,904,78814,166,047
620,31411,237,222
Interest received
Interest and charges396,763850,618
Interest on SDR holdings100,851128,953
Interest from investments221,693162,318
Remuneration paid(302,765)(498,062)
Net usable currencies and SDRs provided by operating activities1,036,85611,881,049
Usable currencies and SDRs from investment activities
Acquisition of fixed assets(16,423)(11,113)
Net acquisition of investments(251,845)(6,078,378)
Net usable currencies and SDRs used in investment activities(268,268)(6,089,491)
Usable currencies and SDRs from financing activities
Subscription payments in SDRs and usable currencies156,225817,350
Changes in composition of usable currencies412,4472,205,290
Net usable currencies and SDRs provided by financing activities568,6723,022,640
Net increase in usable currencies and SDRs1,337,2608,814,198
Usable currencies and SDRs, beginning of year163,587,478154,773,280
Usable currencies and SDRs, end of year164,924,738163,587,478
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

General Department: Notes to the consolidated financial statements for the years ended April 30, 2008, and 2007

1. Nature of operations

The International Monetary Fund (IMF) is an international organization with 185 member countries. It was established to promote international monetary cooperation and exchange stability and to maintain orderly exchange arrangements among members; to facilitate the expansion and balanced growth of international trade, and contribute thereby to the promotion and maintenance of high levels of employment; and to provide temporary financial assistance under adequate safeguards to member countries to assist in solving their balance of payments problems in a manner consistent with the provisions of the IMF’s Articles of Agreement.

The IMF conducts its operations and transactions through the General Department and the Special Drawing Rights Department (the SDR Department), which are distinct entities. The General Department consists of three accounting entities: (1) the General Resources Account (GRA), (2) the Special Disbursement Account (SDA), and (3) the Investment Account (IA). The SDA includes the Multilateral Debt Relief Initiative-I Trust (MDRI-I Trust), for which the IMF is the Trustee and major donor and over which the SDA has substantial control.

The SDR Department is separate and distinct from the General Department and the General Department does not have the power to govern the financial and operating policies of the SDR Department. Accordingly, the financial statements of the SDR Department are presented separately.

The IMF also administers and/or executes trusts and trust fund accounts established by member countries to perform financial and technical services consistent with the IMF’s purposes. The resources of these trusts and trust fund accounts are contributed to the trusts by members or by the IMF through the SDA. The assets of the trusts and trust fund accounts do not belong to the IMF and the General Department does not have the power to govern the financial and operating policies of the Trusts it administers as Trustee, so as to derive benefits from their activities, and therefore the financial statements of these entities are presented separately.

General Resources Account

The operating activities of the IMF are conducted through the GRA. The assets and liabilities in the GRA reflect the payment of quota subscriptions, use and repayment of IMF credit, collection of charges from borrowers, payment of interest (remuneration) on creditor positions, and other operating activities.

Special Disbursement Account

The SDA is the vehicle for receiving and investing profits from the sale of the IMF gold held at the Second Amendment of the IMF’s Articles of Agreement (1978). SDA resources can be used for various purposes, including transfers to the GRA for immediate use in operations and transactions, transfers to the Investment Account, or to provide balance of payments assistance on special terms to developing member countries in difficult circumstances.

The SDA also holds claims on outstanding loans extended under the Structural Adjustment Facility (SAF). Repayments of principal and interest from SAF loans are transferred from the SDA to the Reserve Account of the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust (PRGF-ESF Trust), which is administered separately by the IMF as Trustee.

Multilateral Debt Relief Initiative

The Multilateral Debt Relief Initiative (MDRI) provides full debt relief to qualifying low-income member countries (see Note 10). For this purpose, the MDRI-I and MDRI-II Trusts were established on January 5, 2006, to provide grant assistance under the MDRI. As the IMF is the majority donor, the financial statements of the MDRI-I Trust are consolidated with those of the General Department. The financial statements of the MDRI-II Trust are presented separately since it has been funded by outside donors.

Investment Account

The IA holds resources transferred from the GRA (SDR 6 billion in 2006) to broaden the IMF’s income base. The investment objective of the IA is to generate returns that exceed the SDR interest rate over time while minimizing the frequency and extent of negative returns and underperformance. Investments comprise primarily fixed-income securities. The earnings generated by the IA may be retained in the IA or transferred to the GRA to help meet the expenses of conducting the IMF’s business.

2. Basis of preparation and measurement

The consolidated financial statements of the General Department are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). They have been prepared under the historical cost convention, except for the revaluation of financial assets at fair value through profit and loss.

Use of estimates

The preparation of consolidated financial statements requires the IMF’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The determination of estimates requires the exercise of judgment based on various assumptions and other factors, such as historical experience and current and expected economic conditions and, in some cases, actuarial techniques. Actual results could differ from these estimates.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Provisions

Provisions are recognized when the IMF has a current legal or constructive obligation as a result of a past event, it is probable that an outflow of resources (economic benefits) will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the amounts that are expected to be paid to settle the obligations.

Contingencies

Possible obligations of the IMF, the existence of which will be confirmed only by the occurrence or nonoccurrence of uncertain future events not wholly within the IMF’s control, and present obligations of the IMF for which it is not probable that an outflow of economic benefits will be required to settle the obligation or where the amount of the obligation cannot be measured reliably are not recognized in the balance sheet but are disclosed in the notes to the financial statements.

Consolidation

The consolidated financial statements include the GRA, the SDA, the IA, and the MDRI-I Trust, an entity that is determined to be substantially controlled by the SDA owing primarily to the existence of the Trustee’s power to terminate the Trust and the SDA’s claim on the Trust’s entire residual assets upon termination as long as there are no contributor resources in the Trust. All transactions and balances between these entities have been eliminated during the consolidation. Specific accounting principles and disclosure practices, as set out below, are in accordance with and comply with IFRS and have been applied consistently for all periods presented.

Unit of account

The functional and presentation currency of the IMF is the Special Drawing Right (SDR). The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The current composition of the SDR valuation basket became effective on January 1, 2006. The currencies in the basket as at April 30, 2008, and 2007 and their amounts were as follows:

CurrencyAmount
Euro0.4100
Japanese yen18.4000
Pound sterling0.0903
U.S. dollar0.6320

As at April 30, 2008, one SDR was equal to US$1.62378 (US$1.52418 as at April 30, 2007).

3. Summary of significant accounting policies

Currencies

Currencies consist of members’ currencies and securities held by the IMF. Members may substitute nonnegotiable and non-interest-bearing securities for the IMF’s holdings of their currencies. These securities are encashable by the IMF on demand. IMF currency holdings arise primarily from members’ quota subscription payments made in local currency or usable currencies of other members.

Usable currencies consist of currencies of member countries considered by the IMF to have strong balance of payments and reserve positions. These currencies are included in the IMF’s Financial Transactions Plan (FTP) to finance the use of resources by other members. Participation in the FTP is reviewed on a quarterly basis. Usable currencies and the IMF’s SDR holdings are considered cash equivalents. The changes in usable currencies result from the IMF’s transactions (purchases and repurchases) or from the inclusion/exclusion of a member’s currency in/from the FTP.

Other currencies consist of currencies of member countries not included in the FTP and therefore are not considered cash equivalents for financial statement presentation purposes.

Each member is obligated to maintain, in terms of the SDR, the value of the balances of its currency held by the IMF in the GRA. All currencies are revalued periodically in terms of the SDR, including at each financial year end, and members are required to settle the currency valuation promptly thereafter. Whenever the IMF revalues its holdings of a member’s currency, a receivable or payable is established for the amount required to maintain the SDR value of the IMF’s holdings of that currency. The currency balances in the balance sheets include these receivables and payables.

Credit outstanding

Credit outstanding represents balance of payments assistance provided by the IMF to members by exchanging SDRs or usable currencies for their currencies. IMF credit is repaid through repurchases by members of the IMF’s holdings of their currencies in exchange for SDRs or usable currencies. Depending on the type of IMF credit facility, repurchase periods vary from 2 years to 5 years or up to 10 years for the Extended Fund Facility.

Overdue obligations and the burden-sharing mechanism

The IMF excludes from income interest charged on the use of IMF resources by members that are at least six months overdue in meeting any financial obligation to the IMF. The IMF fully recovers such income under the burden-sharing mechanism, through adjustments to the rates of charge and remuneration. Members that participate in burden sharing for overdue charges receive refunds to the extent that the overdue charges are subsequently settled.

An impairment loss would be recognized if there is objective evidence of impairment as a result of a past event that occurred after initial recognition, and is determined as the difference between the outstanding credit’s carrying value and the present value of the estimated future cash flows. No impairment losses have been recognized.

First Special Contingent Account

In view of the risk resulting from overdue obligations, the IMF accumulates balances in the first Special Contingent Account (SCA-1) by collecting resources under the burden-sharing mechanism (see above). Effective November 1, 2006, the IMF’s Executive Board decided to suspend, for the time being, further additions to the SCA-1. Balances in the SCA-1 are refundable to the members that shared the cost of its financing, in proportion to their contributions, when there are no outstanding overdue repurchases and charges, or at such earlier time as the IMF may decide.

SDR holdings

SDRs are not allocated to the IMF, but the IMF can hold SDRs. It acquires SDRs from members in the settlement of their financial obligations to the IMF and uses SDRs in transactions and operations with members. The IMF earns interest on its SDR holdings at the same rate as all other holders of SDRs.

Investments

The IMF has designated its investments in fixed-income securities, other than fixed-term deposits, as financial assets held at fair value through profit or loss. Such designation may be made only upon initial recognition and cannot subsequently be changed. The designated assets are carried at fair value on the balance sheet, with the change in fair value included in the income statement in the period in which they arise. Investments are recognized on the trade date at which the IMF becomes a party to the contractual provisions of the instrument. Investments are derecognized when the contractual rights to the cash flows from the asset expire, or in transactions in which substantially all the risks and rewards of ownership of the investment are transferred.

The determination of the fair value of investments, other than fixed-term deposits, is based on quoted market prices for financial instruments traded in active markets. The carrying amount of fixed-term deposits, which typically have maturities of 12 months or less, approximates the fair value. Investment income comprises interest income, realized gains and losses, and unrealized gains and losses, including currency valuation differences arising from exchange rate movements against the SDR.

Gold holdings

The IMF values its gold holdings at historical cost using the specific identification method. The IMF acquired the majority of its gold holdings from quota subscriptions and financial transactions prior to the Second Amendment of the Articles of Agreement (April 1, 1978). The IMF also acquired gold through the settlement of obligations by members in 1992 and 1999/2000 (see Note 8). The Articles of Agreement limit the use of gold in the IMF’s operations and transactions. Any transactions in gold provided for in the Articles require a decision adopted by 85 percent of the total voting power. Under the Articles, the IMF may sell gold outright on the basis of prevailing market prices but cannot engage in any other gold transactions, such as loans, leases, swaps, or the use of gold as collateral. In addition, the IMF does not have the authority to buy gold, but it may accept payments from a member in gold instead of SDRs or currencies in any operation or transaction under the IMF’s Articles at prevailing market prices.

In accordance with the provisions of the Articles, whenever the IMF sells gold held on the date of the Second Amendment of the Articles, the portion of the proceeds equal to the historical cost must be placed in the GRA. Any portion of the proceeds in excess of the historical cost will be held in the SDA or transferred to the Investment Account. The IMF may also sell gold held on the date of the Second Amendment, at the historical cost of SDR 35 per ounce, to those members that were members on August 31, 1975, in proportion to their quotas on that date, in exchange for their own currencies.

Other assets

Other assets include primarily fixed assets, net pension plan assets, and net assets for other postretirement benefits (see Notes 9 and 18).

Tangible and intangible fixed assets with a cost in excess of a threshold amount are capitalized at cost and depreciated or amortized over the estimated useful lives of the assets, using the straight-line method. Buildings, equipment, and furniture are depreciated over 30, 3, and 7 years, respectively. Software is amortized over 3 to 5 years.

The IMF has a defined benefit Staff Retirement Plan (SRP) that covers substantially all eligible staff, a Supplemental Retirement Benefits Plan (SRBP) for selected participants of the SRP, and the Retired Staff Benefits Investment Account (RSBIA), to hold and invest resources set aside to fund the cost of the postretirement benefits. The pension plans and other postretirement assets are measured at fair value as at the balance sheet date. Pension costs and expected costs of the postretirement medical and life insurance benefits are determined using the Projected Unit Credit Method. Valuations of these obligations are carried out annually by independent actuaries.

Special Disbursement Account

Loans under the Structural Adjustment Facility (SAF) were provided directly from the Special Disbursement Account as balance of payments assistance to low-income members at concessional interest rates ½ of 1 percent per annum). The last SAF loan disbursement was made in 1995 and currently one member has overdue repayment obligations. Repayments of SAF loans to the SDA are transferred to the PRGF-ESF Trust Reserve Account when received. Allowances for loan losses would be established if and when there is objective evidence that an impairment loss on loans has been incurred.

Reserve tranche position

A member’s reserve tranche in the IMF is equivalent to its quota less the IMF’s holdings of its currency, excluding holdings that reflect the member’s use of IMF credit. Reserve tranches result from quota payments, part of which are normally made in reserve assets, and the use of the member’s currency in the IMF’s transactions or operations. A member’s reserve tranche is considered a part of its external reserves and a liquid claim against the IMF. The member may draw on the reserve tranche at any time when it represents that it has a balance of payments need.

Quotas

Each member is assigned a quota expressed in SDRs that is related to, but not strictly determined by, economic factors such as national income, the value of external trade and payments, and the level of official reserves. Quotas determine members’ subscriptions to the IMF, relative voting power, access to financing, and share in SDR allocations. Should a member withdraw from the Fund, its quota subscriptions are repayable to the extent they are not needed to settle other net obligations of the member to the IMF. Quotas are reviewed at least every five years in relation to the Fund’s liquidity needs.

In September 2006, the IMF approved ad hoc quota increases for China, Korea, Mexico, and Turkey of SDR 1,720.9 million, SDR 1,293.7 million, SDR 567.0 million, and SDR 227.3 million, respectively, and payments have since been effected (see Note 5). Montenegro joined the IMF in January 2007, and its initial quota is SDR 27.5 million. In addition, a quota increase for Liberia from SDR 71.3 million to SDR 129.2 million became effective on March 14, 2008, following its clearance of its arrears to the IMF.

On April 28, 2008, the Board of Governors adopted a resolution on reform of quota and voice in the IMF as part of an effort to realign quota shares of member countries with those countries’ relative weight and role in the global economy and to enhance the participation and voice of low-income countries. The resolution provides for ad hoc quota increases for 54 members under a new quota formula adopted by the Executive Board to provide a simpler and more transparent means of capturing members’ relative positions in the global economy. Total quotas will increase by 9.55 percent if all new quotas become effective. Each member must consent to the proposed increase of its quota no later than October 31, 2008, provided that the Executive Board may extend this period if necessary, and pay to the IMF the increase in quota.

Reserves of the General Resources Account

The IMF’s reserves (retained earnings) consist of the General Reserve and the Special Reserve. The General Reserve may be used to meet capital losses or operational deficits or for distribution, and the Special Reserve can be used for the above purposes except distribution.

The IMF determines annually what part of its net income (if any) will be retained and placed in the General Reserve or the Special Reserve, and what part, if any, will be distributed. Net losses are charged against the Special Reserve under currently applicable Executive Board decisions. The Executive Board decided to transfer the investment income of the Investment Account for the financial year ended April 30, 2008 (SDR 317 million) to the GRA to meet the expenses of conducting the business of the IMF as it had done for FY2007 (SDR 180 million).

Charges

The IMF earns interest, referred to as charges, on members’ use of IMF credit. The basic rate of charge is set at the beginning of each financial year as the SDR interest rate plus a margin expressed in basis points that is determined by the Executive Board. The SDR interest rate is determined weekly by reference to a combined market interest rate, which is a weighted average of yields on short-term instruments in the capital markets of the euro area, Japan, the United Kingdom, and the United States.

Under the burden-sharing mechanism (see Note 15), the basic rate of charge is increased (i) to offset the effect on the IMF’s income of the nonpayment of charges and (ii) to finance additions to the SCA-1 (which have been suspended since November 1, 2006).

Credit outstanding exceeding 200 percent of quota for purchases in the credit tranches under the Stand-By Arrangements or the Extended Fund Facility is subject to a surcharge of 100 basis points (200 basis points for credit in excess of 300 percent of quota). Surcharges ranging from 300 to 500 basis points above the basic rate of charge also apply to purchases under the Supplementary Reserve Facility. Special charges are levied on members’ currency holdings that are not repurchased when due and on overdue charges. Special charges do not apply to members that are six months or more overdue to the IMF. A service charge is levied by the IMF on all purchases except reserve tranche purchases. A refundable commitment fee is charged on Stand-By and Extended Arrangements. At the expiration or cancellation of an arrangement, the unrefunded portion of the commitment fee is recognized as current income.

Remuneration

The IMF pays interest, referred to as remuneration, on a member’s reserve tranche position. A portion of the reserve tranche is unremunerated: that portion is equal to 25 percent of the member’s quota on April 1, 1978 (that part of the quota that was paid in gold prior to the Second Amendment of the Articles). For a member that joined the Fund after that date, the unremunerated reserve tranche is the same percentage of its initial quota as the average unremunerated reserve tranche was a percentage of the quotas of all other members when the new member joined the Fund. The unremunerated reserve tranche remains fixed for each member in nominal terms, but with subsequent quota increases is now significantly lower when expressed as a percentage of quota. The average is equal to 3.7 percent of quota at April 30, 2008, and April 30, 2007, respectively.

The rate of remuneration is equal to the SDR interest rate less burden-sharing adjustments (see Note 16).

Adoption of new International Financial Reporting Standards

During the financial year ended April 30, 2008, the IMF adopted IFRS 7, “Financial Instruments: Disclosures” (issued by the IASB in August 2005), which requires disclosures in the financial statements as to the significance of financial instruments for the General Department’s financial position and performance, the nature and extent of risks arising from such instruments, and how those risks are managed (see Note 4).

In February 2008, the IASB issued an amendment of IAS 32, “Financial Instruments: Presentation.” The amended IAS 32 requires classification as an equity instrument particular types of puttable financial instruments that represent the residual interest in the net assets of an entity even though they meet the definition of a financial liability. The amended IAS 32 will become effective for the financial year ending April 30, 2010. This amendment is not expected to have a material impact on the General Department’s financial statements.

In July 2007, the International Financial Reporting Interpretations Committee (IFRIC) issued IFRIC 14, “IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction.” This interpretation provides guidance on the circumstances under which refunds or reductions in contributions from a defined benefit plan should be regarded as available to an entity for the purpose of recognizing a net defined benefit asset under IAS 19. IFRIC 14 is effective for the General Department in the financial year ending April 30, 2009, and is not expected to have a material impact on its financial position, results of operations, or cash flows.

In September 2007, the IASB issued an amended standard, IAS 1, “Presentation of Financial Statements.” The amended IAS 1 requires presentation of nonowner changes in equity (comprehensive income) either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). The revised IAS 1 will become effective for the financial year ending April 30, 2010, and its adoption is not expected to have a significant impact on the financial position, results of operations, or cash flows of the General Department.

4. Risk management

In providing financial assistance to member countries, conducting its operations and investing its resources, the IMF is exposed to various types of operational and financial risks, including credit, market, liquidity, and income risks. The principal risk facing the IMF is credit risk resulting from its financing operations and unique role in the international monetary system. The measures in place to mitigate financial risks faced by the IMF are reviewed on a regular basis by the Executive Board and the IMF management. These are based on a multilayered control structure to safeguard against financial risks. All decisions involving the commitment of financial resources and related financial policies are taken by the Board. IMF management is responsible for implementing the policies and risk mitigation measures established by the Board and for ongoing risk management.

Financial risks are also reviewed as part of the annual comprehensive risk assessment exercise, which also covers, inter alia, strategic and core mission risks.

Credit risk

Credit outstanding

Credit risk refers to potential losses on credit outstanding owing to the inability or unwillingness of member countries to make repurchases. Credit risk is inherent since the IMF has limited ability to diversify its loan portfolio and generally provides financing when other sources are not available to a member. As a result, credit concentration is high (see Note 6).

Measures to help mitigate the IMF’s credit risk include policies on access limits, program design, monitoring, and conditionality attached to its financing; early repurchase policies; and preventative, precautionary, and remedial measures to cope with the financial consequences of protracted arrears.

The IMF has established limits on overall access to resources in the GRA. The annual overall limit is currently set at 100 percent of a member’s quota, with a cumulative limit of 300 percent of a member’s quota. Access in excess of these limits can be granted in exceptional circumstances subject to certain procedural requirements and substantive criteria that have been adopted by the Executive Board.

The IMF generally provides financial assistance to a member under an economic program adopted by the member to help it overcome its balance of payments difficulties. IMF assistance is normally disbursed in tranches and subject to conditionality in the form of performance criteria and periodic reviews. Safeguards assessments of member central banks are undertaken to provide the IMF with reasonable assurance that each central bank’s legal structure, controls, and accounting, reporting, and auditing systems are adequate to ensure the integrity of their operations and help ensure that IMF resources are used for intended purposes. Misreporting by member countries may entail early repurchases for non-complying purchases.

The IMF maintains precautionary balances consisting of its reserves and the SCA-1 to cover losses in income and possible overdue principal. As at April 30, 2008, precautionary balances amounted to SDR 7 billion (SDR 7.6 billion as at April 30, 2007). The reduction reflects a partial distribution of SDR 525 million from SCA-1. In addition, the burden-sharing mechanism for deferred charges transfers the financial risk from unpaid charges to creditor and debtor members and helps protect the IMF’s overall financial position.

The maximum credit risk exposure is the carrying value of the Fund’s credit outstanding and undrawn commitments.

Investments

Credit risk on investments represents the potential loss that the IMF may incur if obligors and counterparties default on their contractual obligations. Credit risk is managed through the conservative range of eligible investments, including (i) domestic government bonds of countries in the euro area, Japan, the United Kingdom, and the United States, that is, members whose currencies are included in the SDR basket; (ii) bonds of international financial organizations; and (iii) claims on the Bank for International Settlements (BIS). Credit risk is further minimized by restricting eligible investments to financial instruments rated A or higher by a major credit rating agency. Compliance controls are enforced to ensure that the investment portfolio does not include a security whose rating is below the minimum rating required.

The credit risk exposure in the investments portfolio as at April 30 was as follows:

20082007
RatingPercentageRatingPercentage
Government bonds
FranceAAA1.3%AAA1.3%
GermanyAAA17.4%AAA15.6%
JapanAA5.3%AA4.8%
United KingdomAAA3.1%AAA4.0%
United StatesAAA14.1%AAA14.5%
Nongovernment bonds
Bank for International
Settlementsnot rated46.3%not rated47.7%
Other international financial
institutionsAAA7.5%AAA7.1%
Fixed-term deposits and other
Bank for International
Settlementsnot rated4.9%not rated4.9%
Other international financial
institutionsAA0.1%AA0.1%
100%100%

The IMF also engages in a securities lending program with its custodian, as lending agent, to enhance the return on its investments. Under this program, marketable securities are lent temporarily to other institutions in exchange for a fee and collateral equal to at least 100 percent of the market value of the lent securities. The IMF maintains effective control over securities lent and therefore continues to report such securities as invested assets. The IMF participates in the lending agent’s collateral fund but does not recognize the receipt of the collateral held by the lending agent or the obligation to return the collateral, as there exists no right to sell or repledge the collateral. As at April 30, 2008, the market value of securities lent to other institutions under the securities lending program and the collateral amounted to SDR 1,357 million and SDR 1,385 million, respectively (SDR 1,195 million and SDR 1,222 million, as at April 30, 2007, respectively).

Market risk

Interest rate risk

Credit outstanding

Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. Interest rate risk is managed through the use of a floating market rate (the SDR interest rate) to determine the rate of charge. The effect of interest rate fluctuations on lending income is minimized because the IMF links the rate of charge directly, by means of a fixed margin, to the cost of financing (which is equal to the SDR interest rate).

Investments

The investment portfolio is exposed to interest rate movements. The interest rate risk is mitigated by limiting the duration of the portfolio to a weighted average of 1–3 years.

A 50 basis point increase in the average effective yields of the IMF portfolio as at April 30, 2008, would result in a loss of SDR 56.3 million, or approximately 0.85% of the portfolio (SDR 52.7 million, or 0.82% as at April 30, 2007), whereas a 50 basis point decrease would result in a gain of SDR 57.1 million, or approximately 0.87% of the portfolio (SDR 53.4 million, or 0.83% as at April 30, 2007).

Exchange rate risk

Financial assets and liabilities other than investments

Exchange rate risk is the exposure to the effects of fluctuations in foreign currency exchange rates on an entity’s financial position and cash flows. The IMF has no exchange rate risk exposure on its holdings of members’ currencies since, under the Articles of Agreement, members are required to maintain the value of such holdings in terms of the SDR. Any depreciation/appreciation in a member’s currency vis-à-vis the SDR gives rise to a currency valuation adjustment receivable or payable that must be settled promptly after the end of the financial year or at other times as requested by the IMF or the member. The IMF has other assets and liabilities, such as trade receivables and payables, denominated in currencies other than SDRs and makes administrative payments largely in U.S. dollars, but the exchange rate risk exposure from these other assets and liabilities is limited.

Investments

In accordance with current guidelines, exchange rate risk on investments is managed by investing in financial instruments denominated in SDRs or in constituent currencies of the SDR with the relative amount of each currency matching its weight in the SDR basket. In addition, the portfolio is regularly rebalanced to reflect currency weights in the SDR basket.

The value of the SDR is the sum of the market values, in U.S. dollar equivalents, of the predetermined amounts of the four currencies in the SDR valuation basket. The effective share of each currency in the valuation of the SDR fluctuates daily and depends on the prevailing exchange rate in the London market at noon against the U.S. dollar on that day. Since the proportion share of a currency in the SDR valuation basket is determined by reference to the market value against the U.S. dollar, the exchange risk can be measured indirectly using the exchange rate movements between that basket currency and the U.S. dollar. The net effect on the investment portfolio of a 10 percent increase in the market exchange rates of the basket currencies against the U.S. dollar, as at April 30, would be as follows:

2008
Net gain
PercentageAs a percentage
change ofof investments
currency unitIn millionsnot denominated
against SDRof SDRsin SDRs
Euro5.91%0.12< 0.01%
Japanese yen9.71%1.490.02%
Pound sterling8.81%0.760.01%
2007
Net gain
PercentageAs a percentage
change ofof investments
currency unitIn millionsnot denominated
against SDRof SDRsin SDRs
Euro6.18%0.04< 0.01%
Japanese yen9.92%2.020.03%
Pound sterling8.71%1.610.03%

The net effect of a 10 percent decrease in the market exchange rate of the basket currencies against the U.S. dollar, as at April 30, would be as follows:

2008
Net gain
PercentageAs a percentage
change ofof investments
currency unitIn millionsnot denominated
against SDRof SDRsin SDRs
Euro−6.27%1.850.03%
Japanese yen−8.24%0.500.01%
Pound sterling−9.00%1.150.02%
2007
Net gain
PercentageAs a percentage
change ofof investments
currency unitIn millionsnot denominated
against SDRof SDRsin SDRs
Euro−6.52%3.410.06%
Japanese yen−8.22%1.360.02%
Pound sterling−8.92%1.710.03%

Liquidity risk

Use of IMF resources

Liquidity risk is the risk to the IMF of nonavailability of resources to meet the IMF’s financing needs of members and its own obligations. The IMF must have usable resources available to meet members’ demand for credit. While the IMF’s resources are of a revolving nature, uncertainties in the timing and amount of credit extended to members during financial crises expose the IMF to liquidity risk. Moreover, the IMF must also stand ready to meet potential demands from members drawing upon their reserve tranche positions, which have no fixed maturity and are part of members’ reserves.

The IMF manages its liquidity risk not by matching the maturity of assets and liabilities, but by closely scrutinizing developments in its liquidity position. Long-term liquidity needs are addressed by reviewing the adequacy of quota-based resources. General reviews of members’ quotas are conducted at intervals of no more than five years in order to evaluate the adequacy of quota-based resources to meet members’ demand for IMF financing. The last general review was completed in January 2008.

Short-term liquidity needs for lending activities are reviewed and approved by the Executive Board on a quarterly basis through a financial transactions plan (FTP) for SDR amounts and member currencies to be used in transactions with members. The IMF also monitors its short-term liquidity position using objective criteria such as the forward-commitment capacity for the next 12-month period. (Schedule 2 provides the GRA’s available resources and liquidity position.)

Investments

Liquidity risk on investments is limited by investing a portion of the portfolios in readily marketable short- and medium-term financial instruments to meet anticipated liquidity needs.

Income risk

The IMF has been relying principally on income from charges levied on outstanding credit to meet its operating costs. The level of IMF lending has declined significantly, and the IMF faces potential annual income shortfalls in the medium term. In May 2006, the IMF’s Managing Director appointed a committee of well-known experts to study sustainable financing options for the IMF. The committee’s report was publicly released at end-January 2007. The committee recommended that the IMF broaden its income sources to more closely align with the IMF’s diverse activities.

Based on the recommendations of the committee, the Executive Board proposed new and sustainable income and expenditure frameworks to close the projected income shortfall. Key elements of the new income model include establishing an endowment using the profits from the limited sale of 12.97 million ounces of gold holdings, expanding the investment authority to enhance the expected return on the IMF’s investments, and reinstating the practice of reimbursing the IMF for the cost of administering the PRGF-ESF Trust. The expenditure framework proposal includes significant expenditure cuts over the medium term. In May 2008, the IMF’s Board of Governors endorsed these proposals and adopted the related resolution on the amendment of the Articles of Agreement. The implementation of the income proposal will require legislative action in member countries and the completion of the amendment process. The amendment will enter into effect after three-fifths of the members having 85 percent of the total voting power have accepted it.

Operational risk

Operational risk includes risk of loss attributable to errors or omissions because of failures in executing or processing transactions, inadequate controls, human factors, and/or failures in underlying support systems.

The IMF mitigates operational risk by (i) identifying key operational risks, (ii) maintaining a system of internal controls, (iii) documenting policies and procedures on administrative and accounting and reporting processes, and (iv) conducting internal audits to provide independent reviews of the effectiveness of the control processes and risk management. The design and effectiveness of controls are evaluated continuously and improvements are implemented on a timely basis. The results of the internal audits are reported by the Office of Internal Audit and Inspection to both the Managing Director and the External Audit Committee (EAC), which also exercises oversight over the external audit of the IMF’s accounts and its controls.

The IMF has adopted a Code of Conduct to promote the highest standards of ethics among its staff, including senior management and members of the Executive Board. The Code of Conduct, enforced by the Ethics Officer, is supplemented by procedures for the reporting and investigation of irregularities and improprieties, including fraudulent acts.

5. Currencies

Net changes in the IMF’s holdings of members’ currencies for the financial years ended April 30, 2008, and 2007 were as follows:

April 30,NetApril 30,NetApril 30,
2006change2007change2008
(In millions of SDRs)
Members’ quotas213,4783,270216,748625217,373
Members’ outstanding use
of IMF credit in the GRA19,227(11,894)7,333(1,437)5,896
Members’ reserve tranche
positions in the GRA(21,826)6,830(14,996)1,514(13,482)
Administrative currency
balances55(1)4
Total currencies210,879(1,789)209,090701209,791

Receivables and payables arising from valuation adjustments at April 30, 2008, when all holdings of currencies of members were last revalued, amounted to SDR 7,127 million and SDR 7,091 million, respectively (SDR 6,654 million and SDR 4,667 million, respectively, at April 30, 2007). Settlements of these receivables and or payables are required to be made by or to members promptly after the end of each financial year.

6. Credit and loans outstanding

Credit outstanding in the GRA and SAF loans in the SDA are carried at amortized cost.

Changes in the outstanding use of IMF credit under the various facilities of the GRA were as follows:

April 30, 2006PurchasesRepurchasesApril 30, 2007PurchasesRepurchasesApril 30, 2008
(In millions of SDRs)
Credit tranches11,3172,270(7,382)6,2051,122(2,342)4,985
Extended Fund
Facility7,4772(6,762)717346(387)676
Enlarged access268(6)262(95)167
Compensatory and
Contingent
Financing Facility84(5)79(40)39
Supplementary
Financing Facility81(11)70(41)29
Total credit
outstanding19,2772,272(14,166)7,3331,468(2,905)5,896

Members are expected to make repurchases in accordance with the expectation schedule but may request the approval of the IMF Executive Board to extend to the obligation schedule. The following repurchases were made by members during the financial years ended April 30:

20082007
(In millions of SDRs)
Early repurchases3317,086
Repurchase expectations1,310928
Repurchase obligations1,2646,152
Total repurchases2,90514,166

There were no extensions of repurchases from the expectation to the obligation schedule during the financial years ended April 30, 2008, and 2007.

As at April 30, 2008, and 2007, outstanding and overdue GRA and SAF loans amounted to SDR 329 million and SDR 9 million, respectively.

Scheduled repurchases in the GRA and repayment of SAF loans in the SDA are summarized below:

GeneralSpecial
Financial yearResourcesDisbursement
ending April 30AccountAccount
(In millions of SDRs)
20091,741
20102,144
2011958
2012278
2013215
2014 and beyond231
Overdue3299
Total5,8969

The use of credit in the GRA by the largest users was as follows at April 30:

20082007
(In millions of SDRs and as a percentage

of total GRA credit outstanding)
Largest user of credit4,18070.9%5,23771.4%
Three largest users of credit4,91083.3%6,02082.1%
Five largest users of credit5,31990.2%6,58189.7%

The five largest users of GRA credit as at April 30, 2008, in descending order, were Turkey, the Dominican Republic, Liberia, Sudan, and Ukraine (see Schedule 1).

The concentration of GRA outstanding credit by region was as follows at April 30:

20082007
(In millions of SDRs and as a percentage

of total GRA credit outstanding)
Africa76613.0%5938.1%
Asia and Pacific2674.5%1572.1%
Europe1963.3%5517.5%
Latin America and Caribbean3956.7%3514.8%
Middle East and Turkey4,27272.5%,5,68177. 5 %
Total5,896100%,7,3331 0 0 %

Overdue obligations

During the financial year ended April 30, 2008, Liberia settled all of its overdue obligations to the General Department, including GRA credit outstanding and overdue charges of SDR 200 million and SDR 282 million, respectively. Settlement of the overdue charges generated burden-sharing refunds to members for amounts totaling SDR 230 million that were previously collected through burden-sharing adjustments to periodic charges and remuneration (see Notes 11 and 16).

At April 30, 2008, two members (three members at April 30, 2007) were six months or more overdue in settling their financial obligations to the General Department.

GRA repurchases, GRA charges, SAF loan repayments, and SAF interest that are six or more months overdue were as follows as at April 30:

Repurchases and

SAF loans
Charges and

SAF interest
2008200720082007
(In millions of SDRs)
Total overdue3385708151,069
Overdue for six months or more3385708061,053
Overdue for three years or more338570760998

The type and duration of the overdue amounts in the General Department were as follows as at April 30, 2008:

Repurchases

and SAF loans
Charges and

SAF interest
Total

obligation
Longest overdue

obligation
(In millions of SDRs)
Somalia106112218July 1987
Sudan232703935July 1985
Total3388151,153

7. Investments

Investments are held in the Investment Account (SDR 6,482 million and SDR 6,235 million at April 30, 2008, and 2007, respectively) and the MDRI-I Trust (SDR 304 million and SDR 301 million at April 30, 2008, and 2007, respectively) and are managed by external investment managers. These investments comprise fixed-term deposits, short-term investments, and fixed-income securities, none of which include asset-backed securities. Fixed-income securities include domestic government bonds of the euro area, Japan, the United Kingdom, and the United States, and medium-term instruments issued by the Bank for International Settlements.

At April 30, investments consisted of the following:

20082007
(In millions of SDRs)
Short-term investments73251
Fixed-term deposits284287
Fixed-income securities6,4295,998
Total investments6,7866,536

The maturities of the investments were as follows:

Investments maturing in

financial year ending April 30
(In millions of SDRs)
20091,093
20103,178
20112,274
201234
2013207
Total6,786

Investment income

Investment income amounted to SDR 317 million for the Investment Account and SDR 12 million for the MDRI-I Trust for the financial year ended April 30, 2008 (SDR 180 million and SDR 13 million, respectively, for the financial year ended April 30, 2007).

Investment income comprised the following for the financial years ended April 30:

20082007
(In millions of SDRs)
Interest income224193
Realized gains355
Realized losses(5)(5)
Unrealized gains1717
Unrealized losses(96)(7)
Total329193

8. Gold holdings

At April 30, 2008, and 2007, the IMF held 3,217,341 kilograms of gold, equal to 103,439,916 fine ounces of gold, at designated depositories. Gold holdings were valued at a historical cost of SDR 5,852 million as at April 30, 2008, and 2007.

Cost
OuncesPer ounceTotal
(In millions)(In SDRs)(In millions

of SDRs)
Gold acquired from quota subscriptions90.474353,167
Gold acquired from Cambodia in 1992.0212415
Gold acquired through off-market transactions in 199912.9442072,680
Total103.4395,852

As at April 30, 2008, the market value of the IMF’s holdings of gold was SDR 55.5 billion (SDR 45.9 billion at April 30, 2007).

9. Other assets—fixed assets

Other assets include fixed assets, which at April 30, 2008, and 2007 amounted to SDR 296 million and SDR 302 million, respectively, and consisted of land, buildings and equipment, furniture, and software.

LandBuildingsOtherTotal
(In millions of SDRs)
Cost
Beginning of year9629585476
Additions31316
Disposals
End of year9629898492
Accumulated depreciation and amortization
Beginning of year13242174
Additions101222
Disposals
End of year14254196
Net book value as at April 30, 20089615644296
Net book value as at April 30, 20079616343302

10. HIPC Initiative, Multilateral Debt Relief Initiative, and other debt relief

Under the MDRI, effective January 5, 2006, debt relief is provided to qualifying Heavily Indebted Poor Countries (HIPCs) and non-HIPCs with annual per capita income of US$380 or less, and to qualifying HIPCs with an annual per capita income of more than US$380. Grant assistance from the MDRI Trusts (together with assistance under the HIPC Initiative) provides debt relief to cover the debt owed to the IMF as at December 31, 2004, that remains outstanding at the time the member qualifies for such relief. For the financial years ended April 30, 2008, and 2007, the MDRI-I Trust disbursed SDR 7 million and SDR 92 million in grant assistance, respectively, allowing for early repayment of outstanding loans in the PRGF-ESF Trust.

Since the debt owed to the IMF as at December 31, 2004, decreases over time, the actual amount of debt eligible for MDRI assistance for the remaining qualifying HIPCs depends on the timing of their completion points. The IMF periodically reviews the qualification of members for HIPC and MDRI debt relief as these members make progress toward reaching the completion point under the HIPC Initiative.

MDRI grant assistance to the remaining eligible members is subject to the availability of resources and is accrued when it is probable that a liability has been incurred and the amount of such grant assistance needed can be reasonably estimated. The liability recorded in the MDRI-I Trust amounted to SDR 189 million and SDR 299 million as at April 30, 2008, and 2007, respectively, and is based on the evaluation of available facts at the balance sheet dates with respect to each individual eligible member. It includes factors such as progress made toward reaching the completion point under the HIPC Initiative and the capacity to meet the macroeconomic performance and other objective criteria after reaching the completion point. As the qualification of members for MDRI debt relief is assessed, the amounts recorded are reviewed periodically and adjusted to reflect additional information that becomes available. During the financial year ended April 30, 2008, the estimate for MDRI grant assistance was reduced by SDR 108 million to reflect the delay by the remaining eligible members in reaching the completion point.

The reconciliation of accrued MDRI grant assistance for the financial years ended April 30, 2008, and 2007, is as follows:

20082007
(In millions of SDRs)
Beginning of year299380
Additions511
Amounts utilized(7)(92)
Reversals(108)
End of year189299

11. Interest and charges

As at April 30, 2008, the credit outstanding on which the IMF levies charges amounted to SDR 5,896 million (SDR 7,333 million as at April 30, 2007). For the financial years ended April 30, 2008, and 2007, the basic rate of charge was set at a fixed margin of 108 basis points above the SDR interest rate. The average rate of charge (adjusted for burden sharing) before applicable surcharges for the financial year ended April 30, 2008, was 4.90 percent (5.28 percent for the financial year ended April 30, 2007).

Interest and charges receivables as at April 30 were as follows:

20082007
(In millions of SDRs)
Periodic charges8781,190
Amount paid through burden sharing(683)(889)
Unpaid charges(134)(186)
61115
Interest receivable1527
Total interest and charges receivables76142

Interest and periodic charges consisted of the following for the years ended April 30:

20082007
(In millions of SDRs)
Interest and periodic charges615672
Burden-sharing adjustments1215
Burden-sharing refunds(115)
Total interest and charges512687

Interest earned on SAF loans for the financial years ended April 30, 2008, and 2007 amounted to less than SDR 0.01 million each year.

Service charges and commitment fees on canceled or expired arrangements amounted to SDR 9 million and SDR 16 million for the years ended April 30, 2008, and 2007, respectively, and are included in other charges and income.

12. Special Disbursement Account

Contributions to Administered Accounts

Assets in the SDA can be used for special purposes authorized in the Articles of Agreement, including providing financial assistance on special terms to developing member countries.

Proceeds from the repayment of SAF loans and Trust Fund loans and excess resources from the Supplementary Financing Facility Subsidy Account are transferred from the SDA to the PRGF-ESF Trust as contributions. During the financial year ended April 30, 2008, SDR 31 million in Trust Fund loan repayments (SDR 0.2 million for the financial year ended April 30, 2007, in excess resources from the Supplementary Financing Facility Subsidy Account) was contributed to the PRGF-ESF Trust.

Trust Fund

The IMF is the Trustee of the Trust Fund, which was established in 1976 to provide balance of payments assistance on concessional terms to eligible members that qualified for such assistance. The Trust Fund is in liquidation following its termination in 1981. Since that date, the activities of the Trust Fund have been confined to the conclusion of its affairs. Liberia repaid SDR 31 million in overdue Trust Fund loans during the year ended April 30, 2008. The Trust Fund has no assets other than claims receivable, including interest and special charges, from Somalia and Sudan amounting to SDR 88 million at April 30, 2008 (SDR 118 million from Liberia, Somalia, and Sudan as at April 30, 2007). All interest income is deferred. Cash receipts on these loans are transferred to the SDA for onward transfer to the Reserve Account of the PRGF-ESF Trust.

13. Borrowings

Under the General Arrangements to Borrow (GAB) and an associated agreement with Saudi Arabia, the IMF may borrow up to SDR 18.5 billion when supplementary resources are needed, in particular, to forestall or to cope with an impairment of the international monetary system. The GAB became effective on October 24, 1962, and has been renewed through December 26, 2013. Interest on borrowings under the GAB is set at the SDR interest rate.

Under the New Arrangements to Borrow (NAB), the IMF may borrow up to SDR 34 billion in supplementary resources. The NAB is the facility of first and principal recourse, but it does not replace the GAB, which remains in force. Outstanding drawings and commitments under these two borrowing arrangements are limited to a combined total of SDR 34 billion. The NAB became effective on November 17, 1998, and has been renewed through November 17, 2013. Interest on borrowings under the NAB is payable to the participants at the SDR interest rate or any such higher rate as may be agreed between the IMF and participants representing 80 percent of the total credit arrangements.

There were no outstanding borrowings under the GAB or the NAB as at April 30, 2008, and 2007.

14. Arrangements

An arrangement is a decision of the IMF that gives a member the assurance that the IMF stands ready to provide SDRs or usable currencies during a specified period and up to a specified amount, in accordance with the agreed terms. At April 30, 2008, the undrawn balances under the nine arrangements that were in effect in the GRA amounted to SDR 3,086 million (SDR 3,911 million under seven arrangements at April 30, 2007). See Schedule 3.

15. Burden sharing and the Special Contingent Account

Under the burden-sharing mechanism, the basic rate of charge is increased and the rate of remuneration is reduced to offset the effect on the IMF’s income of the nonpayment of charges and also to finance additions to the SCA-1. Since November 1, 2006, the accumulation of further balances in the SCA-1 has been suspended.

Cumulative charges, net of settlements, that have resulted in adjustments to charges and remuneration since May 1, 1986 (the date the burden-sharing mechanism was adopted) amounted to SDR 683 million at April 30, 2008 (SDR 889 million at April 30, 2007). The cumulative refunds for the same period, resulting from the settlements of overdue charges for which burden-sharing adjustments have been made, amounted to SDR 1,320 million and SDR 1,089 million at April 30, 2008, and 2007, respectively.

Balances in the SCA-1 are to be distributed to the members that shared the cost of its financing when there are no longer any outstanding overdue repurchases and charges, or at such earlier time as the IMF may decide. Amounts collected from members for the SCA-1 are akin to refundable cash deposits and are recorded as collections of cash and as a liability to those who paid them. Losses arising from overdue obligations, if realized, would be shared by members in proportion to their cumulative contributions to the SCA-1. No additions have been made to the SCA-1 during the financial year ended April 30, 2008 (additions of SDR 30 million were made during the first half of the financial year ended April 30, 2007). During the financial year ended April 30, 2008, the Fund decided to make a partial distribution of SDR 525 million to contributing members.

16. Remuneration

At April 30, 2008, total creditor positions on which the IMF paid remuneration amounted to SDR 6,598 million (SDR 8,167 million at April 30, 2007). The average rate of remuneration (adjusted for burden sharing) for the financial year ended April 30, 2008, was 3.47 percent (3.74 percent for the financial year ended April 30, 2007). Remuneration consisted of the following for the years ended April 30:

20082007
(In millions of SDRs)
Remuneration271499
Burden-sharing adjustments(12)(15)
Burden-sharing refunds116
375484

17. Administrative expenses

Administrative expenses, the majority of which were incurred in U.S. dollars, were as follows for the years ended April 30:

20082007
(In millions of SDRs)
Personnel351362
Pension and other long-term employee
benefits11781
Travel6268
Other8398
Restructuring68
Total administrative expenses, net of
reimbursements681609

Restructuring

During the year ended April 30, 2008, the IMF initiated institutional restructuring to close the projected income-expenditure gap in the medium term. The restructuring, which includes staff reductions and cuts in other nonpersonnel costs, came into effect in April 2008 and will be implemented over the next three years.

The staff separations phase was completed during the year ended April 30, 2008. Administrative expenses for the financial year then ended include a provision of SDR 68 million for expected severance and other employee termination benefits for 492 separating staff, as well as outplacement and other direct costs. Separating staff have the option of receiving severance payments in a lump sum or over a period of up to 22.5 months. The key factors and assumptions underlying the estimate include the timing of staff separation, the choice of payment options, and the discount rate used to determine the present value of the termination benefits.

As explained in Note 18, an actuarial expense was also recognized during the financial year ended April 30, 2008, due to the separation of a large number of employees before their normal retirement date.

18. Pension and other postretirement benefits

The IMF has a defined benefit Staff Retirement Plan (SRP) that covers substantially all eligible staff and a Supplemental Retirement Benefits Plan (SRBP) for selected participants of the SRP. Participants contribute 7 percent of their pensionable gross remuneration, and the IMF contributes the remainder of the cost of funding the plans and pays their administrative costs. In addition, the IMF provides other employment and postretirement benefits, including medical, life insurance, and other long-term benefits. In 1995, the IMF established a separate account, the Retired Staff Benefits Investment Account (RSBIA), to hold and invest resources set aside to fund the cost of postretirement benefits.

The defined benefit obligations are valued annually by independent actuaries using the Projected Unit Credit Method. The latest actuarial valuations, carried out as at April 30, 2008, included the effect of an amendment to the SRP, effective April 1, 2008, to provide an additional option for eligible staff to receive pension benefits at the early retirement age of 50. The mendment resulted in the recognition of past service cost amounting to SDR 33 million during the financial year ended April 30, 2008, for benefits that are vested immediately. In addition, the effects of the institutional restructuring, which includes the separation of 492 employees, resulted in a curtailment charge of SDR 7 million and accelerated service cost of SDR 21 million.

The amounts recognized in the balance sheets for the financial years ended April 30 are determined as follows:

20082007
SRPSRBPOtherTotalTotal
(In millions of SDRs)
Fair value of plan assets4,409135184,9404,928
Present value of the defined benefit obligation(3,019)(379)(602)(4,000)(4,201)
Unrecognized actuarial (gains)/losses(540)59(171)(652)(407)
Unrecognized prior service cost16166
Net balance sheet asset/(liability)850(307)(239)304326

The IMF expects to contribute SDR 98 million to its defined benefit pension plans during the financial year ending April 30, 2009.

The reconciliation of the defined benefit obligation for the financial years ended April 30 is as follows:

20082007
SRPSRBPOtherTotalTotal
(In millions of SDRs)
Defined benefit obligation at beginning of year3,1763286974,2013,834
Current service cost1023342177165
Interest cost1912142254246
Staff contributions2512628
Benefits paid(96)(9)(41)(146)(133)
Prior service cost (plan amendment)28(7)2344
Curtailment and accelerated service cost (restructuring)218(1)28
Actuarial (gains)/losses(216)27(114)(303)207
Exchange differences(212)(23)(46)(281)(146)
Defined benefit obligation at end of year3,0193796024,0004,201

The amounts recognized in the income statements for the financial years ended April 30 are as follows:

20082007
SRPSRBPOtherTotalTotal
(In millions of SDRs)
Current service cost1023342177165
Interest cost1912142254246
Expected return on assets(330)(1)(39)(370)(335)
Amortization of actuarial (gains)/losses2(7)(5)4
Prior service cost (plan amendment)28(7)12331
Curtailment and accelerated service cost (restructuring)218(1)28
Total expense recognized in income statement12564911781
Actual return on assets349622

The pension and other postretirement benefits expenses recognized in the income statement include the amortization, over the estimated average remaining service lives of IMF staff, of actuarial gains and losses in excess of a corridor that is the larger of 10 percent of either the defined benefit obligation or the fair value of assets at the beginning of the financial year.

The reconciliation of changes in fair value of assets for the financial years ended April 30 is as follows:

20082007
SRPSRBPOtherTotalTotal
(In millions of SDRs)
Fair value of assets at the beginning of year4,402145124,9284,468
Expected return on assets330139370335
Gains/(losses) on assets(18)(1)(2)(21)287
Employer contributions4674396107
Staff contributions2512628
Benefits paid(96)(9)(41)(146)(133)
Exchange differences(280)(33)(313)(164)
Actual fair value of assets at end of year4,409135184,9404,928

The funded status and the experience adjustments for the current and previous four financial years are as follows:

20082007200620052004
(In millions of SDRs)
Defined benefit obligation(4,000)(4,201)(3,834)(3,720)(3,570)
Plan assets4,9404,9284,4683,5043,265
Surplus/(deficit) in the Plans940727634(216)(305)
Experience adjustments on:
Plan liabilities(303)(195)312(45)(1,103)
Plan assets(20)287593136442
Exchange rates(33)(19)(17)253

The major categories of plan assets as a percentage of the total value of plan assets as at April 30 were as follows:

20082007
(In percentage)
Cash6.16.0
Fixed income15.414.0
Equity49.654.6
Real estate3.84.7
Private equity and other25.120.7
100.0100.0

The principal actuarial assumptions used in the actuarial valuations for the financial years ended April 30 were as follows:

20082007
(In percentage)
Discount rate6.55.9
Expected return on plan assets7.57.5
Future salary increases6.4–10.86.4–10.8
Health care trend rate4.0–8.54.0–9.0

The expected return on plan assets is set by reference to historical returns on each of the main asset classes, current market indicators such as long-term bond yields, and the expected long-term strategic asset allocation of each plan.

The effects of the assumed health care costs growth rates on the defined benefit plans are as follows:

Increase of

1 percentage point
Decrease of

1 percentage point
(In millions of SDRs)
Effect on the aggregate of the service cost and interest cost12(9)
Effect on defined benefit obligation85(68)

19. Related party transactions

The GRA conducts its transactions with the SDR Department on the same terms and conditions applicable to participants in the SDR Department. The expenses of conducting the SDR Department and other accounts administered by the Fund as Trustee are borne by the GRA. Reimbursements are made by the SDR Department and some, but not all, of the administered accounts.

The following summarizes the interentity balances as at April 30, 2008, and 2007, and the related party transactions for the financial years then ended:

20082007
(In millions of SDRs)
SDR Department
GRA’s SDR holdings1,8522,598
Receipts (repurchases, charges, and interest on SDR holdings)1,3881,612
Uses (purchases and remuneration)2,1332,655
Administrative expenses (reimbursed)21
PRGF-ESF Trust
Cumulative transfers to the Reserve Account2,8932,862
Cumulative transfers to the Subsidy Accounts870870
Administrative expenses (reimbursements forgone)4348
PRGF-HIPC Trust
Cumulative transfers1,2391,239

Schedule 1

General Department: Quotas, IMF’s holdings of currencies, reserve tranche positions, and outstanding credit and loans as at April 30, 2008

(In thousands of SDRs)

General Resources Account
IMF’s holdingsOutstanding credit and loans
of currencies1ReserveGRAPRGF-ESF
PercenttrancheAmountPercent2SDA3Trust4Total5
MemberQuotaTotalof quotaposition(A)+(B)+(C)=(D)
Afghanistan, Islamic Republic of161,900161,916100.047,10047,100
Albania48,70051,438105.63,3556,0880.1050,62656,714
Algeria1,254,7001,169,61993.285,082
Angola286,300286,445100.1
Antigua and Barbuda13,50013,499100.06
Argentina2,117,1002,116,919100.0195
Armenia92,00092,005100.094,14394,143
Australia3,236,4003,029,93193.6206,856
Austria1,872,3001,738,09592.8134,208
Azerbaijan160,900164,515102.2483,6590.0655,07258,731
Bahamas, The130,300124,04195.26,260
Bahrain135,00063,84347.371,203
Bangladesh533,300666,364125.0278133,3252.26316,730450,055
Barbados67,50061,92991.75,582
Belarus386,400386,400100.020
Belgium4,605,2004,276,52692.9328,710
Belize18,80014,56277.54,239
Benin61,90059,72096.52,1883,5203,520
Bhutan6,3005,28083.81,021
Bolivia171,500162,63894.88,875
Bosnia and Herzegovina169,100169,105100.0
Botswana63,00058,58393.04,426
Brazil3,036,1003,036,249100.0
Brunei Darussalam215,200201,73093.713,673
Bulgaria640,200606,84594.833,381
Burkina Faso60,20052,81687.77,38527,23027,230
Burundi77,00076,64199.536069,30069,300
Cambodia87,50087,500100.0
Cameroon185,700184,90499.680113,25013,250
Canada6,369,2005,963,07593.6406,137
Cape Verde9,6009,59399.9168,3948,394
Central African Republic55,70055,54799.715928,79628,796
Chad56,00055,71999.528232,33832,338
Chile856,100802,09093.754,011
China8,090,1007,575,43693.6514,711
Colombia774,000488,20263.1285,803
Comoros8,9008,35893.9544
Congo, Democratic
Republic of the533,000533,000100.0511,467511,467
Congo, Republic of84,60084,03099.357623,58023,580
Costa Rica164,100144,09287.820,019
Cóte d’lvoire325,200405,768124.874681,3001.3854,931136,231
Croatia365,100364,943100.0159
Cyprus139,600130,14593.29,496
Czech Republic819,300766,92693.652,378
Denmark1,642,8001,538,62893.7104,183
Djibouti15,90014,80093.11,1009,6329,632
Dominica8,20010,242124.992,0500.037,6889,738
Dominican Republic218,900606,349277.03387,4506.57387,450
Ecuador302,300285,14994.317,153
Egypt943,700943,725100.0
El Salvador171,300171,303100.0
Equatorial Guinea32,60032,605100.0
Eritrea15,90015,900100.05
Estonia65,20065,194100.07
Ethiopia133,700126,30694.57,445
Fiji70,30054,60377.715,730
Finland1,263,8001,178,79493.385,053
France10,738,50010,041,07493.5697,493
Gabon154,300164,326106.539410,4160.1810,416
Gambia, The31,10029,61895.21,4856,0006,000
Georgia150,300150,300100.010149,015149,015
Germany13,008,20012,175,67093.6832,581
Ghana369,000369,004100.0105,450105,450
Greece823,000769,90693.553,130
Grenada11,70014,261121.92,5590.041,5604,119
Guatemala210,200210,206100.0
Guinea107,100107,02699.97537,67837,678
Guinea-Bissau14,20015,950112.3301,7750.033,0484,823
Guyana90,90090,902100.037,06037,060
Haiti81,90081,83399.96843,30043,300
Honduras129,500120,87493.38,62720,34220,342
Hungary1,038,400972,21893.666,184
Iceland117,60099,01284.218,589
India4,158,2003,861,36192.9296,871
Indonesia2,079,3001,933,80493.0145,499
Iran, Islamic Republic of1,497,2001,497,204100.0
Iraq1,188,4001,017,31385.6171,100
Ireland838,400778,97392.959,437
Israel928,200869,45893.758,750
Italy7,055,5006,606,69693.6448,843
Jamaica273,500273,550100.0
Japan13,312,80012,464,43393.6849,521
Jordan170,500206,425121.125836,1550.6136,155
Kazakhstan365,700365,700100.05
Kenya271,400258,59595.312,814166,800166,800
Kiribati5,6005,601100.04
Korea, Republic of2,927,3002,740,74493.6186,564
Kuwait1,381,1001,293,14793.687,971
Kyrgyz Republic88,80088,800100.0589,17389,173
Lao People’s Democratic Republic52,90052,900100.014,94914,949
Latvia126,800126,762100.055
Lebanon203,000234,918115.718,83350,7500.8650,750
Lesotho34,90031,31589.73,61321,00021,000
Liberia129,200471,950365.331342,7685.81207,260550,028
Libya1,123,700728,20264.8395,505
Lithuania144,200144,179100.034
Luxembourg279,100259,36392.919,774
Macedonia, former Yugoslav
Republic of68,90068,902100.06
Madagascar122,200122,174100.02742,77242,772
Malawi69,40067,08896.72,31531,06731,067
Malaysia1,486,6001,392,46093.794,144
Maldives8,20010,746131.11,5544,1000.074,100
Mali93,30083,70089.79,6098,0008,000
Malta102,00061,74160.540,261
Marshall Islands3,5003,500100.01
Mauritania64,40064,404100.08,3808,380
Mauritius101,60095,44693.96,154
Mexico3,152,8002,951,03793.6201,808
Micronesia, Federated States of5,1005,100100.01
Moldova123,200133,617108.5510,4170.1895,964106,381
Mongolia51,10050,96799.713615,14415,144
Montenegro27,50020,90076.06,601
Morocco588,200517,75588.070,447
Mozambique113,600113,600100.079,7409,740
Myanmar258,400258,402100.0
Namibia136,500136,434100.076
Nepal71,30071,311100.049,90049,900
Netherlands5,162,4004,833,06293.6329,356
New Zealand894,600837,51393.657,122
Nicaragua130,000130,010100.053,68053,680
Niger65,80057,19386.98,61125,38025,380
Nigeria1,753,2001,753,114100.0143
Norway1,671,7001,565,52093.6106,194
Oman194,000182,55694.111,485
Pakistan1,033,7001,046,221101.211912,6390.21825,928838,567
Palau3,1003,100100.01
Panama206,600197,25295.511,8602,5000.042,500
Papua New Guinea131,600131,16399.7438
Paraguay99,90078,42878.521,475
Peru638,400638,433100.0
Philippines879,900792,31090.087,600
Poland1,369,0001,282,27793.786,738
Portugal867,400807,15093.160,267
Qatar263,800246,68493.517,117
Romania1,030,2001,030,205100.0
Russian Federation5,945,4005,708,64296.0236,792
Rwanda80,10080,113100.06,2736,273
St. Kitts and Nevis8,9008,81999.182
St. Lucia15,30015,295100.07
St. Vincent and the Grenadines8,3007,80094.0500
Samoa11,60010,91894.1693
San Marino17,00012,90075.94,101
São Tomé and Príncipe7,4007,403100.0_62,0462,046
Saudi Arabia6,985,5006,539,93793.6445,566
Senegal161,800160,15799.01,65617,33017,330
Serbia467,700467,714100.0
Seychelles8,8008,798100.03
Sierra Leone103,700103,685100.02423,11323,113
Singapore862,500800,39092.862,130
Slovak Republic357,500351,50598.36,000
Slovenia231,700217,63193.914,093
Solomon Islands10,4009,85294.7550
Somalia44,200140,907318.896,7011.648,840112,004
South Africa1,868,5001,867,27899.91,247
Spain3,048,9002,854,43793.6194,4930.01
Sri Lanka413,400482,693116.847,855117,1301.9938,390155,520
Sudan169,700402,341237.111232,6213.95291,849
Suriname92,10085,97693.46,125
Swaziland50,70044,14787.16,562
Sweden2,395,5002,243,15493.6152,349
Switzerland3,458,5003,238,62393.6219,845
Syrian Arab Republic293,600293,603100.05
Tajikistan87,00087,000100.0229,40029,400
Tanzania198,900188,90395.09,99911,20011,200
Thailand1,081,9001,012,58393.669,323
Timor-Leste8,2008,200100.01
Togo73,40073,06999.533213,26013,260
Tonga6,9005,18975.21,712
Trinidad and Tobago335,600314,12693.621,480
Tunisia286,500266,27192.920,249
Turkey1,191,3005,258,549441.4112,7754,180,02070.894,180,020
Turkmenistan75,20075,200100.05
Uganda180,500180,506100.0_66,0006,000
Ukraine1,372,0001,548,318112.93176,3182.99176,318
United Arab Emirates611,700573,26593.739,016
United Kingdom10,738,50010,036,00093.5702,557
United States37,149,30034,529,76592.92,618,920
Uruguay306,500306,507100.0
Uzbekistan275,600275,600100.05
Vanuatu17,00014,50685.32,496
Venezuela, República
Bolivariana de2,659,1002,337,19987.9321,902
Vietnam329,100329,100100.0595,22095,220
Yemen, Republic of243,500248,821102.2135,3330.0979,52584,858
Zambia489,100489,101100.01855,02355,023
Zimbabwe353,400353,07599.932873,87073,870
Total217,372,700209,791,19513,481,5355,896,074100.008,8403,873,0379,843,642
The ending balances reflect rounding.

Includes nonnegotiable, non-interest-bearing notes that members are entitled to issue in substitution for currencies, and outstanding currency valuation adjustments.

Represents the percentage of total use of GRA resources (column A).

The special Disbursement Account of the General Department financed loans under Structural Adjustment Facility and Poverty Reduction Growth Facility (PRGF) arrangements.

For information purposes only. The PRGF-ESF Trust provides financing under PRGF arrangements and is not a part of the General Department.

Includes outstanding trust Fund loans to Somalia (SDR 6.5 million) and Sudan (SDR 59.2 million).

Less than SDR 500.

The ending balances reflect rounding.

Includes nonnegotiable, non-interest-bearing notes that members are entitled to issue in substitution for currencies, and outstanding currency valuation adjustments.

Represents the percentage of total use of GRA resources (column A).

The special Disbursement Account of the General Department financed loans under Structural Adjustment Facility and Poverty Reduction Growth Facility (PRGF) arrangements.

For information purposes only. The PRGF-ESF Trust provides financing under PRGF arrangements and is not a part of the General Department.

Includes outstanding trust Fund loans to Somalia (SDR 6.5 million) and Sudan (SDR 59.2 million).

Less than SDR 500.

Schedule 2

General Department: Financial resources and liquidity position in the General Resources Account as at April 30, 2008, and 2007

(In thousands of SDRs)

20082007
Total resources
Currencies209,791,195209,089,980
SDR holdings1,852,2782,597,564
Gold holdings5,851,7715,851,771
Other assets16,816,0776,798,577
Total resources224,311,321224,337,892
Less: Non-usable resources259,386,58360,750,415
of which: Credit outstanding5,896,0747,333,633
Equals: Usable resources3164,924,738163,587,477
Less: Undrawn balances under GRA arrangements3,085,7773,910,787
Equals: Uncommitted usable resources161,838,961159,676,690
Plus: Repurchases one year forward4222,3061,203,967
Less: Prudential balance534,878,76034,765,360
Equals: One-year forward commitment capacity FCC)127,182,507126,115,297
Memorandum items
Resources available under borrowing arrangements34,000,00034,000,000
Quotas of members that finance IMF transactions174,393,800173,826,800
Liquid liabilities13,481,53514,995,543

Other assets reflect current assets (charges, interest, and other receivables) and other assets (which include capital assets such as land, buildings, and equipment), net of other liabilities including remuneration payable.

Resources are regarded as non-usable if they cannot be used in the financing of the IMF’s ongoing operations and transactions. These resources include (1) gold holdings, (2) currencies of members that are using IMF credit, (3) currencies of other members with relatively weak external positions, and (4) other assets.

Usable resources consist of (1) holdings of currencies of members considered by the IMF as having balance of payments and reserve positions sufficiently strong for their currencies to be used in transfers, (2) SDR holdings, and (3) any unused amounts under credit lines that have been activated.

Repurchases by member countries during the coming one-year period. It is assumed that repurchases would be made on an expectation basis for the SRF and on an obligation basis under all other facilities.

Prudential balance is set at 20 percent of quotas of members that issue the currencies that are used in the financing of IMF transactions and any amounts activated under borrowing arrangements.

Other assets reflect current assets (charges, interest, and other receivables) and other assets (which include capital assets such as land, buildings, and equipment), net of other liabilities including remuneration payable.

Resources are regarded as non-usable if they cannot be used in the financing of the IMF’s ongoing operations and transactions. These resources include (1) gold holdings, (2) currencies of members that are using IMF credit, (3) currencies of other members with relatively weak external positions, and (4) other assets.

Usable resources consist of (1) holdings of currencies of members considered by the IMF as having balance of payments and reserve positions sufficiently strong for their currencies to be used in transfers, (2) SDR holdings, and (3) any unused amounts under credit lines that have been activated.

Repurchases by member countries during the coming one-year period. It is assumed that repurchases would be made on an expectation basis for the SRF and on an obligation basis under all other facilities.

Prudential balance is set at 20 percent of quotas of members that issue the currencies that are used in the financing of IMF transactions and any amounts activated under borrowing arrangements.

Schedule 3

General Department: Status of arrangements in the general Resources Account as at April 30, 2008

(In thousands of SDRs)

MemberDate of arrangementExpirationTotal amount

agreed
Undrawn

balance
Stand-By Arrangements
GabonMay 7, 2007May 6, 201077,15077,150
HondurasApril 7, 2008March 30, 200938,85038,850
IraqDecember 19, 2007March 18, 2009475,360475,360
Macedonia, former Yugoslav Republic ofAugust 31, 2005August 30, 200851,67541,175
ParaguayMay 31, 2006August 31, 200830,00030,000
PeruJanuary 26, 2007February 28, 2009172,368172,368
TurkeyMay 11, 2005May 10, 20086,662,0402,248,439
Total Stand-By Arrangements7,507,4433,083,342
Extended Arrangements
AlbaniaFebruary 1, 2006January 31, 20098,5232,435
LiberiaMarch 14, 2008March 13, 2011342,768
Total Extended Arrangements351,2912,435
Total General Resources Account7,858,7343,085,777

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