A. Investment Income from the Subaccounts and Timing of Initiation of the EA Payout

10. The use of IA income is guided by the Fund’s Articles. Under Article XII, section 6 (f) (iv), investment income from the IA may be invested, held in the IA, or used for meeting the expenses of conducting the business of the Fund.²⁴ Staff proposes that income in the subaccounts of the IA be used as follows:

• Fixed-Income Subaccount: Since 2006, FI income has been transferred to the GRA to be used towards meeting the expenses of the Fund, thereby contributing to the GRA net income placed to the Fund’s reserves (Figure 1). In light of losses projected for the FI in FY 2022, including the actual losses for the 10 months ended February 2022, no FI income is expected to be transferred to the GRA to be used towards meeting the expenses of the Fund. An amount equivalent to the loss would be reflected in the IA retained earnings.

• Endowment Subaccount: Staff proposes that any net investment income earned in the EA in FY 2022 be fully retained in the endowment and not be transferred to the GRA to be used for meeting administrative expenses (see below). Based on current projections for FY 2022, this would imply that EA projected income of about SDR 202 million will be retained and reinvested according to the investment strategy for the EA. An equivalent amount would be reflected in the special account for IA retained earnings, raising cumulative retained earnings of the IA to about SDR 2,131 million.

11. During the review of the Fund’s income position in April 2021, the Board agreed to delay the commencement of the EA payout to FY 2022, to allow the payout decision to be informed by the outcome of the IA review.²⁵ At the 5-yearly review of the IA in January 2022, the Board approved refinements to the investment strategy for the EA and FI to improve potential return prospects. Specifically for the EA, refinements to the strategic asset allocation would bring projected returns somewhat closer to the EA target (3 percent real return) while maintaining a balanced portfolio which is resilient in different economic and inflation regimes. Compared to the previous asset allocation, expected long-term real returns for the new asset allocation are higher at around 2.2 percent albeit with higher return volatility and downside risk.²⁶

12. The delay in commencing payouts in FY 2021 was also intended to provide an opportunity to further build the EA’s cushion of retained investment income to protect against possible adverse scenarios (Annex IV). As described in Box 1, the delay in implementation of the payout initially agreed in 2018 was to build a target “cushion” of retained investment income that could help protect the value of the EA’s corpus (i.e., initial capital after inflation). At that time, staff suggested that the target cushion could be sized to absorb one extreme event, say a 15 percent loss (equivalent to a two-standard deviation market shock). Under the payout policy framework, the cushion would be reassessed before commencing payouts. In addition, the Fund’s income outlook, the EA’s performance, and market conditions would also be reassessed to establish an appropriate level for the initial payout.

13. While the EA’s cushion had grown considerably since the April 2021 review of the Fund’s income position, market developments have put pressure on the cushion in recent months. The EA cushion had grown in line with strong portfolio returns and stood at around 19.7 percent at end-December 2021 (Figure 2). However, the cushion has declined rapidly in recent months to 15.2 percent at the end of February, and to an estimated 12.2 percent at mid-March. This is primarily due to the sharp increase in inflation which impacts both the EA’s real return target and the value of the EA corpus. Furthermore, EA returns since December 2021 have been negative in US dollar terms, reflecting the market reaction to war in Ukraine and shifts in monetary policy. The mid-March EA NAV is estimated to be US$8.9 billion, down significantly from the high of US$9.5 billion in December 2021.

EA Asset Value and Retained Investment Income Cushion¹

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

¹ Source: State Street data through end February 2022, staff estimates for mid-March 2022. EA portfolio was fully vested in 2017.

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EA Asset Value and Retained Investment Income Cushion¹

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

¹ Source: State Street data through end February 2022, staff estimates for mid-March 2022. EA portfolio was fully vested in 2017.

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EA Asset Value and Retained Investment Income Cushion¹

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

¹ Source: State Street data through end February 2022, staff estimates for mid-March 2022. EA portfolio was fully vested in 2017.

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14. Staff has evaluated several options for commencing the payout on the basis of the criteria set forth in the policy framework and developments described above.²⁷ The EA’s cushion as of end-February was close to the target of 15 percent and has since declined to an estimated 12.2 percent by mid-March. If payouts were commenced in FY 2022, the initial amount would be set at around 0.9 percent of NAV or about US$80 million (slightly lower than the US$85 million estimated at the time of the 2018 review).²⁸ Given the scale of the recent decline, it is reasonable to assume that this may persist amid the ongoing impact of inflation and recent geopolitical events. The estimated decline in the cushion below the threshold level, which is an important condition for initiating the payout, suggests that it may be prudent to delay the initial payout for one year. Moreover, the likelihood that the payout could reach the maximum limit under further market declines, which would necessitate a suspension of payouts in order to protect the EA corpus, is higher.²⁹ The delay would provide time to rebuild the cushion and enable payouts to begin with a lower likelihood of a start-stop scenario under which payouts may need to be suspended in a year or two.

15. Against this background, staff’s view is that there is a strong case for further delaying the commencement of the EA payout. An adequate cushion of retained investment income is an important condition for initiating payouts and to protect the EA corpus against possible adverse market scenarios. The paper proposes that the decision to initiate the EA payout under the policy approved by Directors in 2018 be delayed by one year with the intent of building an adequate income cushion, above the threshold level of 15 percent (proposed Decision 2). In light of the Fund’s income outlook, a delay of payouts for one year could be considered with very negligible impact on the Fund’s ability to cover its administrative expenditures.

B. Allocation of Income

This section revisits the recent practice of allocating annual Fund income equally between the special and general reserve.³⁰ Based on these considerations, the section proposes alternative rules-based allocation frameworks.

16. The Articles of Agreement require the Fund to determine annually how to allocate its net income. The Articles permit the net income of the GRA to be either distributed to members or placed to reserves in accordance with the annual decision on the disposition of the Fund’s net income. The Board has considered alternative allocation approaches on four occasions since 2015, but a clear consensus on a new longer-term allocation framework has yet to emerge.³¹

17. In accordance with the decision taken in FY 2018 by the Board to review the allocation framework on a two-yearly cycle, a review was supposed to take place in FY 2020.³² However, as there was a net loss in that year, the review was deferred until the first subsequent year in which the Fund would have a positive net income after having replenished cumulative losses charged to the special reserve in the intervening periods. In light of the positive net income projected for FY 2022, the Fund is now in a position to review the allocation framework.

18. The special reserve has been the first line of defense against administrative losses. The special reserve was funded in 1957 by the proceeds from a gold sales investment program set up to address prior years’ cumulative annual deficits suffered by the Fund from its inception. Under a policy decision taken at that time, any administrative deficit for the fiscal year would first be written off against the special reserve. Accordingly, throughout the years, all operational deficits have been charged against the special reserve. Under the Fund’s practice, the special reserve has been replenished in the years after a drawdown due to administrative losses.³³

19. The Fund has a long-standing practice of allocating part of its net income to the special reserve, while cumulative allocations to the general reserve have been more sizeable in recent decades (Figure 3). Following a period (1978–1997) when all net income was allocated to the special reserve, starting in 1998 net income was allocated partly to general and partly to special reserves. The general reserve accumulated more rapidly than the special reserve over the past two decades, with the share of the special reserve in total reserves falling from a peak of just over 80 percent in FY 1997 to about 37 percent at end FY 2021 (Figure 4).

Reserve Allocation and Net Income Losses, 1958–2021 1/

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.¹ In FY 2014, the special reserve reflects an allocation of net income of SDR 1.2 billion and a charge of SDR 1.4 billion associated with the amended IAS 19 retroactive adjustment.

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Reserve Allocation and Net Income Losses, 1958–2021 1/

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.¹ In FY 2014, the special reserve reflects an allocation of net income of SDR 1.2 billion and a charge of SDR 1.4 billion associated with the amended IAS 19 retroactive adjustment.

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Reserve Allocation and Net Income Losses, 1958–2021 1/

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.¹ In FY 2014, the special reserve reflects an allocation of net income of SDR 1.2 billion and a charge of SDR 1.4 billion associated with the amended IAS 19 retroactive adjustment.

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Reserve Composition and Special Reserve as a Percentage of Total Reserves, 1958–2021

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.

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Reserve Composition and Special Reserve as a Percentage of Total Reserves, 1958–2021

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.

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Reserve Composition and Special Reserve as a Percentage of Total Reserves, 1958–2021

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.

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20. In April 2018, staff proposed the following principles to guide the framework for annual allocation decisions of net income between the special and general reserve.

• Maintain a role for both the general and the special reserve. This is consistent with the Fund’s longstanding practice over the past six decades. As in the past, it does not preclude the possibility that in certain years, all net income would be allocated to the general reserve if balances in the special reserve were considered adequate, or to the special reserve, if for example there was a need to replenish balances following a period of losses.

• Be consistent with the new income model. This recognizes that the distinction between surcharge and other forms of lending income is no longer meaningful under the new income model.³⁴

• Balance the goals of strengthening the Fund’s balance sheet and preserving future Board flexibility in the use of reserves. Both considerations have been stressed in Board discussions, and the allocation framework should allow scope for an appropriate balance to be struck between these two objectives.

• Retain Board flexibility to decide on future income allocations. Any framework should not be applied mechanistically, but rather would provide sufficient flexibility for future Board judgments in light of evolving circumstances.

21. On the basis of the above considerations, the following four options could be considered as a basis for a new allocation framework:³⁵

• Option 1: Allocate net income in equal parts to the special and general reserves. The 50/50 allocation in recent years has been a reasonable compromise, to strike a balance between diverging views within the Board. Moreover, this approach is simple to implement and communicate, as it involves a single parameter.

• Option 2: Allocating proportionally more to the special reserve than the general reserve until they are equalized. With the special reserve (excluding the gold sales profits in the endowment) at SDR 6.9 billion, and the general reserve at about SDR 12 billion as of end FY 2021, the balance in the special reserve represents less than 60 percent of the general reserve. The special reserve would be drawn down first in the event of any accounting losses, including those arising from IAS 19 remeasurements and the provisioning framework adopted by the Board consistent with International Financial Reporting Standards (IFRS 9). Hence, it would be important to ensure that adequate allocations to the special reserve help maintain a strong balance to enable it to continue its vital role as first line of defense against accounting losses.³⁶ Once the special reserve and the general reserve are broadly equal, staff would then revisit the allocation of income methodology again. In the meantime, staff would continue to report to the Board on a 2-year cycle on the status of the reserves and alert them in the intervening years if the special reserve is closer to equaling the general reserve. The equalization process could be stopped earlier if the Board feels that it is no longer warranted.

• Option 3: An annual allocation rule linked to the minimum floor for precautionary balances. The share of total annual net income allocated to the special reserve could be guided by the difference between the level of the special reserve and the minimum floor approved by the Board.³⁷ Such a rule would provide for larger relative allocations to the special reserve in years when its balances are substantially below the floor. Annual allocation shares to the special reserve would automatically diminish as its balances increase relative to the floor. Once the special reserve reaches the minimum floor, staff would then revisit the allocation of income methodology again. This option did not receive broad Board support when it was proposed by staff in 2018, but it is worth revisiting as it is a simple rule, grounded in the Fund’s framework to mitigate financial risk, and would link allocation decisions to the Board’s biannual review of precautionary balances.³⁸

• Option 4: Allocate all IAS 19 remeasurement gains and losses to the special reserve and allocate any remaining positive net income in equal parts between the special and general reserves. Executive Directors asked staff to explore options to isolate the income volatility arising year-on-year stemming from the unpredictability of pension-related gains and losses. At the informal session to engage the Board on the interim update on the Fund’s income position for FY2021 on March 8, 2021, staff presented two alternate proposals for the treatment of IAS 19 remeasurement gains and losses, to better isolate their impact. The first proposal would be to separately identify and ‘ring-fence’ the IAS 19 remeasurement gains/losses in the special reserve. The second proposal would be to create an additional account outside of the special and general reserve to capture future accumulated IAS 19 remeasurement gains/losses. This would be a separate equity or retained earnings type account recognized as an additional reserve of the General Resources Account (GRA). This second proposal would have implications for income transfers to the investment account, which are limited under the Articles to the total of the general and special reserve. At the time of the March 2021 Board discussion, Directors had divergent views on the suitability of these two proposals with some suggesting to maintain the status quo.

22. In view of the potential shortcomings of the proposal to isolate the impact of the accumulated IAS 19 remeasurement gains/losses in a separate account outside of the special and general reserve, staff proposes to reconsider the alternative of ring-fencing the IAS 19 remeasurement gains/losses in the special reserve. Specifically, staff proposes to consider allocating all IAS 19 remeasurement gains and losses to the special reserve and allocate any remaining positive net income in equal parts between the special and general reserves. Recording IAS 19 remeasurement gains or losses only within the special reserve would ring-fence the associated volatility entirely within the special reserve, which is non distributable and therefore more suitable for the allocation of unrealized amounts. Under this approach IAS 19 remeasurement gains and losses would be more clearly identified while confining the allocations to the two reserves specifically identified by the Articles. Any cumulative remeasurement losses would reduce the amount available for loss absorption while cumulative remeasurement gains would not be available for future distribution to the membership as a dividend. Since the IAS 19 remeasurement gains and losses tend to offset each other over time, in the medium-long term the impact on the special reserve is expected to be limited. Allocating any remaining positive net income to the special and general reserve would allow accumulation of both reserves.

23. Figure 5 illustrates how the potential differences between these approaches impact reserve accumulation based on medium-term income projections under the current desk survey scenario. The projections do not account for the income effects of either IAS 19 (pension-related gains and losses) or IFRS 9 (provisioning for impairments), as these are difficult to predict with any degree of certainty.

Projected Reserve Accumulation Under Different Allocation Options

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.1 The special reserve dynamics under option 4 would depend on accounting adjustments arising from IAS 19 gains and losses. However, it is expected that over the years option 4 would have a similar outcome as option 1 since cumulatively the remeasurement gains and losses offset each other and the balance tends to zero.

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Projected Reserve Accumulation Under Different Allocation Options

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.1 The special reserve dynamics under option 4 would depend on accounting adjustments arising from IAS 19 gains and losses. However, it is expected that over the years option 4 would have a similar outcome as option 1 since cumulatively the remeasurement gains and losses offset each other and the balance tends to zero.

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Projected Reserve Accumulation Under Different Allocation Options

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: IMF Finance Department.1 The special reserve dynamics under option 4 would depend on accounting adjustments arising from IAS 19 gains and losses. However, it is expected that over the years option 4 would have a similar outcome as option 1 since cumulatively the remeasurement gains and losses offset each other and the balance tends to zero.

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• Under option 1, by FY 2028 the special reserve would reach about 70 percent of general reserve and 84 percent of the current precautionary balances minimum floor of SDR 15 billion.

• Under option 2, with an allocation of 2:1 to the special reserve, the latter would reach slightly over 90 percent of the general reserve by FY 2028. With an allocation of 3:1 the special reserve would equal the general reserve in FY 2027 and exceed it the following year. Hence, based on the medium-term income projections, staff would be expected to revisit the allocation of income approach and offer new options to the Board in FY 2027.

• Under option 3, the initial estimated allocation to the special reserve would be about 54 percent in FY 2022. Through FY 2028, on average about 37 percent of the Fund’s projected annual income would be allocated to the special reserve, implying a cumulative increase in the special and general reserve of about SDR 4.5 billion and SDR 6.9 billion, respectively. At the end of the projection period, the special reserve would amount to about 76 percent of the minimum floor, still lower than all other options proposed.

• The special reserve dynamics under option 4 would depend on accounting adjustments arising from IAS 19 gains and losses. However, it is expected that over the years option 4 would have a similar outcome to option 1 since cumulatively the remeasurement gains and losses offset each other and the balance tends to zero.³⁹

24. Weighing all the considerations discussed above, staff proposes an allocation framework based on the rule described under option 4 that would isolate IAS 19 remeasurement gains and losses in the special reserve (proposed Decision 3). This practice would avoid distorting allocations to the Fund’s distributable reserves by gains and losses that may not be supported by corresponding underlying cash flows and may be reversed in future financial years. It would also further reinforce the role of the special reserve as the first line of defense against any income losses. At the same time, allocating any positive remaining net income according to a 50/50 ratio over the next two years remains a simple approach and this approach was also broadly supported by Directors in previous years. Continuation of the 50/50 allocation also allows for the special reserve to grow at a modest pace, increasing the share of the special reserve in total reserves, broadly in line with option 1. In light of the balance of the cumulative remeasurement gain in the general reserve of SDR 1,020 million at April 30, 2021,⁴⁰ as a transitory measure, staff proposes that any remeasurement losses be allocated to the general reserve until the gain is cleared down to zero.⁴¹

C. Transfer of Currencies

25. The placement of FY 2022 GRA net income to reserves provides scope for a further transfer of currencies to the FI. Article XII, Section 6(f)(ii) permits the transfer of additional GRA currencies to the IA if, at the time of the decision to make such transfer, the Fund’s reserves are above the cumulative amount of previous transfers of currencies from the GRA to the IA.⁴² After the above placement, the combined balance in reserves is projected to total SDR 25.4 billion. This would remain above the net cumulative amount of transfers made thus far to the IA from the GRA of about SDR 23.4 billion.⁴³

26. Accordingly, staff proposes to transfer currencies equivalent to the full amount of the increase in reserves from the GRA to the IA for investment in the FI (proposed Decision 4).⁴⁴ This proposal is consistent with the assumption that the IA will over time achieve a higher return than the SDR interest rate.

27. Considering the sensitivity of the net income projections to several underlying assumptions, the final outcome for FY 2022 remains uncertain. The projections remain susceptible to the unpredictability of key underlying assumptions including projections for lending, investment returns, exchange rates, etc. In particular, the pension-related gain for FY 2022 remains unpredictable, mainly due to its sensitivity to the discount rate and other factors such as the volatility of plan asset returns.

A. Summary of Key Risks

30. Key risks to Fund income and finances associated with recent economic and geopolitical developments include: cancellations and changes in the timing of purchases under existing and potential arrangements under the desk survey; fluctuations in the annual pension-related gain or loss as determined under IAS 19; uncertainties around the global interest rate environment and US dollar/SDR exchange rate path; and credit risk that is inherent in the Fund’s unique role in the international financial architecture. More specifically:

• Delays, rephasing or cancellation of purchases under existing and potential arrangements or early repurchases could lead to lower Fund income, though this risk could be mitigated by members seeking new Fund arrangements.

• It is difficult to assess precisely at this stage the financing needs arising from the spillover on other countries of the war in Ukraine, or countries impacted by rising inflationary pressures and the ongoing impact of the pandemic; which could result in new loan programs, augmentations, and rephasing of programs to help meet the costs of the current crisis.

• Changes in actuarial assumptions that impact the annual pension-related gain or loss under IAS 19 can be substantial and have a significant impact on overall Fund net income.

• While the broadening of non-lending income sources under the Fund’s income model is helping to mitigate income risk, the low return environment relative to initial expectations and potential for further market volatility could imply downside risks to expected contributions from investment income.

• Regarding credit risks, staff is currently in the process of conducting IFRS 9-related impairment assessments for FY 2022.

B. Key FY 2023–2024 Income Outlook Factors

31. Key factors that affect the FY 2023–2024 income outlook are discussed below (see Table 3). A sensitivity analysis of the income effects of changes in some of the assumptions is presented in Table 4.

^{Table 4.}

Sensitivity Analysis—Effect of Changes in Selected Assumptions on FY 2023 Projected Income

(in millions of SDRs)

¹Implicit returns on GRA interest-free resources.

²Based on the estimated average credit outstanding for FY 2023.

^{Table 4.}

Sensitivity Analysis—Effect of Changes in Selected Assumptions on FY 2023 Projected Income

(in millions of SDRs)

Increase/decrease in:
SDR interest rate by 50 basis points
Implicit returns 1	24
Margin for the rate of charge by 20 basis points 2	192
US dollar vis-à-vis SDR by five percent - Administrative expenses	44
US dollar vis-à-vis SDR by 1 US cent - Endowment Subaccount	47
Investment income margin by 50 basis points	139

¹Implicit returns on GRA interest-free resources.

²Based on the estimated average credit outstanding for FY 2023.

View Table

^{Table 4.}

Sensitivity Analysis—Effect of Changes in Selected Assumptions on FY 2023 Projected Income

(in millions of SDRs)

Increase/decrease in:
SDR interest rate by 50 basis points
Implicit returns 1	24
Margin for the rate of charge by 20 basis points 2	192
US dollar vis-à-vis SDR by five percent - Administrative expenses	44
US dollar vis-à-vis SDR by 1 US cent - Endowment Subaccount	47
Investment income margin by 50 basis points	139

¹Implicit returns on GRA interest-free resources.

²Based on the estimated average credit outstanding for FY 2023.

• Lending income. Margin and surcharge income are projected to be higher in FY 2023–2024, reflecting mainly the potential new demand for Fund lending under the desk survey projections and continued disbursements under current arrangements. Income from commitment fees in FY 2023 of SDR 196 million reflects the expected two-year commitment fees earned on three arrangements treated as precautionary that are scheduled to expire in FY 2023, and commitment fee income of SDR 183 million is expected in FY 2024 when another FCL arrangement is scheduled to expire.

• Surcharges are an integral part of the Fund’s multi-layered risk management framework. They are designed to provide incentives for members to limit exposures to Fund credit and encourage timely repurchases. At the same time, they also help strengthen the Fund’s balance sheet by allowing accumulation of precautionary balances when its credit exposures grow. Projections of lending income excluding surcharges remain strong and are expected to exceed expenses in FY 2023–2024.

• In the context of the Interim Review of the Adequacy of the Fund’s Precautionary Balances on December 13, 2021, the Board discussed the role of surcharges and the merits of a comprehensive review of the surcharge policy. At that time there was insufficient Board support for a review. A number of Directors did not see a need to change the design, given the overall low total cost of borrowing from the Fund and noting the critical role of surcharge income in ensuring an adequate build-up of risk buffers.

• Fixed-Income Subaccount.⁴⁵ FI income is projected to be positive in FY 2023 and FY 2024 at about SDR 240 million and SDR 391 million, respectively, reflecting a combination of the expected uptick of the SDR interest rate path over the medium term and higher average expected returns projected for the portfolio under the new investment strategy.⁴⁶ However, a rise in interest rates beyond current market expectations could reduce these gains.

• Endowment Subaccount. Total EA returns are projected to average about 3.4 percent over the medium term. However, over short time periods, income projections for the EA remain subject to considerable uncertainty given the high degree of volatility across the asset classes in which the EA is invested.

  • Income projections assume an initial payout commencing in FY 2023, broadly in line with the portfolio’s prevailing return outlook, and an increase in US dollar terms by the GED rate each year thereafter (Box 1). For a return to conditions suitable for a payout the EA cushion which has fallen below the minimum level would need to improve from current levels, and financial markets would need to stabilize more in line with the long-term return outlook, in the coming year. As such, the initial value of the payout would be reassessed and decided by the Board later in FY 2023 in accordance with the framework for guiding future payouts from the EA agreed by the Board (Annex IV).⁴⁷

  • The initial payout in FY 2023 is estimated to be about SDR 65 million (equivalent to about 1 percent of the US dollar value of the portfolio translated at the projected US dollar/SDR exchange rate for the year), and SDR 66 million in FY 2024 based on the constant payout rule.⁴⁸

• Interest-free resources and reimbursements. Income from interest-free resources is projected to be higher reflecting the sharp rise in interest rates in recent months and expected uptick of the SDR interest rate path over the medium term. Suspension of reimbursements from FY 2022 to FY 2026 will reduce expected GRA income by about SDR 452 million through the 5-year period.

• RST. Implementation of the RST is expected to incur recurring steady state costs in the medium-term for operations and trust management. The cost of administering the RST is expected to be based on reasonable estimates of gross incremental costs with a view to ensuring cost recovery. It is proposed that decisions on annual reimbursements of costs would be made by the Board in the annual income paper starting FY 2024, along with other reimbursable expenses. For FY 2023, costs are planned to be covered by the transitional resources given to departments.

• Expenditures.

  • Net administrative expenses are consistent with those estimated in the medium-term budget paper and continue to reflect the Fund’s crisis response. These needs and those emerging from the war in Ukraine will be met by reprioritization and use of carryforward resources. At the same time, and after a decade of flat real budgets, the FY 2023 administrative budget will implement the first phase of the targeted budget augmentation framework for FY 2023-2025 approved by the Executive Board last December to step up the Fund’s work on longer-term global challenges, returning to a flat real budget trajectory thereafter.

  • Capital budget items expensed for FY 2023 are expected to be marginally lower and reflect continued uncertainties on the facilities side pertaining to the pandemic and the “new normal”, which has prompted a reconsideration of investments in buildings and related systems including scaled down investment in new IT-intensive transformation projects.⁴⁹

  • Periodic pension costs are not projected beyond FY 2022.

• Pension remeasurement (IAS 19) gains and losses. Forward-looking projections about the demographic and other assumptions, and returns on the asset portfolio, are not built into the income scenarios, due to the volatility, and hence unpredictability, of these assumptions.

• Provision for impairment losses. IFRS 9 requires entities to record provisions based on an “expected loss” model with a broad range of relevant considerations, including forward-looking information. The Fund has never recorded a provision for impairment losses and cases where provisioning may need to be considered by the Fund are expected to remain very rare. Accordingly, given the current circumstances and future uncertainty surrounding any expected exceptional events, the projection assumptions do not incorporate any provision for impairment losses under IFRS 9.

• Sensitivity Analysis. Projected income and expenses remain volatile in the near term and are particularly susceptible to changes in the underlying assumptions.

  • The effect of changes in key income assumptions is summarized in Table 4.

  • The pension-related (IAS 19) gain or loss is highly unpredictable and can be significant: on the asset side, performance can be very volatile, and on the liability side, the defined benefit obligation (DBO) is highly sensitive to the underlying actuarial assumptions, in particular the discount rate.⁵⁰

  • In the unlikely event of a provision for impairment losses on credit outstanding being required under IFRS 9 Fund income would be reduced accordingly. Staff commenced IFRS 9- related impairment assessments for FY 2022 in January with the process scheduled for conclusion by June 2022.

C. Review of the Margin for the Rate of Charge

32. The Board is to set the margin for the basic rate of charge for financial years 2023–24. The Executive Board is required to set the margin over the SDR interest rate for two years, with a mid-period review before the end of the first year. Under the Rule I-6(4), the margin should be set at a level that is adequate to cover the Fund’s intermediation costs, taking into account income from service charges, and help build up the Fund’s reserves, considering the existing level of precautionary balances and the expected contribution from surcharges and commitment fees. At the same time, the level of the margin should ensure that the Fund’s borrowing costs remain appropriately aligned with long-term credit market conditions. The rule also permits that, in exceptional circumstances, the margin may be set at a level other than that required to cover intermediation expenses and accumulate reserves. The margin has been set at 100 basis points since May 2008.

Coverage of Intermediation Costs

33. Lending income is projected to remain substantially in excess of intermediation costs, in FY 2022.⁵¹ Income from service charges is projected at US$101 million in FY 2022 (Table 5, row B). An unchanged margin of 100 basis points would provide margin income of about US$1,284 million. These amounts compare with estimated intermediation costs of about US$126 million in FY 2022 (Table 5, row A). Fund-wide intermediation costs related to Generally Available Facilities (GAF) are derived using the Fund’s Analytic Costing and Estimation System (ACES). They cover direct personnel, travel, and other administrative expenses, as well as indirect support and governance costs. A proportion of capital spending is also added. Estimated FY 2022 costs are lower than earlier projections, reflecting the slowdown in lending operations as the financing support has been shifting from emergency financing towards UCT-quality arrangements.

^{Table 5.}

Income from the Margin and Reserve Accumulation¹

(in millions of US dollars, unless otherwise indicated)

Source: Finance Department and Office of Budget and Planning.

¹For analytical purposes, surcharges and commitments fees are considered for reserve accumulation only.

²Costs related to the Fund’s “generally available facilities”.

³Derived by applying the margin against average Fund credit outstanding at the average US$/SDR exchange rate.

⁴Includes commitment fees for expired or canceled arrangements.

⁵Surcharges are projected on the basis of current quotas and surcharge thresholds.

⁶Potential reserve accumulation is derived by assuming other sources of income are sufficient to cover non-intermediation costs.

⁷Potential reserve accumulation as a percent of precautionary balances at the beginning of the financial year.

⁸Additions to or reductions in reserves based on net income or loss for the year (including actual and projected IAS 19 gains/(losses) up to FY 2022 and excludes retained EA investment income).

⁹Precautionary balances include the Fund’s reserves less the gold endowment of SDR 4.4 billion. The SCA-1 was fully distributed in the context of Sudan’s arrears clearance in June 2021. Precautionary balances are also adjusted for a positive one-off permanent adjustment of SDR 205 million effective May 1, 2021 (Annex II).

¹⁰Excludes FCL and PLL arrangements.

^{Table 5.}

Income from the Margin and Reserve Accumulation¹

(in millions of US dollars, unless otherwise indicated)

	Actual			Projected
	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024
A. Intermediation costs 2	92	112	141	126	163	167
Less
B. Service charges	238	115	162	101	166	102
C. Costs to be covered by income from margin (A-B)	-146	-3	-21	25	-3	65
D. Income from margin 3
80 basis points	…	…	…	…	1,082	1,063
100 basis points	708	921	1,222	1,284	1,352	1,329
120 basis points	…	…	…	…	1,623	1,595
E. Commitment fees 4	116	515	99	402	276	260
E.1 FCL/PLL	69	488	55	402	276	260
E.2 Other	47	27	44	0	0	0
F. Surcharges 5	587	1,038	1,313	1,749	2,018	1,943
G. Potential reserve accumulation 6 (D+E+F-C)
80 basis points	…	…	…	…	3,379	3,201
100 basis points	1,557	2,477	2,654	3,410	3,649	3,467
120 basis points	…	…	…	…	3,920	3,733
H. Potential reserve accumulation (as a percent) 7
80 basis points	…	…	…	…	11.5%	9.8%
100 basis points	6.4%	10.2%	11.8%	12.0%	12.4%	10.7%
120 basis points	…	…	…	…	13.3%	11.5%
I. Actual reserve accumulation 8
80 basis points	…	…	…	…	2,553	2,631
100 basis points	262 -2,150	5,679	2,941	2,823	2,897
120 basis points	…	…	…	…	3,094	3,163
J. Actual reserve accumulation (as a percent) 8
80 basis points	…	…	…	…	8.7%	8.1%
100 basis points	1.1% -8.8%	25.2%	10.3%	9.6%	8.9%
120 basis points	…	…	…	…	10.5%	9.7%
K. Precautionary balances at the end of FY (in SDR billions) 9
80 basis points	…	…	…	…	22.7	24.8
100 basis points	17.7	16.0	20.0	20.9	22.9	24.9
120 basis points	…	…	…	…	23.1	25.1
Memorandum items
Average Fund credit outstanding (in SDR billions)	50.6	66.7	86.7	90.4	95.9	93.6
Number of active arrangements (average) 10	15	18	23	…	…	…
Average exchange rate US$/SDR	1.40	1.38	1.41	1.42	1.41	1.42

Source: Finance Department and Office of Budget and Planning.

¹For analytical purposes, surcharges and commitments fees are considered for reserve accumulation only.

²Costs related to the Fund’s “generally available facilities”.

³Derived by applying the margin against average Fund credit outstanding at the average US$/SDR exchange rate.

⁴Includes commitment fees for expired or canceled arrangements.

⁵Surcharges are projected on the basis of current quotas and surcharge thresholds.

⁶Potential reserve accumulation is derived by assuming other sources of income are sufficient to cover non-intermediation costs.

⁷Potential reserve accumulation as a percent of precautionary balances at the beginning of the financial year.

⁸Additions to or reductions in reserves based on net income or loss for the year (including actual and projected IAS 19 gains/(losses) up to FY 2022 and excludes retained EA investment income).

⁹Precautionary balances include the Fund’s reserves less the gold endowment of SDR 4.4 billion. The SCA-1 was fully distributed in the context of Sudan’s arrears clearance in June 2021. Precautionary balances are also adjusted for a positive one-off permanent adjustment of SDR 205 million effective May 1, 2021 (Annex II).

¹⁰Excludes FCL and PLL arrangements.

View Table

^{Table 5.}

Income from the Margin and Reserve Accumulation¹

(in millions of US dollars, unless otherwise indicated)

	Actual			Projected
	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024
A. Intermediation costs 2	92	112	141	126	163	167
Less
B. Service charges	238	115	162	101	166	102
C. Costs to be covered by income from margin (A-B)	-146	-3	-21	25	-3	65
D. Income from margin 3
80 basis points	…	…	…	…	1,082	1,063
100 basis points	708	921	1,222	1,284	1,352	1,329
120 basis points	…	…	…	…	1,623	1,595
E. Commitment fees 4	116	515	99	402	276	260
E.1 FCL/PLL	69	488	55	402	276	260
E.2 Other	47	27	44	0	0	0
F. Surcharges 5	587	1,038	1,313	1,749	2,018	1,943
G. Potential reserve accumulation 6 (D+E+F-C)
80 basis points	…	…	…	…	3,379	3,201
100 basis points	1,557	2,477	2,654	3,410	3,649	3,467
120 basis points	…	…	…	…	3,920	3,733
H. Potential reserve accumulation (as a percent) 7
80 basis points	…	…	…	…	11.5%	9.8%
100 basis points	6.4%	10.2%	11.8%	12.0%	12.4%	10.7%
120 basis points	…	…	…	…	13.3%	11.5%
I. Actual reserve accumulation 8
80 basis points	…	…	…	…	2,553	2,631
100 basis points	262 -2,150	5,679	2,941	2,823	2,897
120 basis points	…	…	…	…	3,094	3,163
J. Actual reserve accumulation (as a percent) 8
80 basis points	…	…	…	…	8.7%	8.1%
100 basis points	1.1% -8.8%	25.2%	10.3%	9.6%	8.9%
120 basis points	…	…	…	…	10.5%	9.7%
K. Precautionary balances at the end of FY (in SDR billions) 9
80 basis points	…	…	…	…	22.7	24.8
100 basis points	17.7	16.0	20.0	20.9	22.9	24.9
120 basis points	…	…	…	…	23.1	25.1
Memorandum items
Average Fund credit outstanding (in SDR billions)	50.6	66.7	86.7	90.4	95.9	93.6
Number of active arrangements (average) 10	15	18	23	…	…	…
Average exchange rate US$/SDR	1.40	1.38	1.41	1.42	1.41	1.42

Source: Finance Department and Office of Budget and Planning.

¹For analytical purposes, surcharges and commitments fees are considered for reserve accumulation only.

²Costs related to the Fund’s “generally available facilities”.

³Derived by applying the margin against average Fund credit outstanding at the average US$/SDR exchange rate.

⁴Includes commitment fees for expired or canceled arrangements.

⁵Surcharges are projected on the basis of current quotas and surcharge thresholds.

⁶Potential reserve accumulation is derived by assuming other sources of income are sufficient to cover non-intermediation costs.

⁷Potential reserve accumulation as a percent of precautionary balances at the beginning of the financial year.

⁸Additions to or reductions in reserves based on net income or loss for the year (including actual and projected IAS 19 gains/(losses) up to FY 2022 and excludes retained EA investment income).

⁹Precautionary balances include the Fund’s reserves less the gold endowment of SDR 4.4 billion. The SCA-1 was fully distributed in the context of Sudan’s arrears clearance in June 2021. Precautionary balances are also adjusted for a positive one-off permanent adjustment of SDR 205 million effective May 1, 2021 (Annex II).

¹⁰Excludes FCL and PLL arrangements.

34. Commitment fees for non-drawing arrangements and surcharges are also projected to make substantial further contributions to the Fund’s lending income and reserve accumulation (see below). Income from commitment fees and surcharges in FY 2022 are estimated at about US$402 million and US$1,749 million, respectively (Table 5, rows E and F), which are higher than prior year projections.

Reserve Accumulation

35. Reserve accumulation is projected to remain relatively strong in FY 2023 and FY 2024. Table 5 first illustrates the potential reserve accumulation that would result if lending income were required solely to cover intermediation costs and provide for additional reserves (Rows G and H). In this hypothetical scenario, potential reserve accumulation with a margin of 100 basis points would rise to 12.4 and 10.7 percent in FY 2023 and FY 2024, respectively. Projected actual reserve accumulation would be 10.3 percent of reserves in FY 2022 (Rows I and J). Precautionary balances are now projected to decline to SDR 20.9 billion by end-FY 2022, lower than the SDR 21.5 billion estimated in April 2021, mainly driven by the full utilization of the SCA-1 to facilitate Sudan’s arrears clearance. Table 5 further simulates reserve accumulation at alternative margins of 80 and 120 basis points, respectively.

36. Updated projections of the pace of reserve accumulation are slightly lower than those anticipated in April 2021, and broadly in line with the recent review of precautionary balances (Figure 6).⁵² This reflects mainly the potential demand for Fund lending under the current desk survey being lower than previously anticipated for certain projected arrangements, lowering the path for credit outstanding, and a higher projected expenditure path in SDR terms following an upward revision in the GED and the strengthening of the US dollar against the SDR; offset partly by higher investment income attributable mainly to higher projected SDR interest rates over the medium term and a higher excess return margin of 50 basis points on average over time. Further, with the broad support of Executive Directors, the measurement of precautionary balances has been adjusted to reflect the pension funding status on an economic basis, resulting in a positive one-off permanent adjustment to reverse the impact of the cumulative IAS 19 gains and losses as of April 30, 2021 previously included in the Fund’s precautionary balances under the accounting basis (Annex II).⁵³ Based on the current projection, the indicative medium-term target of SDR 25 billion is still expected to be reached in FY 2025.

Projected Precautionary Balances Accumulation

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: Finance Department.

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Projected Precautionary Balances Accumulation

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: Finance Department.

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Projected Precautionary Balances Accumulation

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: Finance Department.

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Alignment of Fund Borrowing Costs with Market Conditions

37. Rule I-6(4) requires a cross-check of the margin’s alignment with long-term credit market conditions.⁵⁴ This aims to ensure that the cost of borrowing from the Fund is not too high or low relative to the cost of long-term market funding. Staff benchmarks based on EMBI spreads provide a useful guide for this purpose, but should not be applied mechanistically without judgment on the global financial context and future developments.⁵⁵ As in the past, the level of the margin is compared to the lowest quartile of EMBI spreads (reflecting the spreads for the more creditworthy borrowers within the sample) as a proxy measure to account for the lower credit risk the Fund faces as a cooperative public policy institution.⁵⁶ Market borrowing spreads reflect a country-specific, time-varying credit risk premium. While the Fund also bears credit risk when it lends to member countries, it uses a multilayered framework—including policies on access, program design, and conditionality—to support members’ balance of payments adjustment—to mitigate such credit risk.

38. The cost of Fund credit at the current margin remains broadly in line with the staff benchmarks for long-term credit market conditions. Since the last review in April 2021, the composite EMBI spreads have increased by nearly 55 basis points, and the lowest quartile of the EMBI spreads have risen by over 40 basis points. However, from a medium-term perspective, the five-year rolling average of the spreads remains broadly unchanged since the last review (Figure 7). The median for the lowest quartile EMBI spread stands at 42 basis points above the current margin (relative to 47 basis points at the time of the 2021 income review, Table 6). Staff therefore does not see any fundamental change in the alignment of the margin with long-term credit market conditions.

EMBIG Spreads: Total Composite and Bottom Quartile

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: JPMorgan and Fund staff calculations.1 Weighted average of spreads from the JPMorgan Emerging Market Bond Index Global Sovereign Spread (US dollar) and the JPMorgan Euro EMBI Global Government Spread, using US dollar and euro weights in the SDR basket.2 Weighted average of the lowest quartile of country-specific US dollar EMBI spreads and the lowest quartile of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket.3 Weighted average of the median of country-specific US dollar EMBI spreads and the median of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket, considering a sample of members with Fund GRA arrangements between 2000 and 2019.

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EMBIG Spreads: Total Composite and Bottom Quartile

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: JPMorgan and Fund staff calculations.1 Weighted average of spreads from the JPMorgan Emerging Market Bond Index Global Sovereign Spread (US dollar) and the JPMorgan Euro EMBI Global Government Spread, using US dollar and euro weights in the SDR basket.2 Weighted average of the lowest quartile of country-specific US dollar EMBI spreads and the lowest quartile of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket.3 Weighted average of the median of country-specific US dollar EMBI spreads and the median of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket, considering a sample of members with Fund GRA arrangements between 2000 and 2019.

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EMBIG Spreads: Total Composite and Bottom Quartile

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: JPMorgan and Fund staff calculations.1 Weighted average of spreads from the JPMorgan Emerging Market Bond Index Global Sovereign Spread (US dollar) and the JPMorgan Euro EMBI Global Government Spread, using US dollar and euro weights in the SDR basket.2 Weighted average of the lowest quartile of country-specific US dollar EMBI spreads and the lowest quartile of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket.3 Weighted average of the median of country-specific US dollar EMBI spreads and the median of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket, considering a sample of members with Fund GRA arrangements between 2000 and 2019.

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^{Table 6.}

Long-Term Credit Market and Comparator Spreads¹

(median spread unless otherwise noted, in SDR-equivalent basis points)

Sources: Bloomberg, JP Morgan, and Fund staff calculations.

¹Weighted average of spreads from the JPMorgan Emerging Market Bond Index Global Sovereign Spread (US dollar) and the JPMorgan Euro EMBI Global Government Spread, using US dollar and euro weights in the SDR basket.

²Weighted average of the lowest quartile of country-specific US dollar EMBI spreads and the lowest quartile of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket.

³Weighted average of the median of country-specific US dollar EMBI spreads and the median of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket, considering a sample of members with Fund GRA arrangements between 2000 and 2019.

^{Table 6.}

Long-Term Credit Market and Comparator Spreads¹

(median spread unless otherwise noted, in SDR-equivalent basis points) Sources: Bloomberg, JP Morgan, and Fund staff calculations.

¹Weighted average of spreads from the JPMorgan Emerging Market Bond Index Global Sovereign Spread (US dollar) and the JPMorgan Euro EMBI Global Government Spread, using US dollar and euro weights in the SDR basket.

²Weighted average of the lowest quartile of country-specific US dollar EMBI spreads and the lowest quartile of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket.

³Weighted average of the median of country-specific US dollar EMBI spreads and the median of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket, considering a sample of members with Fund GRA arrangements between 2000 and 2019.

View Table

^{Table 6.}

Long-Term Credit Market and Comparator Spreads¹

(median spread unless otherwise noted, in SDR-equivalent basis points)

View Expanded

Sources: Bloomberg, JP Morgan, and Fund staff calculations.

¹Weighted average of spreads from the JPMorgan Emerging Market Bond Index Global Sovereign Spread (US dollar) and the JPMorgan Euro EMBI Global Government Spread, using US dollar and euro weights in the SDR basket.

²Weighted average of the lowest quartile of country-specific US dollar EMBI spreads and the lowest quartile of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket.

³Weighted average of the median of country-specific US dollar EMBI spreads and the median of country-specific euro EMBI spreads, using US dollar and euro weights in the SDR basket, considering a sample of members with Fund GRA arrangements between 2000 and 2019.

Exceptional Circumstances Clause

39. Current global interest rates are low despite an uptick in recent months, and the exceptional circumstances clause under Rule I-6(4) remains applicable for purposes of setting the margin for the rate of charge. Rule I-6(4), which was amended as part of the Fund’s New Income Model, was designed to move away from reliance on lending income for financing the Fund’s non-lending activities, i.e., non-lending income was expected to cover non-lending activities while lending income was expected to cover intermediation costs and contribute to reserve accumulation. However, investment income, the main source of the Fund’s non-lending income, is expected to be negative based on projections for FY 2022. Therefore, for the time being, the Fund will need to continue to rely on its lending income (excluding surcharges) to cover a significant portion of its non-lending operating costs.

40. Against this background, the margin for FY 2023–24 will again need to be set under the exceptional circumstances clause. Non-lending income (consisting of investment income transferred to the GRA and implicit income from interest free resources) is projected to increase in FY 2023 and more significantly throughout the medium term, covering up to 90 percent of the Fund’s non-lending administrative expenses by FY 2028. The projected coverage ratio assumes higher investment income, attributable mainly to higher projected SDR interest rates over the medium term and a higher excess return margin of 50 basis points on average over time, and the commencement of payouts from the Endowment Subaccount in FY 2023 (Figure 8). The need to cover the residual non-lending expenses by income from the margin reduces its potential contribution to the Fund’s reserve accumulation and precautionary balances.

Projected Non-Lending Operational Income and Non-Lending Expenses¹

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: Finance Department and Office of Budget and Planning.¹ Non-lending operational income comprises investment income and implicit income from interest free resources. Projections assume an initial 1 percent USD payout from the Endowment Subaccount commencing in FY 2023 (increasing by GED thereafter).

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Projected Non-Lending Operational Income and Non-Lending Expenses¹

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: Finance Department and Office of Budget and Planning.¹ Non-lending operational income comprises investment income and implicit income from interest free resources. Projections assume an initial 1 percent USD payout from the Endowment Subaccount commencing in FY 2023 (increasing by GED thereafter).

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Projected Non-Lending Operational Income and Non-Lending Expenses¹

Citation: Policy Papers 2022, 026; 10.5089/9798400212000.007.A001

Source: Finance Department and Office of Budget and Planning.¹ Non-lending operational income comprises investment income and implicit income from interest free resources. Projections assume an initial 1 percent USD payout from the Endowment Subaccount commencing in FY 2023 (increasing by GED thereafter).

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41. Significant progress has been made in implementing the NIM with most elements now in place. Annex III provides a status update of the implementation of the NIM in FY 2022. Initial expectations for non-lending income have been constrained and the prospect for achieving investment income under these expectations could continue to remain low, unless global interest rates revert to higher levels considered more normal in the past. As part of a broader review of the Fund’s income model, staff sees merit in revisiting the assumptions underlying these initial expectations including the impact on Rule I-6(4) and setting of the margin under the exceptional circumstances clause.

42. Burden sharing adjustments reflect the current levels of overdue obligations and burden sharing amounts collected in previous quarters. The burden sharing decision allows for a “carry-forward” of excess amounts generated from a minimum adjustment to the rate of charge and the rate of remuneration.⁵⁷ If the amounts brought forward are sufficient to offset deferred charges in subsequent quarter(s), no adjustments are necessary for such quarters (see Table 7). This was the case for the first quarter of FY 2022. The burden sharing rates in the remaining quarters of FY 2022 stood at zero basis points given the settlement of the last overdue GRA charges owed by Sudan in June 2021. All accumulated burden sharing balances, including the SCA-1 balances, were distributed during Sudan’s arrears clearance and the balances are now zero. For a report on historical cumulative burden sharing adjustments (by member), please refer to www.imf.org/external/np/fin/tad/query.aspx.

^{Table 7.}

Recent Burden Sharing Adjustment Rates

(in basis points, unless otherwise stated)

Source: Finance Department.

¹The average rates have been calculated using the quarterly burden sharing rates and SDR interest rates.

²In October 2014 (FY2015), the minimum for the quarterly burden sharing rate adjustment of 1 basis point was reduced to 0.1 basis point.

^{Table 7.}

Recent Burden Sharing Adjustment Rates

(in basis points, unless otherwise stated) Source: Finance Department.

¹The average rates have been calculated using the quarterly burden sharing rates and SDR interest rates.

²In October 2014 (FY2015), the minimum for the quarterly burden sharing rate adjustment of 1 basis point was reduced to 0.1 basis point.

View Table

^{Table 7.}

Recent Burden Sharing Adjustment Rates

(in basis points, unless otherwise stated)

View Expanded

Source: Finance Department.

¹The average rates have been calculated using the quarterly burden sharing rates and SDR interest rates.

²In October 2014 (FY2015), the minimum for the quarterly burden sharing rate adjustment of 1 basis point was reduced to 0.1 basis point.