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International Monetary Fund

Budget and Planning. Contents INTRODUCTION REVIEW OF THE FY 2020 INCOME POSITION DISPOSITION DECISIONS FY 2021–2022 INCOME OUTLOOK A. Key FY 2021–2022 Income Outlook Factors B. Review of the Margin for the Rate of Charge BOX 1. EA Payout Policy Framework FIGURES 1. Summary of Proposed Disposition Decisions 2. Projected Precautionary Balances Accumulation 3. EMBIG Spreads: Total Composite and Bottom Quartile 4. Projected Non-Lending Operational Income and Non-Lending Expenses TABLES 1. Projected Income and

International Monetary Fund
This paper reviews the Fund’s income position for FY 2020 and FY 2021–22. It updates the April 2019 projections and proposes decisions for the current year. The paper also includes a proposed decision to set the margin for the rate of charge for financial years 2021 and 2022. Projections of the Fund’s income are subject to larger than normal uncertainties related to the impact of the COVID-19 pandemic on key assumptions. For FY 2020, these uncertainties relate mainly to the discount rate used to measure the Fund’s retirement plan obligations at April 30, 2020 and to the full year asset returns on the retirement plan and the Endowment Subaccount (EA), given the recent volatility in financial markets. For FY 2021–22, a key additional uncertainty is the scale of new lending associated with the economic fallout from the COVID-19 pandemic.
International Monetary Fund. Finance Dept.

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) Increase/decrease in:   SDR interest rate by 50 basis points     Implicit returns 1 24   Margin for the rate of charge by 20

International Monetary Fund

-lending income sources under the Fund’s new income model is helping mitigate income risk, the low interest rate environment is expected to diminish the contributions from investment income in the near term. B. Key FY 2021–2022 Income Outlook Factors 6. The outlook for the Fund’s net income in FY 2021–2022 has been updated for the impact of changes in key assumptions, notably investment returns and lending income . The lending projections for FY 2021–2022 are expected to remain broadly unchanged from the staff paper, which already reflected most of the surge in demand

International Monetary Fund

Outlook Factors 26. Key factors that affect the FY 2021–2022 income outlook are discussed below (see Table 2 ) . A sensitivity analysis on the income effects of changes in some of the assumptions is presented in Table 3 . Lending income . 20 Margin and surcharge income is projected to increase steadily in FY 2021–22, averaging about SDR 0.9 billion and SDR 1 billion, respectively, reflecting mainly the new demand for Fund lending in the form of emergency financing and continued disbursements under the current arrangements. Colombia’s precautionary arrangement

International Monetary Fund. Finance Dept. and International Monetary Fund. Legal Dept.

General Reserve FY 2019–2020 INCOME OUTLOOK A. Review of the Margin for the Rate of Charge B. Key FY 2019–2020 Income Outlook Factors REVIEW OF SPECIAL CHARGES BOXES 1. EA Payout Policy Proposal 2. History of Income Allocations, FY 1958–FY 2017 3. Recent Board Discussions on Income Allocation FIGURES 1. Summary of Proposed Disposition Decisions 2. Reserve Allocation and Net Income Losses, 1958–2017 3. Annual Reserve Allocations and Special Reserve as a Percentage of Precautionary Balances, 1958–2017 4. Projected Reserve Accumulation

International Monetary Fund. Finance Dept. and International Monetary Fund. Legal Dept.
The Fund’s total net income for FY 2018 is projected at about SDR 0.7 billion, broadly in line with the April 2017 estimate. The projections for total lending income are broadly unchanged. Most sources of lending income are lower, reflecting a lower level of credit outstanding as a result of advance repurchases and delayed disbursements. However, projected commitment fee income is higher following the early cancellation of a large FCL arrangement in November 2017. The paper recommends that GRA net income of SDR 0.7 billion for FY 2018 (excluding projected income of the gold sales profits-funded Endowment Subaccount) be placed to the special and general reserve. After the placement of GRA FY 2018 net income to reserves, precautionary balances are projected to reach SDR 17.4 billion at the end of FY 2018. The paper further proposes to transfer currencies equivalent to the increase in the Fund’s reserves from the GRA to the Investment Account. The paper also revisits options for the allocation of net income between the special and general reserve, and proposes that net income be allocated equally between the special and general reserve. In line with the recent Board discussion of a framework for guiding future payouts from the Endowment Subaccount, the paper presents a detailed proposal, which includes delaying payouts for three years to protect the real value of the Endowment. The paper also recommends that the margin for the rate of charge for the period FY 2019–2020 be kept unchanged at 100 basis points. The margin will again be set under the exceptional circumstances clause, as non-lending income continues to be constrained by the low interest rate environment and lending income will be used to finance a portion of the Fund’s non-lending activities. The projections for FY 2019 and FY 2020 point to a net income position of SDR 0.4 billion and SDR 1 billion, respectively. These projections are subject to considerable uncertainty and are sensitive to a number of assumptions.
International Monetary Fund. Finance Dept. and International Monetary Fund. Legal Dept.

conditions. In line with Rule I-6(4), Directors will have an opportunity to review the level of the margin before the end of FY 2019. B. Key FY 2019–2020 Income Outlook Factors 32. Key factors that affect the FY 2019–2020 income outlook are discussed below (see Table 2 ) . A sensitivity analysis on the income effects of changes in some of the assumptions is presented in Table 5 . Table 5. Sensitivity Analysis-Effect of Changes in Selected Assumptions on FY 2019 Projected Income (in millions of SDRs) Increase/decrease in: SDR

International Monetary Fund

This paper reviews the Fund's income position for FY 2020 and FY 2021-22. It updates the April 2019 projections and proposes decisions for the current year.

International Monetary Fund

DECISIONS FY 2018 INCOME OUTLOOK A. Review of the Margin for the Rate of Charge B. Key FY 2018 Income Outlook Factors REVIEW OF SPECIAL CHARGES BOXES 1. The Fund’s Reserves 2. The Rule for Setting the Margin for the Basic Rate of Charge FIGURES 1. Summary of Proposed Disposition Decisions 2. Projected Reserve (PB) Accumulation 3. EMBIG Spreads: Total Composite and Bottom Quartile 4. Key Factors affecting Amended IAS 19 Actuarial Gains/Losses (FY 2000–16) 5. Current Levels of SDR-Weighted Yields and Market-Implied Forward Rates 6