The IMF and the World Bank Group have two main income streams. The first derives from their lending operations, charging mainly the borrowing countries; and the second from their income on investments in financial markets. Additionally, the International Development Association (IDA) receives contributions from members.
The net income on loans as well as investment returns are used to cover administrative expenses, build up reserves to strengthen balance sheets, and – in the case of the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC) – provide annual transfers to the IDA.
IMF resources total $363 billion, of which $265 billion are available for lending. When borrowing from the IMF under the General Account, debtor countries pay a refundable commitment fee, service charges and interest on outstanding credit. Interest rates are around one percentage point above the remuneration rate paid to members with deposits at the Fund. Charges and interest payments have added up to $11.2 billion1 over the past five years. The biggest borrower over the last five years, for example, was Turkey, which paid $3.7 billion2 in interest and charges between 2004 and 2008.
The IMF has paid $5.5 billion3 in remuneration to members, distributed according to their actual financial position with the IMF. Over the past five years, $3.6 billion4 of these payments were made to developed countries. Administrative expenses have reached $4.8 billion5 between 2004 and 2008, and the rest of the $11.2 billion has been used to increase the reserves of the IMF. The reserves, which consist of retained earnings from charges and investments, are currently $8.6 billion.
The IMF holds an investment portfolio worth around $9 billion, getting annual net returns adding up to $990 million6.
In 2008 the IBRD possessed $41.5 billion in equity, of which $11.5 billion was paid-in capital. For its lending, the IBRD raises money in financial markets by issuing bonds and other financial instruments. To cover borrowing costs and administrative expenses, it charges borrowing countries. These charges paid by developing countries were $24.4 billion7 between 2004 and 2008. The IBRD refused to provide us with the amount of charges paid by individual countries.
The Bank’s borrowing costs, mainly the interest paid to private creditors, have been $18.3 billion8. Administrative expenses total up to $6 billion9.
In June 2008, the IBRD’s outstanding borrowing from capital markets was about $80.7 billion in total; and $23 billion was invested in cash and liquid assets. Trading in financial markets, it earned $4.4 billion10 over the past five years.
IDA is largely funded by repeated contributions of 45, mostly developed, countries. Every three years its resources are refilled. The IDA15 replenishment 2009-2011 has a total budget of $42 billion, of which donor countries gave $25.2 billion. These donor contributions are complemented by $6.3 billion from prior donor pledges to the Multilateral Debt Relief Initiative (MDRI). Additionally, IDA will receive transfers of $3.9 billion from the IBRD and the IFC combined between 2009 and 2011. These are paid from the net income of these institutions, which partly comes from payments of debtor countries. Thus, they constitute a transfer from one set of developing countries to another. The rest comes from repayments, net charges and investment income.
IDA’s credits are concessional with a grant element of about 60 percent, and 20 percent of the credits are outright grants. The repayments made by IDA’s borrowers, which totalled $5.6 billion11 between 2006 and 2008, are also used for further lending.
Generally, IDA provides credits to its borrowers interest-free. However, it lends a very small proportion of its credits (less than 5 per cent) on a variable rate, which was 4.2 per cent in 2008. Apart from that, it charges an administrative fee of 0.75 per cent against the outstanding balance of credits. There is also a variable commitment fee that is set annually in the range of zero to 0.5 per cent; for the current fiscal year (2009), this fee is set at zero. Over the past three years, these payments by developing countries have added up to $2.5 billion12. IDA generated income of $1.6 billion13 on its investments between 2006 and 2008.
The IFC has received $8.6 billion.14 over the past three years from service fees and from its investments, i.e. loans, equity investments and debt securities. These costs are borne by the clients, i.e. companies investing in developing countries. From this money, the IFC has paid $2.2 billion15 towards the costs of borrowing in financial markets.
The income the IFC made on its liquid asset trading was $1.5 billion16 over the past three years.
Main income sources and expenses
|Income in billion US$||Expenses in billion US$|
|Charges and fees paid by debtors||Contributions made by donor countries||Income from investment||Borrowing costs/ remunerations||Administrative expenses||Transfers to IDA|
|IDA 14th replenishment (2006-2008)||2.5||17.7 + 3.8 (through MDRI)||1.6||–||2.8||–|