The IMF has appointed an external committee of well-known experts to provide the Fund with an independent assessment of the options available to finance its running costs in the future. Until now, the IMF has paid for its operating costs from the interest charges and fees levied on its loans to member countries. But income has fallen short of target recently because of a significant decline in the level of IMF lending, prompting the Fund to explore other sources of funding.
In an announcement on May 18, IMF Managing Director Rodrigo de Rato explained that the Committee of Eminent Persons will focus on how to ensure that the IMF will have a sustainable and durable income base over the long term. To be chaired by Andrew Crockett, President of JP Morgan Chase International and former General Manager of the Bank for International Settlements, the committee will comprise seven members: Mohamed A. El-Erian, President and Chief Executive Officer of Harvard Management Company; Alan Greenspan, Chief Executive Officer of Greenspan Associates and former Chairman of the Federal Reserve Board; Tito Mboweni, Governor of the Reserve Bank of South Africa; Guillermo Ortiz, Governor of the Bank of Mexico; Hamad Al-Sayari, Governor of the Saudi Arabian Monetary Agency; Jean-Claude Trichet, President of the European Central Bank; and Zhou Xiaochuan, Governor of the People’s Bank of China. The work of the committee will be supported by Fund staff.
The announcement did not detail which options the committee may examine. However, in the past, the IMF’s. Executive Board has considered several possibilities, including the following:
- broadening the IMF’s investment authority so that it is able to invest its large quotas—capital paid by member countries that is used as a lending pool for those in balance of payments difficulty (currently about $300 billion);
- selling a portion of its gold holdings (103.4 million ounces, or 3,217 metric tons);
- asking members for annual dues;
- imposing user charges (or collecting money from donor countries) for certain services (such as technical assistance) not mandated by the IMF’s Articles;
- boosting revenue by earning money from new financial instruments, such as the proposed high-access contingent financing vehicle; and
- borrowing money and investing it at a higher return (as the World Bank does).
As an initial step, the Executive Board approved in May the creation of an investment account that will boost IMF income over the medium term. The committee will focus on long-term changes to the way the IMF funds its core activities, such as surveillance and technical assistance. Despite a small forecast budget shortfall, the Fund has a strong balance sheet, and its current level of reserves of SDR 5.9 billion (about $8.8 billion) could be used to cover a budgetary deficit well into the next decade. A report by the Committee of Eminent Persons is expected in the first quarter of 2007.