Relief For Nigeria, Others As IMF Cuts Borrowing Cost By 36%

…New Measure May Slash IMF’s Income From Borrowing By $1.2bn Annually

The International Monetary Fund (IMF) said it will slash interest on loans of members by 36 per cent.

This will enable members save up to $1.2bn annually.

Nigeria has an outstanding balance of $2bn with the IMF, according to the Debt Management Office update as of March, 31, 2024.

The IMF announced the development in a statement where it also said it will reduce the number of countries subject to surcharges.

According to the Washington-based lender, the changes will take effect from November, 1, 2024.

Reacting to the changes, the Managing Director of the IMF, Kristalina Georgieva said the review comes in a challenging global financial environment.

She said, “In a challenging global environment and at a time of high interest rates, our membership has reached consensus on a comprehensive package that substantially reduces the cost of borrowing while safeguarding the IMF’s financial capacity to support countries in need.

“The approved measures will lower IMF borrowing costs for members by 36 per cent, or about $1.2bn annually. The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.

“This is achieved by reducing the margin over the SDR interest rate, raising the threshold for level-based surcharges, lowering the rate for time-based surcharges, and increasing the thresholds for commitment fees. The approved package will take effect on November 1, 2024.”

IMF said surcharges is a vital part of its lending framework.

She said, “While substantially lowered, charges and surcharges remain an essential part of the IMF’s cooperative lending and risk management framework, where all members contribute, and all can benefit from support when needed.

“Together, charges and surcharges cover lending intermediation expenses, help accumulate reserves to protect against financial risks and provide incentives for prudent borrowing.

“This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.”