Global lender, the International Monetary Fund (IMF) said on Friday it has amended the rule for setting the Special Drawing Right (SDR) interest rate by introducing a floor of 0.050 percent (5 basis points) and changing the rounding convention for calculating the SDR interest rate from two to three decimal places.
Similarly, the IMF said it has made a corresponding change in the rounding convention for the burden sharing mechanism and reduced the minimum burden sharing adjustment from 1 basis point to 0.1 basis point.
‘’In view of the prevailing interest rates today, the SDR interest rate for the next weekly period starting Monday, October 27, will be established at the floor of 0.050 percent,’’ the IMF said.
The SDR interest rate provides the basis for calculating the interest charged to members on nonconcessional IMF loans from the IMF’s general resources, the interest paid to IMF members on their remunerated creditor positions in the IMF (reserve tranche positions and claims under borrowing agreements), and the interest paid to members on their SDR holdings and charged on their SDR allocation.
This is determined weekly and is based on a weighted average of representative interest rates on short-term financial debt instruments in the money markets of the SDR basket currencies, except if the weighted average falls below the floor for the SDR interest rate of 0.050 percent (5 basis points).
According to the Fund, under the burden sharing mechanism, debtor and creditor members as a group share equally the cost of unpaid charges on outstanding IMF credit through adjustments to the rates of charge and remuneration.
