Ukraine to save $130 mln annually from IMF fee reduction

Ukraine's annual expenses for using the resources of the International Monetary Fund (IMF) will decrease by $130 million, thanks to the IMF's decision to lower its fees, according to Vladyslav Rashkovan, IMF Executive Director representing Ukraine.

"The IMF Board of Directors has decided to reduce its fees (charges, surcharges, and commitment fees) that affect the cost of resources for developing countries with IMF financing programs. On average, the fees will drop by 36%, which will reduce the IMF's annual revenue by approximately $1.2 billion," Rashkovan wrote on Facebook on Monday.

According to Rashkovan, this decision also positively impacts Ukraine. The country's overall annual costs for utilizing IMF resources will decrease by about $130 million. Taking into account future IMF tranches under the existing program, the effect over the next five years is estimated to be between $650 million and $700 million.

"Not bad, especially since Ukraine's costs will be reduced by around 38-39%, which is more than other countries," he said.

Additionally, Rashkovan noted that these fees were reduced only for developing countries, as the cost structure for poorer nations is determined differently.

He emphasized that this decision was not easy to reach, as the IMF is a consensus-driven organization, and the issue of fees clearly revealed differing interests between donor and debtor countries.

"As major economies (and their central banks) tackle inflation, central banks have begun lowering key interest rates, so the base lending rate will soon drop from the peaks it reached last year. This will further reduce the cost of IMF resources for Ukraine," Rashkovan concluded.

According to the IMF website, on October 11, a decision was made to lower the margin on the SDR interest rate from 100 basis points to 60 basis points and to raise the threshold for surcharges based on access levels from 187.5% of the quota to 300%.

Additionally, the time-based surcharge rate was reduced from 100 basis points to 75 basis points, and the threshold for commitment fees was increased to 200% of the quota annually and 600% cumulatively, up from the current 115% and 575%, respectively.

The number of countries subject to surcharges is expected to decrease from 20 to 13 by the 2026 fiscal year.

The approved changes will take effect on November 1, 2024.