IMF forecasts profit of $1.9bn in 2021 but warns of coronavirus-related uncertainty

The Washington lender projects $1.6bn loss for the financial year ended April 30, partly due to an unrealised pension-related adjustment

A sign outside the IMF's headquarters in Washington. The fund will maintain the margin on the IMF lending rate unchanged at 100 basis points for the 2021 and 2022 financial years. AFP.

The International Monetary Fund forecast a net profit of $1.9 billion (Dh6.97bn) next year and $2.4bn in 2022 but said the projections are subject to “larger-than-normal” uncertainty owing to the Covid-19 pandemic.

The Washington lender expects a net loss of $1.6bn for the year ended April 30, partly due to an unrealised pension-related adjustment during the fiscal year, it said on Friday.

The accounting adjustment offset net operational income of about $1.9bn and the resulting loss will be absorbed by the fund’s “sizeable” reserves.

“Operational income for [fiscal year] 2021 and [fiscal year] 2022 is expected to remain strong,” the fund said.

“However, these projections are subject to a high degree of uncertainty related to the scale of new lending associated with the Covid-19 economic fallout, as well as the timing and amounts of disbursements under approved arrangements included in the projections.”

The projected net profit for the next two years also depends on uncertainty related to the discount rate used to measure the fund’s retirement plan obligations and asset returns.

Such uncertainty can have “a large impact on the actual outcome, given the heightened volatility in financial markets in the wake of the pandemic”, it said.

Additional uncertainty affecting its income projections includes the performance of the fund’s investment and retirement plan asset portfolios.

The lender’s executive board agreed to maintain the margin on the IMF lending rate unchanged at 100 basis points above the interest rate for Special Drawing Rights – a multilateral reserve asset used by the lender based on a basket of currencies – for the 2021 and 2022 financial years. This is the basic lending rate for member countries that choose to borrow from the IMF.

This year’s net operating income, mainly from lending and investments, was “robust” and reflects “ongoing elevated use of fund credit that is expected to remain high” as member countries seek help to cope with the pandemic.

Last week, the fund temporarily increased the amount of assistance member countries can request in a year and removed limits on the number of disbursements poor countries can secure.

The move came as the lender moves to help strengthen economies struggling because of the pandemic.

As of mid-July, 72 countries had received assistance from the fund's emergency financing instruments after it doubled the annual access limits on April 6.