IMF to Pay Lenders 95% of Market Rates: IMF to Pay Higher Rate For Its Loans
Over the objections of its poorer member countries, the International Monetary Fund has agreed in prim ciple to pay the United States and other countries from whom it borrows money at least 95 percent of prevailing market interest rates by May I, 1986.</br></br>The IMF now pays its creditors 85 percent of market rates, or about 7.4 percent, on the advances that it then relends to the poor countries. During the debate in Congress last fall over the controversial $8.4 billion increase in the American quota (dollar deposits) in the fund, many lawmakers insisted that the interest rates paid by the IMF were too low.</br></br>The market rate ÛÏbase" used by the IMF is the interest rate earned on Special Drawing Rights (SDRs), the international currency issued by the IMF to member nations.</br></br>The congressional hope was to require the IMF to pay the full market rate, and the U.S. executive director was instructed to work toward this goal. The compromise reached Tuesday calls for at least a 3.33 percentage point increase a year for three years, adding at least 10 points by mid-1986. Then, if the rate doesnÛªt equal 100 percent of market rates, the executive directors agreed they would take up the issue again.</br></br>Developing countries that objected argued that as members of a ÛÏcooperativeÛ institution, the creditor countries should he willing to subsidize the operation. The creditor countries responded that they are .already doing so by advancing the funds, and that the lending rate-now 6.6 percentÛÓis itself subsidized.