With the global financial landscape still unsettled, temporary spending looks set to remain at current levels over the next few years. Lending commitments and crisis-management activities have surged since the onset of the crisis: by the end of December 2010, there were 60 program and financial arrangements in place, compared with 40 at the time of the Fund’s restructuring in early 2008. The higher lending has generated a sharp but temporary rise in income, but has also required an increase in temporary spending. This expenditure will unwind over time, but only marginally over the FY 12–14 MTB period

The Fund has been operating under a flat real resource envelope for the past six years. With continued efforts to maximize the use of available resources, spending in FY 17 is projected to reach 99 percent of the net administrative budget, and a low vacancy rate has helped stabilize overtime at 11 percent. Internal savings and reallocations have allowed the Fund to dedicate more resources to country work, including capacity development, without requiring an increase in the approved budget—apart from $6 million provided in FY 17 to cover rising security costs. An unchanged real net administrative budget in FY 18, despite deeper Fund engagement in a number of areas, as well as increased costs for corporate modernization. Accordingly, the budget proposal incorporates significant savings from reallocations and efficiency gains to fund new demands, as well as a further increase in the upfront allocation of carry-forward funds by about $10 million. The broad themes of the proposal are: (i) more intensive country work with a shift from surveillance to programs, but net savings in field offices; (ii) significant policy and analytical work on the financial sector and the role of the Fund (global safety net, facilities, and quotas), albeit less than in FY 17, with more work on structural issues and new challenges; (iii) funding for transforming IT and HR services, offset by central savings; and (iv) enhanced risk mitigation and knowledge management (KM), with the establishment of a KM unit to support cross-country analysis and knowledge transfer. At this stage, a flat resource envelope is assumed also for the medium term, contingent on continued reprioritization and a broadly unchanged global economic environment. Upward pressure on resources will arise from growing capacity development activities and certain revenue losses. Savings are expected from the TransformIT initiative and internal efficiency gains. But for the budget to remain flat, the Fund will need to continuously reprioritize and adjust its activities to make room for new demands. Even then, a more challenging global environment, with a further ramping up of Fund lending, or significant demands for deeper engagement in other areas, would put significant strains on resources over the medium term. The proposed capital budget envelope for FY 18–20 remains broadly unchanged from current levels. Some frontloading, however, is planned for the first two years, due to the cyclical nature of these investments and to accommodate strategic IT projects.

The proposed FY 14–16 Medium-Term Budget was formulated within the Fund’s strengthened strategic planning framework and seeks to align the allocation of resources to the delivery of institutional priorities. Despite the additional resources that have been provided to meet crisis demands, crisis related work and overall work pressures remain elevated. At the same time, available resources are not being fully utilized. Therefore, the budget strategy—instead of asking for further additional resources—is geared toward making more efficient use of existing resources to reduce work pressures and meet new demands.

The medium-term income projections have been updated since the last estimate provided to the Executive Board in April 2013. Lending income is higher compared with the earlier estimates as a result of new arrangements approved since April 2013. Non-lending income is lower primarily due to revised projections for investment income. The updated expenditure path assumes the net administrative budget remains constant in real terms at the FY 2014 level, implying a nominal medium-term path that is somewhat higher than in the April 2013 projections. Precautionary balances are projected to reach the current target of SDR 20 billion in FY 2018. The projections also illustrate a broad balance between income and expenditures even if lending were to return to pre-crisis levels.

On April 27, 2020, the Executive Board of the International Monetary Fund (IMF) approved the IMF’s administrative and capital budgets for financial year (FY) 2021, beginning May 1, 2020, and took note of indicative budgets for FY 2022–23.

For the net administrative budget, the FY 16–18 medium-term budget (MTB) proposal includes: In FY 16, an unchanged budget envelope in real terms, for the fourth year in a row. To accommodate new and ongoing strategic priorities of the Fund within a flat envelope, efforts to reallocate resources away from lower-priority activities and achieve efficiency gains were stepped up both at the departmental level and across the institution. Savings measures implying a reallocation of resources of close to 5 percent of the net administrative budget were identified through this process. The bulk of these savings would be used to help meet the new priorities highlighted in the Global Policy Agenda and in Management’s Key Goals, while preserving room at the departmental level to further reduce work pressures, phase in the new streamlining measures and, more generally, cope with business uncertainties and unanticipated demands. This robust prioritization effort implies difficult trade-offs and the willingness to cut lower-priority activities in order to create space for new initiatives. For FY 17–18, as a baseline assumption, a flat real budget envelope as well. Against the backdrop of a robust income position, the Fund’s medium-term budget formulation is guided primarily by considerations of prudence and credibility. The medium-term spending path will depend on new demands placed on the institution, and the scope for further reprioritization, and will be reassessed in the context of the FY 17–19 budget.

This paper updates the consolidated income and expenditure outlook and the projected accumulation of precautionary balances over the medium-term. The paper incorporates and extends the income and budget projections in the companion papers; these projections are also in line with those discussed in the recent paper on the review of precautionary balances.