The International Monetary Fund (IMF) has said that it has amended the rule for setting the Special Drawing Right (SDR) interest rate by introducing a floor of 0.050%.
The SDR interest rate provides the basis for calculating the interest charged to members on non-concessional IMF loans from the IMF's general resources, the interest paid on remunerated creditor positions in the IMF, and the interest paid to members' SDR holdings and charged on their SDR allocation.
It has also changed the rounding convention for calculating the SDR interest rate from two to three decimal places.
The IMF 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 27 October, will be established at the floor of 0.050%, the Fund said in a press release.
The SDR interest rate 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%.
Under the burden-sharing mechanism, debtor and creditor members as a group equally share the cost of unpaid charges on outstanding IMF credit through adjustments to the rates of charge and remuneration.