IMF to Add $2.3 Billion Net Income to Reserves Amid Rising Risks

The International Monetary Fund said it had estimated net income of $2.3 billion in the fiscal year ended April 30, which it will add to its precautionary reserves as a protection against growing risks.

“The Fund is facing increased credit risk in light of a surge in program lending in the context of the global crisis,” the IMF staff wrote in a report released today.

“While the Fund has a multi-layered framework for managing credit risks, including the strength of its lending policies and its preferred creditor status, there is a need to increase the Fund’s reserves in order to help mitigate the elevated credit risks,” the staff said in the report.

The Washington-based IMF is co-financing loans to Greece, Ireland and Portugal to help stem the European debt crisis, with Greece representing the IMF’s largest loan on record. As a result, the IMF last month decided to raise reserves in the medium term to about $30.8 billion.

Net income last year was about $6 billion, including a profit of about $4.9 billion from gold sales.

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.