Pressure mounts against IMF surcharges

Pressure is intensifying on the International Monetary Fund (IMF) to end its surcharges policy which is costing Barbados millions of dollars whenever it repays IMF loans.

United States Congressman Jesús “Chuy’’ García, backed by seven other American lawmakers, has introduced the Stop Onerous Surcharges Act to reform IMF surcharges.

An April 10 release from Garcia’s office said the legislation was intended to “direct US representatives
at the IMF to support a review of the IMF’s surcharge policy and a pause in the policy for the duration of the review”.

The statement noted that “the IMF imposes surcharges on countries that have particularly large or long-standing debt. These charges are owed in addition to regular interest payments and other fees”.

It said that “a growing number of economists and public officials are calling for a review of the policy as the effects of the pandemic, climate change, and rising interest rates accumulate”, adding that “the IMF confirmed that it plans to review its surcharge policy in 2024”.

Garcia said: “Instead of dealing with the ravages of war, climate disaster and other crises, countries in need of help around the globe are being saddled with IMF surcharges.

“These surcharges trap countries in cycles of debt and raise the cost of borrowing, making it more difficult for them to address urgent challenges facing their people. International momentum is growing for the IMF to review and reform its surcharge policies, and the US should lead that call.”

Another lawmaker, Joyce Beatty, who is a member of the US House of Representatives’ Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions, is a signatory to the proposed Stop Onerous Surcharges Act.

“IMF surcharge fees imposed on already distressed countries are neither necessary nor constructive, particularly amid multiple global crises creating significant economic pressures,” Beatty said.

“As countries around the world join the call for surcharge reform, the United States as a global leader should be at the forefront of this effort.”

Alex Main, Director of International Policy at the Centre for Economic and Policy Research, said: “Countries struggling under heavy debt burdens need support, not punishing fees. It’s time to finally end the IMF’s harmful and counterproductive surcharge policy.”

Gina Cummings, vice president of advocacy, alliances and policy for Oxfam America also endorsed the legislation.

“Over the last four years, a series of overlapping crises have caused the sovereign debts of countries in the Global South to balloon. Many, through no fault of their own, are now on the brink of default,” she argued.

“The last thing that countries already grappling with high interest rates need are burdensome IMF surcharges that take away resources that could be spent on vital public services like health and education.”

“As many countries continue to face the devastating impacts of climate change and conflict, we must work towards reforming our international financial architecture in order to better support them and fight inequality across the globe,” Cummings added.

During the IMF’s recent Spring Meetings in Washington DC, the Group of 24 Countries also called for a review of the surcharges.”

“We are of the view that IMF’s robust financial performance does not warrant burdening members with high rates at this time,” the group said as it demanded that surcharges should be suspended until such a review happens.

In a recent journal article in the Review of Keynesian Economics, Nobel Laurette Joseph E. Stiglitz and Kevin P. Gallagher, Professor of Global Development Policy and director, Global Development Policy Centre at Boston University also issued an urgent call for reform of the IMF surcharges.

They argued that surcharges were found to worsen potential outcomes for both the borrowing country and its investors, with gains accruing to the IMF at the expense of both. They also noted that this transfer of resources to the IMF “has profound consequences for the borrowing country, as it affects not just the level of poverty, health, education and overall well-being in the country in crisis, but also its potential growth”.

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