BENGALURU: Countries, mostly middle and lower-income, have been burdened by surcharges on top of interest payments on their borrowings from the International Monetary Fund (IMF), widening global inequities, according to a report by US think tanks.
Indebted member countries paid about $6.4 billion in surcharges between 2020-2023, the report from Boston University’s Global Development Policy Centre and Columbia University’s Initiative for Policy Dialogue released on Tuesday showed.
And the number of countries paying these surcharges has more than doubled in the last four years.
The IMF is expected to charge an estimated $9.8 billion in surcharges in the next five years, according to an earlier report by the Center for Economic and Policy Research.
Critics of the policy argue that surcharges do not hasten repayment and instead punish countries already struggling with liquidity constraints, increase the risk of debt distress and divert scarce resources that could be used to boost the struggling economies.
Countries such as Ukraine, Egypt, Argentina, Barbados and Pakistan pay the most in surcharges, the report showed, accounting for 90 per cent of the IMF’s surcharge revenues.
These surcharges, levied on top of the fund’s increasingly steeper basic rate, are IMF’s single largest source of revenue, accounting for 50pc of total revenue in 2023.
“IMF surcharges are inherently pro-cyclical as they increase debt service payments when a borrowing country is most need of emergency financing,” Global Development Policy Center’s director Kevin Gallagher said.
“Increasing surcharges and global shocks are compounding the economic pressure on vulnerable countries.”
Data published by the Institute of International Finance earlier this year showed global debt levels hit a record of $313 trillion in 2023, while the debt-to-GDP ratio — a reading indicating a country’s ability to pay back debts — across emerging economies also scaled fresh peaks.IMF shareholders agreed last week on the importance of addressing challenges faced by low-income countries, Managing Director Kristalina Georgieva said on Friday.
Published in Dawn, April 25th, 2024
