IMF Is Forcing Some Of Hardest-Hit Countries To Pay Unnecessary Fees
Washington, DC — The International Monetary Fund is requiring that some of its most heavily indebted borrowers pay billions in unnecessary and counterproductive fees, new research from the Center for Economic and Policy Research (CEPR) shows. The new issue brief, “The Growing Burden of IMF Surcharges: An Updated Estimate,” by Francisco Amsler and Michael Galant, finds that the IMF will charge over $2 billion per year in surcharges through 2025, even as IMF Managing Director Kristalina Georgieva warns that “poverty and hunger could further increase,” and as the Fund notes that some 15 percent of countries are experiencing debt distress “and an additional 45 percent are at high risk of debt distress.” The IMF has just downgraded its global growth forecast to just 2.7 percent for 2023.
“While the IMF is, correctly, cautioning that multiple crises currently pose a serious threat to many low- and middle-income countries, and to the global economy itself, it nevertheless is demanding that some of the most indebted borrowing countries pay even more in surcharges,” CEPR Co-Director Mark Weisbrot said. “These are junk fees; they’re completely unnecessary, and only pile more of a debt burden on these countries exactly when they are trying to recover economically and need more liquidity.”
The new CEPR research finds that annual average surcharge payments have substantially increased from pre-2023 levels as a result of countries’ increased reliance on the Fund following exogenous shocks. In effect, developing countries are being punished with higher borrowing costs for a global economic downturn that is beyond their control.
For surcharge-paying countries, the fees make up, on average, 36 percent of all charges and interest payments to the IMF — 40.2 percent on average for the five most indebted countries.
Affected countries include war-ravaged Ukraine, one of the most heavily burdened by surcharges. Even as Fund officials and policy makers discuss ways to assist Ukraine, the Fund is quietly demanding that the country keep making surcharge payments, expected to total $3.5 billion from 2023 to 2031. Pakistan, which is still recovering from a major climate catastrophe, is expected to pay $142 million per year in surcharges. Egypt, which is experiencing a debilitating food price crisis, is required to pay $306 million per year.
CEPR finds evidence that surcharges are not effective in achieving their purported goal of incentivizing early repayment of IMF debt. For example, the five most indebted countries over 2018–2023 are not only still paying more in surcharge fees, but their additional debt service burden is also extending over a longer period of time than initially projected.
“Developing countries struggling to withstand exogenous shocks are facing significantly increased borrowing costs,” the brief notes. “By the same token, the Fund itself is, effectively, profiting from these crises. This dynamic is likely to continue as the interrelated debt and climate crises continue.”