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Monday 22 august 2022

IMF fees on war-torn countries closer to

elimination

department director said
as a lender of last resort,
the Fund's ability to lend is
important as low and mid-
dle income countries face
rising interest rates.
"The Fund's staff is small and
in a crisis, its efforts are bet-
ter deployed serving mem-
ber countries' needs," he
said in an email to The As-
sociated Press. "Surcharges
could be relaxed tempo-
rarily in the face of intense
pressures on borrowing
countries, but at the ex-
The logo of the International Monetary Fund is visible on their pense of the Fund's ability
building, April 5, 2021, in Washington. to serve its membership in
Associated Press the longer term."
Illinois Congressman Jesús
By FATIMA HUSSEIN may be offered in the next "Chuy" García, who of-
Associated Press few weeks or even on the fered the defense spend-
WASHINGTON (AP) — The Senate floor. ing amendment, told The
International Monetary As the largest IMF share- Associated Press "it is unfair
Fund is facing pressure to holder and member of the for the IMF to require coun-
reevaluate how it imposes Fund's executive board, tries like Ukraine that are al-
fees on loans it disperses to the U.S. can push for policy ready deep in debt to pay
needy countries like war- decisions and unilaterally surcharge fees. These sur-
torn Ukraine — which is one veto some board decisions. charges increase poverty
of the fund's biggest bor- Citing worsening financial and hold back our global
rowers. crises in Sri Lanka and Paki- economic recovery."
The move comes as more stan as examples, some Ukraine's projected real
countries will need to turn accuse China of engaging GDP is expected to decline
to the IMF, as food prices in debt trap diplomacy — by 35 percent, due in large
and inflation internationally or having countries falls so part to Russia's invasion of
continues to rise. deeply in debt to that they Ukraine, according to IMF
Surcharges are added are beholden to it on inter- data.
fees on loans imposed on national issues. The country, engaged in
countries that are heavily Advocates and civil rights a war with no projected
indebted to the IMF. organizations lodge the end, has an outstanding
Treasury Deputy Secretary same complaint against balance of 7.5 billion SDRs
Wally Adeyemo said in the Fund, who claim the — an IMF accounting unit
Aspen last month that fi- organization undercuts its valued at around $9.8 bil-
nance ministers of several core lender-of-last-resort lion according to Ukrai-
countries realize they have role with countries in vulner- nian central bankers. The
to pay a price for Russia's able positions to pay back latest figures estimate that
war in Ukraine, especially debt. Ukraine will owe the IMF
with food prices going up. With an ever-worsening risk $360 million in surcharges
"They're going to have to of a global debt crisis and between 2021 and 2023.
go to the IMF, they're going rising interest rates, the issue Economists Joseph Stiglitz
to need to find assistance," has become more pressing at Columbia University and
Adeyemo said. for countries looking to re- Kevin P. Gallagher at Bos-
However, the IMF fee sys- duce their deficits. ton University wrote earlier
tem could change through However, some economists this year that "forcing ex-
U.S legislation. An amend- and representatives of the cessive repayments lowers
ment to the National De- fund say the surcharges the productive potential of
fense Authorization Act, amount to responsible the borrowing country, but
otherwise known as the de- lending behavior, as they also harms creditors" and
fense spending bill, would provide an incentive for requires borrowers "to pay
suspend IMF surcharges members with large out- more at exactly the mo-
while their effectiveness standing balances to re- ment when they are most
and burden on indebted pay their loans promptly. squeezed from market ac-
countries is studied. This applies especially for cess in any other form."
That was passed by the U.S. countries that may other- Serhiy Nikolaychuk, Dep-
House in July. The Senate is wise may not be able to uty Chairman of the Na-
expected to vote on its de- obtain financing from pri- tional Bank of Ukraine, said
fense bill in September. A vate lenders. Ukraine is continuing to
representative of the Sen- Maurice Obstfeld, a Berke- pay its debts "despite Rus-
ate Armed Services Com- ley economics professor sia's full-scale war against
mittee said an amendment and former IMF research Ukraine."q