Surcharges are additional payments on top of regular interest charges and other lending fees that the International Monetary Fund (IMF) levies on countries when loans meet certain conditions. The IMF claims that surcharges limit the demand for borrowing from the IMF, encourage borrowers to pay back loans ahead of schedule or on time, and are essential to hedge against losses. Yet in reality, these extra charges are unfair, counterproductive, and unnecessary. Instead of mitigating credit risk or discouraging borrowing, surcharges only serve to substantially increase the cost of borrowing for countries already facing severe economic hardship and further restrain liquidity. Between 2021 and 2028, the IMF is projected to receive US$ 7.9 billion in surcharge payments alone — hard currency which could be better used to support COVID-19 response, climate resilience, or food security efforts.
Pressure from civil society, prominent economists, and lawmakers is mounting on the IMF to eliminate these onerous fees. While proponents of surcharges claim the fees impact only a select number of countries, there are currently 16 countries subject to surcharges, with the Fund estimating this number could reach 38 countries by 2024. The IMF has a responsibility to provide temporary funding for member countries “without resorting to measures destructive of national or international prosperity.” In the midst of the COVID-19 pandemic, Russia’s war in Ukraine, and climate change, the IMF should support its members rather than extract rents from them when they are least able to pay. If the IMF wants to promote an equitable global recovery, it should immediately stop surcharges.
For more information on surcharges and how they impact countries, read our policy brief here.