With alarm growing over widespread unsustainable debt levels and divergent pandemic recovery trajectories, a group of over 250 civil society organisations (CSOs) and experts has called on the IMF executive board to eliminate harmful surcharges in a public letter ahead of the 2022 World Bank and IMF Spring Meetings. The signatories expressed serious concern that “the IMF continues to levy punitive fees on countries facing debt distress while struggling against the effects of the pandemic,” demanding “the immediate suspension or outright elimination of this policy”, in line with previous calls from development experts, economists, CSOs, and governments that “surcharges need to go.”
Surcharges are levies the IMF adds to particularly large and long-term loans, which will cost countries in debt distress an estimated $7.9 billion over the next six years (see Inside the Institutions, What are IMF surcharges?). The CSO initiative is bolstered by a host of recent articles and briefings that have pointed out that surcharges are “counterproductive and unfair” and undermine debt sustainability (see Observer Winter 2021, Summer 2021; Dispatch Annuals 2021). The letter highlights that surcharges “jeopardize the recovery of countries facing severe economic difficulties,” while “turning the pandemic into a profit opportunity for the IMF.”
A December 2021 IMF board discussion revealed split opinions: Most executive directors signalled openness to a holistic review of the policy, while others only supported temporary relief, and a small group refused to consider any revision to the policy. With war-torn Ukraine one of the major surcharge payers, the US’s blocking stance is receiving domestic pushback from US lawmakers urging their government to abolish surcharges, and introducing a bill to that end on March 8 (see Observer Spring 2022).