Press Release

New Report Finds that IMF Surcharge Fee Reforms Are Inadequate

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Dan Beeton

Director, International Communications

Countries Will Still Be Paying Many Millions Each Year in Unnecessary Fees

Washington, DC — The International Monetary Fund’s (IMF) recent revision to its surcharge policy will reduce the number of countries paying surcharges but fails to significantly reform the policy, which remains onerous, procyclical, and counterproductive. These are among the key findings of a new report from the Center for Economic and Policy Research (CEPR) that examines the IMF’s recent review of, and reforms to, its controversial surcharge fee policy. Previous CEPR reports have noted that the IMF’s justifications for the policy are not supported by the evidence, and that the surcharges are unnecessary and unduly add to countries’ debt burdens at a time of growing global debt crisis.

“Our examination of the IMF’s surcharge reforms shows that our initial concerns were justified,” report coauthor Michael Galant said. “Many countries, including the IMF’s most-indebted borrowers, will continue to have to pay many millions each year in completely unnecessary fees despite the Fund’s tweaks to the policy.”

“The evidence put forth in the review does not yield a compelling case that surcharges should remain in place,” the report states, noting that the IMF itself finds that surcharges are ineffective for its biggest payers. This was a “missed opportunity to ratify the precedent of the 1990s, when a similar set of surcharges was eliminated altogether and was later acknowledged to have created ‘perverse incentives’ by Fund staff.”

The report finds:

  • The reform decreases the current number of surcharge-paying countries from 19 to 10, though the IMF projects that 13 countries will be subject to surcharges in FY 2026.
  • The 10 countries currently paying surcharges are: Argentina, Ecuador, Ukraine, Egypt, Jordan, Angola, Seychelles, Costa Rica, Barbados, and Pakistan. The three that are no longer paying, but are projected to resume doing so by 2026, are Suriname, Kenya, and Sri Lanka.
  • At least four other countries — Benin, Cote d’Ivoire, Gabon, and Moldova — are at risk of soon having to pay IMF surcharges.
  • From 2025 to 2030, the IMF will levy an estimated $5.2 billion in surcharges. This is approximately $4.7 billion less than our pre-reform estimate for the same period of $9.9 billion.
  • The IMF’s most heavily indebted borrowers will still have to pay tens, or even hundreds, of millions in surcharges over the next three years: Argentina ($751 million per year on average), Ukraine ($186 million per year), Ecuador ($152 million per year), Pakistan ($63 million per year), and Egypt ($60 million per year).
  • The IMF’s own surcharge review found that the fees are not effective for “large borrowers with more prolonged Fund financing needs and more entrenched imbalances.” Yet these are the same borrowers that bear over 90 percent of the historical and expected cost of surcharges.
  • The real value of the surcharge threshold erodes over time. According to the IMF, raising the surcharge threshold to 280 percent would have realigned its real value to that of 2016, when the last surcharge review took place. In real terms relative to 2016, the IMF’s new increase to the threshold, to 300 percent, is therefore only a marginal improvement.
  • The impact of the reforms on the IMF’s bottom line and precautionary balances is marginal, as the Fund’s lending is projected to continue to generate record net income, while the Fund’s precautionary balances can be expected to remain comfortably above their medium-term target.

“It’s unfortunate that, during the worsening global debt crisis, and as the outlook for global economic growth remains bleak and highly uncertain, the IMF put its own hunger for revenue ahead of the needs of people in countries hit by severe economic shocks,” report coauthor Ivana Vasic-Lalovic said.

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