•Press Release Economic Crisis and Recovery Globalization and Trade IMF Latin America and the Caribbean Surcharges World
Washington, DC — Over 150 civil society organizations from around the world are calling on the International Monetary Fund (IMF) to end the “unfair” and “counterproductive” surcharges attached to its lending to the most heavily indebted countries, including Ukraine, Egypt, Angola, Jordan, Ecuador, and Gabon. The open statement was sent to the IMF Executive Board today ahead of the IMF and World Bank’s Spring Meetings this month.
“In the case of Egypt, the IMF is imposing additional fees, even in this time of crisis, which are not only unfair but go against the Fund’s own policies for economic recovery. This means that the poorest citizens are the ones who are going to end up paying those charges,” Shereen Talaat, co-director for Middle East and North Africa at the Arab Watch Coalition, said.
“The policy of surcharges for Tunisia is deepening the economic crisis and prolonging the cycle. It’s like they are punching our country by putting additional financial burdens on it, even as it is struggling to pay its debts. Instead, this money could be used to rescue and reform Tunisia’s entire health sector, without austerity measures,” Emna Maaref of the Arab Watch Coalition-Tunisia said.
As Yurii Romashko, co-founder and executive director of Ukraine’s Institute for Analysis and Advocacy, which is a signer of the letter, stated in a recent op-ed in MarketWatch:
why would the U.S. Treasury argue for keeping surcharges, which add significantly to the stress on Ukraine and an increasing number of other states with high levels of debt to the IMF. So far the message seems to be ‘because we always have.’ … A quick and easy way to help mitigate [Ukraine’s] economic destabilization … is for the U.S. to call for an immediate decision by the IMF executive board to scrap surcharges.
The civil society statement reads, in part: “We are deeply concerned that the IMF continues to levy punitive fees on countries facing debt distress while struggling against the effects of the pandemic.” It concludes: “We call on the IMF’s Executive Board to carry out an immediate review of surcharge policy, ensure transparency around past and future surcharge payments, and align the institution with its mandate by supporting the complete elimination of surcharges.”
The IMF levies surcharges, in addition to regular interest payments and other fees, on countries with high levels of IMF debt, or with three or more years of outstanding IMF debt, including Ukraine, Ecuador, Argentina, Egypt, Pakistan, and others. Officials from borrowing governments, economists, and other critics have pointed out that surcharges significantly increase countries’ IMF borrowing costs, and are usually paid by countries with balance of payments difficulties and other serious financial problems.
Prominent economists have also recently called for the IMF to stop its use of surcharges, including Nobel laureate Joseph Stiglitz; Jayati Ghosh, an advisor to UN Secretary-General António Guterres; Andrés Arauz, former director of Ecuador’s central bank; Kevin Gallagher, director of the Global Development Policy Center at Boston University; Patrick Honohan at the Peterson Institute for International Economics, and Mark Weisbrot, co-director of the Center for Economic and Policy Research (CEPR) in Washington, DC. The G24 group of developing countries has also called on the IMF to reconsider its surcharge policy, as have US legislators.
“Angolan citizens live under taxes imposed by those who do not live our reality,” Manuel Pembele Mfulutoma, Executive Director of Associação Juvenil para o Desenvolvimento Comunitário de Angola (AJUDECA), said, adding:
The overlap of IMF surcharges with these taxes restrains the fundamental freedoms of Angolan citizens. We are paying unfair taxes that ultimately serve to further enrich the top 6 percent and impoverish the 94 percent who live on less than $1.50 a day. Fair tax rates generate justice in development and balance in society. Surcharges must be canceled because they delay the development of underdeveloped and developing countries by pressuring governments to settle debts and, in turn, governments cut basic social services that favor citizens. As the Angolan people suffer, we implore the reduction of surcharges according to the income of debtors.
Several of the signing organizations are organizing an event on gendered and other negative impacts of IMF surcharges on April 15 as part of the IMF and World Bank’s Civil Society Policy Forum related to the Spring Meetings. The event will feature Christina Laskaridis, lecturer in economics at the Open University in the UK; Shereen Talaat, co-director for the Middle East and North Africa for Arab Watch Coalition; and Samah Krichah, program officer Kvinna till Kvinna Foundation, Tunis. Jayati Ghosh will moderate the event (details here; watch live here).