IMF fees on war-torn countries closer to elimination

The International Monetary Fund is facing pressure to reevaluate how it imposes fees on loans it disperses to needy countries like war-torn Ukraine - which is one of the fund’s biggest borrowers.

The move comes as more countries will need to turn to the IMF, as food prices and inflation internationally continues to rise.

Surcharges are added fees on loans imposed on countries that are heavily indebted to the IMF.

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Treasury Deputy Secretary Wally Adeyemo said in Aspen last month that finance ministers of several countries realize they have to pay a price for Russia’s war in Ukraine, especially with food prices going up.

"They’re going to have to go to the IMF, they’re going to need to find assistance,” Adeyemo said.

However, the IMF fee system could change through US legislation. An amendment to the National Defense Authorization Act, otherwise known as the defense spending bill, would suspend IMF surcharges while their effectiveness and burden on indebted countries is studied.

A woman waits in a queue to buy kerosene for home use at a service station in Colombo. AFP

That was passed by the US House in July. The Senate is expected to vote on its defense bill in September. A representative of the Senate Armed Services Committee said an amendment may be offered in the next few weeks or even on the Senate floor.

As the largest IMF shareholder and member of the Fund’s executive board, the US can push for policy decisions and unilaterally veto some board decisions.

Citing worsening financial crises in Sri Lanka and Pakistan as examples, some accuse China of engaging in debt trap diplomacy — or having countries falls so deeply in debt to that they are beholden to it on international issues.

Advocates and civil rights organizations lodge the same complaint against the Fund, who claim the organization undercuts its core lender-of-last-resort role with countries in vulnerable positions to pay back debt.

With an ever-worsening risk of a global debt crisis and rising interest rates, the issue has become more pressing for countries looking to reduce their deficits.

Associated Press