IMF Eyes Decision On Loan Fees Reduction By October Meetings

The International Monetary Fund (IMF) is planning to make a decision on whether to ease billions of dollars in loan fees, which have been criticized as unjustly punitive on borrower countries, before its annual gathering in Washington next month, Bloomberg reported on Monday.

Citing people familiar with the plan, the news agency said the IMF’s executive board plans to hold an informal meeting on the so-called surcharges review, which it announced in April, on Monday afternoon in Washington, adding that the US, the IMF’s biggest shareholder, has signaled a willingness to consider relief.

Board members — 24 directors from the fund’s member countries plus Managing Director Kristalina Georgieva — plan to discuss the issue after they held a question-and-answer session with staff regarding the policy last Wednesday, the sources added.

The fund said in April that “a number” of directors were open to reviewing the policy, with any change requiring 70 per cent of votes. Following these two meetings, the goal is to have a decision on whether to reduce the fees before the IMF and World Bank annual meetings the week of Oct. 21, they said.

The surcharges have become a top target for criticism by progressives, from Democrats in the US Congress to Brazil President Luiz Inacio Lula da Silva, this year’s host of the Group of 20.

They argue that the interest rate, which has soared in recent years and is now above 8% on some loans, creates a heavy burden for countries that are turning to the fund precisely because they’re suffering financial distress.

The burden, which has topped about $6 billion, is being carried mainly by a handful of countries, notably its biggest borrowers such as Argentina, Egypt, Ukraine and Ecuador, according to IMF data compiled by the Center for Economic and Policy Research, a progressive think tank that supports surcharge relief.

Advocates of relief say that the fees are exorbitant and deprive countries of precious resources needed for social spending on their citizens such as hospitals, schools and pensions.

Economists including Joseph Stiglitz, a Nobel Prize winner and professor at Columbia University, called for the elimination of the surcharges in an article published Monday, saying they account for the largest source of net revenue for the fund.