The International Monetary Fund (IMF) gave its agreement this Friday reduce the cost of loans granted by 36%which will save low- and middle-income countries around $1.2 billion (around €1,097 million) per year.
The general director of the establishment, Kristalina Georgievaexplained in a statement that the measure will be put into practice from November 1 and that seven of the countries that currently pay surcharges for exceeding debt thresholds will stop doing so by 2026.
Georgieva said the IMF board concluded on Friday the review of the pricing policy and increases of the institution with the approval of a “global package that significantly reduces the cost of loans while preserving the financial capacity of the IMF to support countries in need”.
To reduce the cost, the IMF will reduce the margin on special drawing rights (SDRs) from 100 to 60 basis points, increase the threshold for applying surcharges, lower the interest on surcharges applied for temporary reasons from 100 to 75 basis points and will increase the rate thresholds.
But the international institution also clarified that does not intend to eliminate fees and surcharges considering that they constitute an “essential part” of its risk management structure.
“Together, fees and surcharges cover loan intermediation costs, help build reserves to protect against financial risks, and incentivize prudent financing,” Georgieva said.
The IMF last revised its fee and surcharge policy in 2016. The IMF acknowledged that since then, interest rates have risen sharply around the world, making borrowing costs more expensive for countries .
Europe Press
Currently, 19 countries pay surcharges on IMF loans. As of November 1, Benin, Ivory Coast, Gabon, Georgia, Moldova, Senegal, Sri Lanka and Suriname will stop doing so due to the increase in the threshold to apply them.
For the 2026 financial year, of the 20 countries that, according to the IMF, would have had to pay the surcharges if they had not made this change, seven will not do so thanks to the measures approved this Friday.
Precisely on Thursday, an international group of economists asked the IMF for a substantial reform of its surcharge policy.
“Research shows that IMF surcharges are procyclical and regressive, in that they demand higher interest rates from countries in times of financial crisis, when they should be investing in their own recovery,” the letter notes. signed by nearly 150 economists, including Nobel Prize winner Joseph. Stiglitz.
