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DRGR Co-Chair Argues “IMF’s Surcharges Unfit for Purpose” in the FT

Kevin Gallagher, co-author of the DRGR proposal, criticizes surcharges added by an IMF mechanism to the debt interest costs – and argues for their abandonment.

Kevin Gallagher is professor and director of the Global Development Policy Center at Boston University’s Pardee School of Global Studies and one of the co-chairs of the DRGR project. In the Financial Times he takes issue with the surcharges that the IMF adds to the interest and fees on its loans.

The article starts by outlining the key issues with the current IMF mechanism adding surcharges to the debt interest costs on its loans:

“In response to the COVID-19 pandemic, the IMF has already approved 119 programs to 85 countries at a cost of over $100bn. But, as it turns out, the countries that need the most from the IMF will have to pay over $4bn in extra surcharges on top of interest payments and fees from the beginning of the crisis through the end of 2022.”

[…]

“Currently, 30 per cent of the countries with IMF funding face surcharges in the midst of the crisis, including Angola, Argentina and Georgia. And more are due to begin paying. This is just when many middle-income countries still don’t have access to vaccines and will continue to suffer the health, economic, and financial pain of the crisis.”

Kevin Gallagher, therefore, argues for the abandonment of surcharges to “help countries recover from the virus, and to give the IMF the incentive to rethink its broken business model” – not least because “developing countries need every penny they can muster to fight the virus, protect the vulnerable, and mount an inclusive and green recovery.”

Read the full text here.

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