20 April 2024 12:54 am Views - 721
By Nishel Fernando
Sri Lanka is to pay US $ 308 million in surcharges to the International Monetary Fund (IMF) over the next decade (2024-2033), in constituting to 15.8 percent of the total “charges and interests” over the period, according to the United States-based think tank Centre for Economic and Policy Research (CEPR).
Over the period, Sri Lanka’s total charges and interests payments to the IMF stand at
US $ 1.94 billion.
Sri Lanka joined the list of 22 heavily indebted countries facing controversial surcharges imposed by the IMF from last year.
Surcharges are fees levied by the IMF on loans to countries whose outstanding credit to the IMF exceeds certain time-based and/or level-based thresholds. The fees add two to three percentage points to the lending rates, on top of the regular interest rates and service fees. These additional payments, aimed at countries whose outstanding credit to the IMF’s main account exceeds 187.5 percent of their quota, have stirred debate and concern. Sri Lanka’s current GRA credit to quota ratio stands at 202 percent.
The CEPR outlined that the surcharge policy presents a significant burden on heavily indebted countries. “… the net increase of six surcharge-paying countries since our previous update less than one year ago demonstrates that this burden is affecting an increasing number of countries and strongly suggests that surcharges are not effective in achieving their purported goal of disincentivising reliance on the IMF lending,”
it said.
In recent years, numerous world leaders, the G77 group of developing countries, UN officials, UN human rights experts, leading economists, civil society organisations and more have called for the suspension or complete elimination of the IMF’s surcharge policy.
“The fact that the IMF has thus far failed to heed these calls is often attributed to the resistance of the US government, which exercises a major influence over policy decisions at the IMF,” the CEPR remarked.
However, the members of the US Congress have repeatedly urged surcharge reform. In 2022, US House of Representatives passed legislation directing the US executive director at the IMF to support a review and suspension of the policy. Similar legislation, titled the Stop Onerous Surcharges Act, was introduced in April 2024.
As a result of growing global and Congressional pressure, the IMF hinted its willingness to consider reviewing its surcharge policy. In September 2023, US Under Secretary for International Affairs Jay Shambaugh stated that the US Treasury Department is “open to hearing views on surcharge policy reform”. The following month, the chair of the International Monetary and Financial Committee, Nadia Calviño, said that the IMF “will consider a review of surcharge policies”.
“As the 2024 IMF Spring Meetings, scheduled for April 19-21, approach, the evidence is clearer than ever that the Biden administration should support efforts to reform or eliminate the IMF’s surcharge policy,” the CEPR stressed.