Should nations facing debt distress have to pay more to the International Monetary Fund to get support? It’s a question now being asked by a disparate coalition of economists and U.S. lawmakers voicing concern that countries are being squeezed for fees at precisely the time when they are most cash-strapped.
This long-standing surcharge practice, they argue, hampers governments’ ability to pay back the loans, leaving both creditors and debtors worse off.
IMF surcharges are extra fees for countries that need to borrow large sums of money over several years from the lender of last resort. Nobel Memorial Prize-winning economist Joseph Stiglitz, in a paper written with Boston University’s Kevin Gallagher, said the charges are “akin to the penalty rates imposed by banks.”