Ahead of COP28, Civil Society Groups Call for End to IMF Surcharges So that Heavily Indebted Countries Can Better Respond to Climate Crisis
Washington, DC — Ahead of COP28, various civil society groups are urging the International Monetary Fund to end its policy of levying billions of dollars in unnecessary and counterproductive surcharges so that heavily indebted countries will have more funds available to respond to the climate crisis. The groups, which include Eurodad; the Bretton Woods Project; MenaFem; Latindadd; EuroMed Rights; and the Center for Economic and Policy Research in Washington, DC, note that, combined, countries will have to pay more than $2 billion to the IMF by the end of 2025 in additional surcharges tacked on to the biggest and/or longest term loans owed to the Fund.
“Leaders at the UN, the IMF, the World Bank, and other major international organizations agree that the world is going through a period of extraordinary crises, including crises of external debt, food security, and climate, yet the Fund is itself adding to the challenges faced by Global South countries through its unfair, punitive, and counter-productive surcharge policy,” MenaFem director and found Shereen Talaat said.
“IMF surcharges have a ‘kick ‘em while they’re down’ effect, punishing the very countries that are already struggling to pay off their IMF loans,” CEPR Senior Research and Outreach Associate Michael Galant said. “Surcharges only end up making it even harder for these countries to get out of debt, let alone fund other priorities — including responding to climate disasters. Even some of the most crisis-stricken countries, including Ukraine, Egypt, and Pakistan — a third of which was recently underwater as a result of climate change — are being forced to pay these junk fees to the IMF.”
CEPR research shows that annual average surcharge payments have increased substantially from pre-2023 levels due to countries’ increased reliance on the Fund following exogenous shocks. For the countries forced to pay surcharges, these comprise, on average, about 36 percent of all charges and interest payments to the IMF.
CEPR also found that IMF surcharges are not effective in achieving their purported goal of incentivizing early repayment of IMF debt. The five most indebted countries over 2018–2023 are not only still paying more in surcharge fees, but their additional debt service burden is extending over a longer period of time than initially projected.
“It is countries in Latin America and the Caribbean, and throughout the Global South, that are really on the front lines of the climate crisis,” Patricia Miranda, Global Advocacy Director with Latindadd, said. “Yet these are the same countries with the least resources to adapt to our warming world and to respond to climate disasters. Ending its unnecessary surcharges is the least the IMF could do to actually help these countries.”
“With the world average temperature reaching 2 degrees Celsius above the historic norm for the first time, and with Oxfam showing that the world’s richest individuals are generating more carbon emissions than most of the world’s poorest, it is imperative that the Bretton Woods institutions do everything they can to help mitigate climate change and enable countries to be able to respond effectively to the ravages of the climate crisis,” Bretton Woods Project Coordinator Luiz Vieira said. “The simplest and easiest first step the IMF could take would be to stop diverting funds that middle-income countries need for climate, that instead go into the IMF’s already flush accounts.”
“The IMF and World Bank are feeling the heat as the gap between their rhetoric on climate, and what they’re willing to do about it, continues to widen,” Iolanda Fresnillo, Debt Justice Policy and Advocacy Manager with Eurodad, said. “The rest of the world is no longer going to sit by and watch these institutions hand-wring about the climate crisis while continuing to burden the same countries most affected by climate change with more and more debt, usually with austerity conditions attached. It is time that these institutions’ rhetoric matched the reality.”
Source : cepr.net