In February, surcharges were discussed by economists Joseph Stiglitz of Columbia University and Kevin P. Gallagher of Boston University. They claimed that forcing excessive repayments not only hurts creditors but also lowers the productive potential of the borrowing country. It also forces borrowers to make additional payments “at precisely the moment when they are most squeezed from market access in any other form.”
According to other economists, the fees encourage members with high outstanding balances to make timely loan repayments.
The World Bank projects that the struggling Ukrainian economy will contract by 35% even with help and that by 2023, the nation will repay the IMF almost $360 million in surcharge fees alone.
It might not be so simple to convince the IMF’s 24 directors—who are chosen by groups of countries or by individual members of the organization—to stop the fees.
The directors made the decision to keep the fee policy in place just before Christmas. In a statement released on December 20, they stated that while some directors “noted that the average cost of borrowing from the Fund remains significantly below market rates,” the majority of directors “were open to exploring possible options for providing temporary surcharge relief.”
In a report released in December titled “Rebuilding Ukraine: Principles and Policies,” published by the Paris- and London-based Centre for Economic Policy Research, eminent economists examining the effects of the war noted that “some significant voting members may have interests that are not aligned with having Ukraine succeed economically.”