Gallagher & Stiglitz Argue for Suspension of IMF Surcharges
Kevin Gallagher, Professor of Global Development Policy at the Frederick S. Pardee School of Global Studies at Boston University and Director of BU’s Global Development Policy Center (GDP Center), published a VoxEU article arguing for the suspension of International Monetary Fund (IMF) surcharges to give distressed countries and the global economy a better chance to recover and rebuild from COVID-19.
Galagher co-authored the article, titled “IMF surcharges: A lose-lose policy for global recovery,” with Nobel Prize-winning economist and professor at Columbia University Joseph E. Stiglitz. In their piece, Gallagher and Stiglitz outline how IMF surcharges combined with existing interest payments that predate the COVID-19 pandemic are forcing borrowing countries to implement risky economic policies in hopes of paying off their loans. The two claim that this is putting a further squeeze on the most desperate countries precisely when they need to be investing in response and recovery. They propose suspending IMF surcharges as this would “provide some breathing room for affected countries and allow time for a fuller review of the surcharges system with a view to eliminating them completely.”
An excerpt:
The IMF estimates that borrowing countries will pay over $4 billion in extra surcharges on top of interest payments and fees from the beginning of the COVID-19 crisis through the end of 2022 (IMF 2020). These surcharges, payable in hard currency, are imposed on countries just at the time when they are typically facing a real shortage of such currency. Surcharges are counterproductive, because they are pro-cyclical…The IMF thus exacerbates the underlying problem.
The full article can be read on VoxEU‘s website.
Kevin Gallagher is a professor of global development policy at Boston University’s Frederick S. Pardee School of Global Studies, where he directs the Global Development Policy Center. He is the author or co-author of numerous books, including most recently, The Case for a New Bretton Woods (Wiley, 2022). Read more about Professor Gallagher on his Pardee School faculty profile.