IMF loan fees for countries face scrutiny

WASHINGTON — The International Monetary Fund is facing pressure to re-evaluate how it imposes fees on loans it disburses to needy countries such as war-torn Ukraine — which is one of the fund’s biggest borrowers.

The move comes as more countries will need to turn to the IMF with food prices and inflation internationally continuing to rise.

Surcharges are added fees on loans imposed on countries that are heavily indebted to the IMF.

Treasury Deputy Secretary Wally Adeyemo said in Aspen last month that finance ministers of several countries realize they have to pay a price for Russia’s war in Ukraine, especially with food prices going up.

“They’re going to have to go to the IMF, they’re going to need to find assistance,” Adeyemo said.

But the IMF fee system could change through U.S. legislation. An amendment to the National Defense Authorization Act, the defense spending bill, would suspend IMF surcharges while their effectiveness and burden on indebted countries is studied.

That was passed by the House in July. The Senate is expected to vote on its defense bill in September. A representative of the Senate Armed Services Committee said an amendment may be offered in the next few weeks or even on the Senate floor.

As the largest IMF shareholder and member of the fund’s executive board, the U.S. can push for policy decisions and veto some board decisions.

Citing worsening financial crises in Sri Lanka and Pakistan as examples, some accuse China of engaging in debt trap diplomacy — or having countries falls so deeply in debt to that they are beholden to it on international issues.

Advocates and civil rights organizations lodge the same complaint against the fund, alleging it undercuts its core lender-of-last-resort role.