The Angolan government could save US$160 million over the next five years if the International Monetary Fund (IMF) eliminates or lowers the interest rates it charges for loans made to the most indebted countries.
According to the Bloomberg financial information agency, the Fund is being pressurised by its shareholders, who are also the borrowers of the loans, to lower the rate it charges countries that receive more than the quota to which they are entitled or that benefit from longer loan repayment maturities, known as a surcharge.
Leading the list is Argentina, which will have to pay more than US$4.6 billion (€4.2 billion) over the next five years, followed by Ecuador and Egypt, with US$584 million and US$370 million (€543 million and €344 million) respectively, and Angola, with a surcharge of US$160 million (€148 million), which represents the amount the IMF charges for lending to a country whose loans exceed 185% of the quota to which it is entitled or which benefits from longer payment maturities.
Citing figures from the Centre for Economic and Policy Research, Bloomberg writes that the IMF “has received billions of dollars in charges from the biggest borrowers, a practice that penalises those who need the money the most”.
With its coffers full and commercial interest rates rising to over 8%, the IMF admits that “several” of its managers are open to reviewing the rules on surcharges, and a meeting on the subject has been scheduled for June.
The President of Brazil, Luiz Inácio Lula da Silva, who leads the G20, has promised to prioritise this issue in the context of the reform of the global financial architecture currently being debated, and the United States, the Fund’s largest lender, has also admitted that the issue merited analysis, not only because of the injustice it creates, but also because the high cost of IMF loans can push countries towards other creditors, such as China.
Until now, the IMF has emphasised that these surcharges are an integral part of the Fund’s own financing model and that they serve to discourage excessive indebtedness or long repayment periods, but borrowers argue that these surcharges divert funds needed for priority areas such as food or healthcare, and are increasingly punitive in view of high inflation and interest rates.
The number of countries that endure these surcharges has grown from eight in 2019 to 22 today, with the Fund having lent almost US$150 billion (€139.4 billion) to almost 100 countries since the Covid-19 pandemic.
Lusa
