Joseph Stiglitz insisted on immediate removal of surcharges that the IMF applies to countries

According to the development expert, “Surcharges disproportionately affect low-quota middle-income countries, which need both significant IMF funding to pay as well as longer repayment periods to recover from shocks“.

Stiglitz expressed his point of view in a column titled “Understanding the Consequences of IMF Surcharges: The Need to Implement Reforms,” ​​co-authored with The Economist Kevin gallagher, published in the Center for Global Development Policy at Boston University.

The authors felt that the Fund “should not get involved in the business of taking advantage of those in dire straits. It should immediately eliminate surcharges amid the Covid-19 crisis and strive to reform its own accounts “.

“Charging the poorest countries in return for basic support from the global financial institution of last resort may seem odd.: This is a regressive transfer, and it is likely to intensify in the world after the pandemic, as an increasing number of poor countries will have to assume surcharges, ”they noted. His point of view is consistent with the information circulating up to the moment on the agreement of the International Monetary Fund with Argentina.

Alberto Fernández himself made a statement about this recently in El Uncover: “The deal is closed, the rate cut must be formalized. But if it doesn’t come out soon, it can be dealt with with a pari passu clause, like the term issue. “, He anticipated.

According to economists, “It is important that member countries do not rely too much on the IMF for liquidity, but regressive and pro-cyclical surcharges are not the way to create incentives to do so in the midst of a global economic crisis“.

In this regard, they indicated that at least two objections can be raised to the argument of the imposition of surcharges to avoid payment default: the first, because of the IMF’s status as a preferred creditor and the central role it plays. ‘it plays in the international financial system, the absence of direct payments is not a problem, or at least not so far.

The second argument, they continued, is that allegedly high interest rates (surcharges) are needed to avoid moral hazard, to deter countries from borrowing excessively from the IMF and to encourage them to pay more. quickly.

Economists were of the opinion, however, that “countries tend to do everything possible to avoid going to the Monetary Fund, even when borrowing from others at much higher rates“.

Also, “since there is no automatic right to borrow, the IMF will always be able to curb excessive borrowing,” concluded Stiglitz and Gallagher.