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Quick Press Primer on the Sovereign Debt Crisis (not an official IPD policy brief)

Sovereign Debt Program

Backgrounder  261kb pdf

Background Information:

Since 2019, the number of countries facing debt distress has risen dramatically, as the global economy has experienced shocks from the Covid-19 pandemic and the ongoing war in Ukraine. An increasingly number of countries are at risk.

Research by IPD has shown that current international lending policy is procyclical and regressive, meaning it often perpetuates more debt. Already indebted countries are often saddled with more interest in fees at the exact time they're struggling to pay back current debts, so they have an even more difficult time repaying those debts.

Countries that pay billions in debt interest and fees have fewer funds to invest in their own citizens and climate goals:

  • UNICEF has identified the debt crisis as a primary factor preventing children around the world from breaking free of poverty.
  • UNCTAD reports that half of low-income countries in or at risk of debt distress also have high climate vulnerabilities. Those countries are “in a vicious cycle” and creating a climate resilient world requires “starting with a reform of the international debt structure.

The IMF, which was founded to be a lender of last resort and steward of global financial stability, levies billions of dollars of charges on distressed countries through increased interest rates and extra surcharges.

Key facts:

· According to the IMF, today the overwhelming majority of low-income countries—60 of 68—are either in risk distress or are in moderate or high risk of debt distress.

· High interest rates mean indebted countries struggle to escape debt as their interest runs to the billions. Many indebted countries pay creditors, including the IMF, 8% interest.

· 3.3 billion people live in countries that pay more in debt interest than for education or health.

· The countries most indebted to the IMF are saddled with extra surcharges.


Surcharges were established in 2009 to mitigate credit risk by providing members with incentives to limit their demand for IMF assistance and encourage early repayment while allowing the IMF to accumulate precautionary balances. For countries that tap resources from the General Resources Account, the IMF now imposes 1) Level-based surcharges: 200 basis points are applied to the portion of the credit outstanding greater than 187.5 percent of the quota. 2) Time-based surcharges: 100 basis points are applied on the portion of credit exceeding the threshold of 187.5 percent of quota for more than 36 months (51 months in case of borrowings under the Extended Arrangement).

In the current global economic context, balance of payments needs of countries in distress are quite large. So many countries have borrowed large amounts for long periods from the IMF. Because both level- and time-based surcharges apply, borrowing costs increase by 300 basis points, increasing borrowing costs to 800 basis points per year (as of the first quarter of 2024).

Today, out of 33 countries paying charges for IMF programs such as Stand-By Arrangements and Extended Fund Facilities; 22 are paying surcharges (Angola, Argentina, Armenia, Barbados, Benin, Costa Rica, Côte d’Ivoire, Ecuador, Egypt, Gabon, Georgia, Jordan, Kenya, Moldova, Mongolia, North Macedonia, Pakistan, Senegal, Seychelles, Sri Lanka, Tunisia, and Ukraine).

Proponents of the IMF surcharge policy argue that it’s needed to discourage excess borrowing and to raise funds to maintain the IMF; in other words, the most indebted countries are subsidizing the IMF at the exact moment of their distress.

In the last four years, the number of countries paying surcharges has more than doubled to 22 countries: Angola, Argentina, Armenia, Barbados, Benin, Costa Rica, Ivory Coast, Ecuador, Egypt, Gabon, Georgia, Jordan, Kenya, Moldovia, Mongolia, North Macedonia, Pakistan, Senegal, Seychelles, Sri Lanka, Tunisia and Ukraine.

In Ukraine, just surcharges paid to the IMF were the equivalent to 7.72 percent of one year’s health spending.

If you are covering IPD and PASS's conference at the Vatican, please contact mkw2109 at gsb.columbia.edu for more information or a quote from co-presidents Joseph E. Stiglitz or Martin Guzman.

Please find attached a complete academic concept note with the full agenda and list of speakers at the end.

Publication Information

Type Backgrounder
Program Sovereign Debt Restructuring
Download 261kb pdf