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Understanding the consequences of IMF surcharges: the need for reform

Joseph Stiglitz, Kevin Gallagher

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The International Monetary Fund (IMF) provides a global public good when it lends emergency balance-of-payments support to countries that otherwise could not access such financing at comparable terms. No country borrows from the IMF lightly, and only does so as a last resort in the face of an economic crisis. In exchange for IMF lending, governments surrender some sovereignty, self-determination of their economic policies, and implicitly admit that the government, on its own, could not manage the travails through which it is going. A lesser-known but also costly trade-off is that the IMF imposes significant surcharges – akin to the penalty rates imposed by banks – on countries with large borrowings from the IMF that are not paid back within a relatively short time. Indeed, IMF surcharges are pro-cyclical financial penalties imposed on countries precisely at a time when they can least afford them. This brief note examines the economic implications of the surcharges from a global distributive perspective. In so doing, the authors stress the need to eliminate excessive surcharges in the COVID-19 era and call for a more fundamental reform of IMF financing.

About the Authors

Joseph Stiglitz
Initiative for Policy Dialogue (IPD)

Joseph E. Stiglitz is President of the Initiative for Policy Dialogue, and Chairman of the Committee on Global Thought at Columbia University. He is University Professor at Columbia, teaching in its Economics Department, its Business School, and its School of International and Public Affairs. He chaired the UN Commission of Experts on Reforms of the International Monetary and Financial System, created in the aftermath of the financial crisis by the President of the General Assembly. He is former Chief Economist and Senior Vice-President of the World Bank and Chairman of President Clinton’s Council of Economic Advisors. He was awarded the Nobel Memorial Prize in Economics in 2001.

Kevin P. Gallagher
Professor of Global Development Policy
Global Development Policy Center
Boston University

Dr. Kevin P. Gallagher is an associate professor of international relations at Boston University, and senior researcher at the Global Development and Environment Institute at Tufts University. He specializes in global economic and development policy, with an emphasis on Latin America.

Professor Gallagher is the author of The Dragon in the Room: China and the Future of Latin American Industrialization (with Roberto Porzecanski), The Enclave Economy: Foreign Investment and Sustainable Development in Mexico's Silicon Valley (with Lyuba Zarsky), and Free Trade and the Environment: Mexico, NAFTA, and Beyond. He writes a monthly column on globalization and development for the The Guardian (UK) newspaper.

Professor Gallagher is also a research fellow at Boston University’s Frederick S. Pardee Center for the Study of the Longer-Range Future where he directs the Global Economic Governance Initiative. In 2010 he served on the US Department of State’s investment subcommittee of the Advisory Committee on International Economic Policy.

Publication Information

Type Network Paper
Program -
Posted 09/09/22
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