"IMF's Borrowing Surcharges Worsen Global Inequality"

 BENGALURU: A report from US-based think tanks highlights that nations, particularly those in the middle and lower-income brackets, are facing added financial strains due to surcharges imposed alongside interest payments on loans acquired from the International Monetary Fund (IMF). This situation is contributing to the widening gap in global economic fairness.

"IMF Surcharges Amplify Global Inequities, Strain Economies of Middle and Lower-Income Countries: US Think Tanks Report"

The policy's critics contend that surcharges divert scarce resources that could be used to boost struggling economies, punish nations already struggling with liquidity constraints, increase the risk of debt distress, and delay repayment.

Nations, for example, Ukraine, Egypt, Argentina, Barbados and Pakistan pay the most in overcharges, the report showed, representing 90% of the IMF's additional charge incomes.

In addition to the fund's ever-increasing basic rate, these surcharges are the IMF's single largest source of revenue, accounting for 50% of total revenue in 2023.

According to Kevin Gallagher, director of the Global Development Policy Center, "IMF surcharges are inherently pro-cyclical because they increase debt service payments when a borrowing country is most in need of emergency financing."

"Global shocks and rising surcharges are intensifying the economic pressure on vulnerable countries."

The Institute of International Finance released data earlier this year showing that global debt will reach a record $313 trillion in 2023. Additionally, the debt-to-GDP ratio, which shows a country's ability to repay its debts, reached new highs across emerging economies. According to Managing Director Kristalina Georgieva on Friday, IMF shareholders agreed last week on the significance of addressing low-income country challenges.