He International Monetary Fund (IMF) will begin this Friday the debate on the reform in its charges and surcharges policy, something that could benefit Argentina by about US$12,000 million. The definition of the IMF board is scheduled to be announced this Friday afternoon.
As far as he could know Scope, The multilateral organization would be willing to grant a reduction in the extra interest it charges to countries that are in debt above their quota.
During his time at the Ministry of Economy, Martin Guzman was particularly active on this matter. He met with representatives from different countries and put it on the agenda of the forums in which Argentina participated, such as the case of the G20, which included it in its final declaration in one of its meetings.
Already out of management, the former minister and the Nobel Prize winner Joseph Stiglitz together with Boston University professor Kevin Gallagher, they presented a concrete proposal to reform this point of the international financial architecture.
What does the proposal presented by Martín Guzmán and Joseph Stiglitz include?
1 – Reduction of surcharges
2 – Increase in the threshold from which surcharges are charged
3 – Base rate reduction
The overcharges were discovered in 2020 when Argentina’s negotiations with the Fund began. From there, a crusade began around the world, positioning the issue in different forums and gaining support from leading countries.
After Guzmán left Economy, he continued with the request: in April of this year he organized a meeting with the directors of the IMF in Washington DC, in the Fund building, and then a massively attended seminar in the Vatican, in which he participated Pope Francis. The president of Brazil, Lula da Silva, also expressed his support and called for this reform, being the president of the G20 this year.
IMF: request from 150 economists around the world for rate reform
A group of more than 150 economists, including three former Argentine economy ministers, Martín Guzmán, Martin Lousteau and Jorge Remes Lenicovurged the IMF to significantly reform its policies, especially regarding surcharges.
Other prominent economists who signed are Stiglitz, Kevin Gallagher, Jayati Ghosh, Mariana Mazzucato, Thomas Piketty and José Antonio Ocampo.
IMF: The overcharges
At issue is the IMF’s interest rate policy, which imposes additional rates on countries whose debts have exceeded certain size and time thresholds.
At the moment, 675 million people live in low- and middle-income countries whose taxpayers are projected to pay the IMF approximately $2 billion in surcharges alone each year for the next five years.
Importantly, the IMF’s surcharge policy has been the subject of criticism and controversy in the past. Some argue that surcharges fail to achieve their goal of discouraging dependence on the IMF and may instead exacerbate the debt problems of countries in crisis.
Main criticisms of the IMF surcharge policy
– Procyclicality. Overcharges increase during financial crises, when countries most need access to funds.
– Regressivity. Overcharging disproportionately affects low- and middle-income countries.
– Inefficiency. Overcharges fail to discourage dependence on the IMF.
Source: Ambito
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