(Bloomberg) -- The head of the International Monetary Fund said she’s “cautiously optimistic” the institution’s board this week will revise its policy on so-called loan surcharges, the billions of dollars in extra fees some struggling nations must pay when borrowing from the fund.
The IMF should make the change because it’s the fund’s role to support countries in need, particularly as the world becomes more unstable and unpredictable, Managing Director Kristalina Georgieva said on the sidelines of a German central bank event in Berlin on Tuesday. She added that the move would also demonstrate that the fund is strong enough and well-equipped to manage without the extra revenue from the fees.
The board is expected to decide on the issue during a meeting in Washington on Friday, according to people familiar with the matter. Options that have been discussed include cutting the size of the fee or raising the threshold before they kick in.
The surcharges apply to nations that borrow more than their allotted share or take longer to repay loans. The Washington-based fund has long imposed the fees as a way to discourage its biggest borrowers from becoming too reliant on the crisis lender.
The fees have gone to filling the fund’s precautionary balances, the money on hand to protect against possible losses. But the IMF already reached a $34 billion target for those balances ahead of schedule earlier this year, easing the need to continue collecting the fees.
The fees — which are estimated to total about $6 billion over five years — have been carried mainly by a handful of the IMF’s biggest borrowers including Argentina, Egypt, Ukraine and Ecuador, according to fund data compiled by the Center for Economic and Policy Research, a progressive think tank that supports surcharge relief.
--With assistance from Mark Schroers.
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