IMF Surcharges on Barbados Repayments Raise Concerns Over Excessive Fees and Policy Review

The International Monetary Fund (IMF) is charging Government millions of dollars in fees being collected whenever Barbados repays money it borrowed from the institution.

These controversial “surcharges” are in addition to the regular interest rates and service fees this country sends to the fund when repaying loans and Minister in the Ministry of Finance Ryan Straughn said Government was in discussions with the IMF regarding the issue.

Published IMF data revealed that Barbados paid the IMF about US$25 million last year, including about US$4.23 million in surcharges. The fund estimates that it will receive US$67.6 million in payments from Government this year. About US$4.55 million of this is expected to be in surcharges.

Earlier this month, the IMF’s executive board announced that “a review of the surcharges policy is scheduled to take place during the course of 2024”, a decision Straughn confirmed.

“We have been in discussions with the IMF on this matter. There is an expectation of this being addressed by the IMF Board by [the] Annual Meetings later this year,” he said.

The Centre For Economic And Policy Research (CEPR), a United States economic think tank, believes Barbados and other countries now shelling out millions of dollars in surcharges are likely to end up paying more of these fees than the IMF is calculating.

It said this was because the fund “appears to only project surcharge payments on existing loans that were effectively disbursed [and] does not include surcharge payments derived from commitments – loans under existing arrangements that have yet to be disbursed; also referred to as “prospective credit”.

In the recent report A Broader Impact Than Ever Before: An Updated Estimate Of The IMF’s Surcharges, CEPR researchers Ivana Vasic-Lalovic, Michael Galant and Francisco Amsler estimated that Barbados will pay the IMF US$43 million in surcharges between this year and 2033.

This would be 14.9 per cent of the overall US$291 million in charges and interest the IMF says Barbados will pay it in that period.

The IMF said that up to the end of October last year, there was US$472.6 million in credit outstanding from Barbados. This included US$18.7 million from the IMF’s Resilience and Sustainable Trust, which is excluded from surcharge payments.

CEPR experts explained that IMF surcharges “are a fee levied by the IMF on loans to countries whose outstanding credit to the IMF exceeds certain time-based and/or level-based thresholds”.

The surcharge “adds two to three percentage points to lending rates, on top of regular interest rates and service fees”.