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WASHINGTON (AP) — The International Monetary Fund (IMF) is under pressure to reassess how it charges fees for loans scattered to poor countries like war-torn Ukraine — one of the fund’s largest borrowers .
As international food prices and inflation continue to rise, more and more countries will need to turn to the International Monetary Fund.
A surcharge is an additional loan fee levied on countries that are heavily indebted to the IMF.
Treasury Undersecretary Valli Adejemo said in Aspen last month that some finance ministers realized they had to pay for Russia’s war in Ukraine, especially with rising food prices.
“They’re going to have to go to the IMF, and they’re going to need to ask for help,” Adejemo said.
However, the IMF’s fee system may change through U.S. legislation.
Amendments to the National Defense Authorization Act, also known as the Defense Spending Act, would suspend the IMF surcharge while studying its effectiveness and burden on indebted countries.
The U.S. House of Representatives passed the bill in July. The Senate is expected to vote on its defense bill in September. A representative on the Senate Armed Services Committee said amendments could even be introduced in the Senate in the coming weeks.
As the largest shareholder of the IMF and a member of the IMF’s executive board, the United States can drive policy decisions or unilaterally veto some board decisions.
In the case of the worsening financial crises in Sri Lanka and Pakistan, some accuse China of engaging in debt-trap diplomacy — or leaving some countries so deeply in debt that they are held accountable to China on international issues.
Advocates and civil rights groups have filed the same complaint against the fund, which they claim has diminished the role of its core lender of last resort, and the countries are in a vulnerable position to pay their debts.
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