The International Monetary Fund’s board of directors turned down a request by Argentina to discuss relief on the commissions the country pays for its record loan, a setback for the government of President Alberto Fernández.
In an informal meeting held last month, the board rejected a proposal to discuss temporary relief on so-called surcharges, which are the commissions charged to countries that use the lender’s credit lines extensively, according to people with direct knowledge of the matter, who asked not to be named discussing private conversations.
Argentina, the IMF’s largest debtor, has proposed that countries be exempted from paying the surcharges amid the financial and economic burden of the pandemic. But the other member countries of the Washington-based organisation didn’t see reasons to explore the idea, which is now unlikely to be discussed again any time soon, one of the people said.
Without access to international debt markets and unable to pay back the Fund a loan worth more than US$40 billion, Argentine officials have since last year campaigned against the surcharges as a way of reducing financial costs. The lender charges a rate of 200 basis points, or two percentage points, on outstanding loans above 187.5 percent of a country’s quota, growing to 300 basis points if a credit remains above that percentage after three years.
Argentina’s three-year stand-by arrangement, originally issued in 2018 for a record US$56 billion, represents about 10 times the nation’s allowance with the Fund. While the Fernández administration has said it wants to renegotiate the loan’s conditions, talks between the parts have stalled without much progress for over a year.
The IMF declined to comment on Bloomberg News’s reporting and said informal board meetings are regularly held to seek views and guidance ahead of formal board discussions. Argentina’s Economy Ministry didn’t reply to a request for comment.
The IMF has previously defended surcharges applied on credit lines, with its spokesman Gerry Rice saying earlier this year that they help strengthen the Fund’s balance sheet. The organization’s latest review of this tool took place in 2016, with some of the people with knowledge also saying there is low appetite for an extensive assessment of the policy.
The Argentine government still expects that some Fund members will support a formal review of the surcharges mechanism before the end of the year, according to one of the people.
Beyond Argentina, other groups that have argued in favor of modifying the current surcharge system include the G24 countries, a group of developing nations including Mexico and India, and Nobel prize winner Joseph Stiglitz, who recently co-authored a policy brief calling for reform of the system.
by Jorgelina do Rosario & Eric Martin, Bloomberg
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