U.S. Treasury rejects push by lawmakers to finish IMF surcharges on some loans


The Worldwide Financial Fund (IMF) emblem is seen outdoors the headquarters constructing in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas

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WASHINGTON, Feb 11 (Reuters) – The U.S. Treasury Division on Friday rejected an enchantment by 18 Democratic lawmakers who need the Worldwide Financial Fund (IMF) to finish its observe of charging largely center and lower-income nations vital surcharges on bigger loans that aren’t repaid rapidly.

The IMF has estimated that borrowing nations pays over $4 billion in surcharges on high of curiosity funds and charges from the beginning of the pandemic by way of the top of 2022.

Jonathan Davidson, the Biden administration’s assistant Treasury secretary for legislative affairs, informed the lawmakers that the surcharges have been meant to handle the elevated threat to shareholders concerned in lending giant sums to member nations. They don’t apply to the world’s poorest nations, Davidson added and loans made usually had charges effectively beneath market charges.

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“Income from surcharges for these nations who do pay them helps construct precautionary balances to guard the IMF’s shareholders in opposition to potential losses,” Davidson wrote in his reply to a Jan. 10 letter from lawmakers, a replica of which was seen by Reuters.

“In Treasury’s view, surcharges have to be thought of within the context of the general steadiness sheet of the IMF, most significantly its capability to soak up potential losses from nonrepayment of its lending,” he mentioned.

Washington’s view is significant since america is the most important shareholder within the world lending establishment, which is funded by its member states; though Germany, France and Britain have been open to reviewing the surcharge coverage.

Representatives Jesus Garcia, Alexandria Ocasio-Cortez and Pramila Jayapal final month led a letter to Treasury Secretary Janet Yellen, urging her to again a overview of a coverage they mentioned was “unfair and counterproductive,” and robbed nations of assets wanted to fight the COVID-19 pandemic.

Argentina, which is anticipated to spend some $3.3 billion on surcharges from 2018 to 2023, has repeatedly requested for short-term reduction from the surcharges given the COVID-19 disaster, however IMF government board members stay divided over the broader concern.

IMF government board members reviewed the position of surcharges, now the fund’s largest income, late final 12 months, with out coming to a last choice.

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Reporting by Andrea Shalal; Modifying by Aurora Ellis

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