The International Monetary Fund (IMF) has reduced surcharges, a major policy change that will benefit 20 countries, including Argentina. The country is set to be spared around US$450 million annually. 

Surcharges are fees that the IMF charges to borrowers whose debt exceeds their loan quota or have repayment periods exceeding 36 months. These amounts are tacked on top of interest and service costs. Analysts have called this regulation regressive as it targets countries already in financial distress. 

Ukraine, for example, has been subject to them even in the midst of a war.

The decision was made on Friday during a meeting of the lender’s executive board and comes after years of repeated requests from government officials and economists worldwide. Former Argentine Economy Minister Martín Guzmán was among those who had insisted the most on this policy change.

“It was a 4-year global crusade,” Guzmán posted on X. “From our initial proposal at the G-20 in Saudi Arabia in 2020, we obtained support from the G-20, lawmakers in the U.S. Congress, the United Nations, the Vatican, many academic institutions and civil society.”

The IMF board raised the threshold at which surcharges based on the amount of debt are applied. Whereas these fines used to be applied to countries exceeding their quotas by 187.5%, they will now be slapped on those exceeding it by 300%. 

Surcharges applied on how long the repayment period is were lowered from 100 basis points to 75 (one basis point is one-hundredth of 1 percentage point). Time-based surcharges are applied on the portion of credit exceeding a 36-month repayment deadline, or 51 months in the case of Extended Fund Facility loans. 

The basic charges’ interest rate margin in Special Drawing Rights (SDR, what is known as the fund’s “currency”) was reduced from 100 basis points to 60. The surcharge threshold for commitment fees — charges applied to the undisbursed portion of a loan — was increased to 200% of the annual quota and 600% of the cumulative one. Until now, these values were set at 115% and 575% respectively.

This policy change will become effective on November 1. This means that Argentina will save approximately a total of US$3.2 billion on the current US$44 billion loan, a 29.1% reduction in the payment of fees and surcharges. 

IMF head Kristalina Georgieva welcomed the board’s decision in a challenging global environment and at a time of high interest rates.” 

“Our membership has reached consensus on a comprehensive package that substantially reduces the cost of borrowing, while safeguarding the IMF’s financial capacity to support countries in need,” she said in a statement.

“The approved measures will lower IMF borrowing costs for members by 36 percent, or about US$1.2 billion annually. The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13,” she added.

Guzmán began spearheading the fight against surcharges in 2020 while negotiating the IMF debt taken during Mauricio Macri’s presidency. Guzmán served as economy minister during the Alberto Fernández administration from 2019 to 2022. 

He continued with the demand after leaving his position. In September, he co-signed an article alongside Nobel laureate Joseph Stiglitz, political scientist Kevin Gallagher, and former G24 Director on International Monetary Affairs and Development, Marilou Uy. Titled “The IMF Must End Its Destructive Surcharges,” the piece argued that the surcharges had “become the largest source of net revenue to the Fund in recent years” and called for their adjustment or elimination.

Shortly before the Fund’s meeting on Friday, 150 economists including Mariana Mazzucatto, Guzmán, Stiglitz, and former Argentine economy ministers Jorge Remes Lenicov, Martín Lousteau, and Axel Kicillof signed an open letter to the IMF requesting it reform its surcharge policy. 

“These extra fees on heavily indebted countries mean they pay more during crises. It’s diverting billions from health, education and clean energy when countries need these investments most,” Mazzucatto wrote on X.

Current Finance Secretariat Pablo Quirno, however, did not name Guzmán in his post on X celebrating the cut. He claimed it was all the product of “an exhaustive work” carried out “since the beginning of President Javier Milei’s term of office.”

After the decision was made, Guzmán pointed out that what Argentina would save is “more than half the cost” of the university funding bill President Javier Milei vetoed last week. 

“Here is funding that has to be given a use. The money is there. What if they use it to finance public education this time?” he asked.