The IMF is bringing down its borrowing costs for member countries with 36%, or $1.2 billion annually, starting in November. As a result of the new policy, the expected number of countries subject to surcharges (extra charges for countries with high or prolonged loans) will fall from 20 to 13 in 2026.  This is a huge win for indebted countries confronted with increasing debt burdens in an era of high interest rates.

The new policy was introduced after extensive societal critique, amongst others from former Argentinian minister Martin Guzmán and Nobel laureate economist Joseph Stiglitz. SFL also contributed to a critical analysis and a proposal for an alternative lending policy in a recently launched T20 paper, informing the Brazilian G20 presidency. The paper argues that the current lending rate policy is procyclical, amplifies the global spill-over of monetary policy and makes it harder for IMF programs to promote economic recoveries. It recommends setting a cap on the lending rate and/or devising a surcharge-sliding scale.

SFL would like to thank all authors of the paper for their work. Amidst historically high debt levels and a challenging global economic outlook, the IMF’s revision of its lending rate is a huge win for indebted countries.

Download the paper here.