IDEAS home Printed from https://ideas.repec.org/a/pal/develp/v67y2024i3d10.1057_s41301-025-00425-x.html
   My bibliography  Save this article

Should the IMF Charge 8 Percent a Year? The Evolution of the Fund’s Lending Rate Policy and a Proposal for Reform

Author

Listed:
  • Emiliano Libman

    (Fundar)

  • Maia Colodenco

    (Suramericana Vision)

  • Anahí Wiedenbrüg

    (Facultad Latinoamericana de Ciencias Sociales (FLACSO))

  • Jens van’t Klooster

    (University of Amsterdam)

  • Sara Murawski

    (Sustainable Finance Lab)

  • Sander Tordoir

    (Centre for European Reform)

  • Michael Waibel

    (University of Vienna)

Abstract

Since 2022, major central banks have raised market interest rates to combat a global inflationary surge, especially in energy and food prices, following the COVID-19 pandemic and Russia’s invasion of Ukraine. This increase has driven up lending rates from multilateral financial institutions, with some countries now paying the IMF up to 8% annually. We raise three objections to this policy: it is pro-cyclical and unfairly redistributes resources from poor to rich countries, exacerbates global monetary policy spillovers, and hinders economic recoveries in developing economies. To address this, the IMF should set an overall cap on its lending rates or implement a sliding scale on the extra interest rate it charges large borrowers.

Suggested Citation

  • Emiliano Libman & Maia Colodenco & Anahí Wiedenbrüg & Jens van’t Klooster & Sara Murawski & Sander Tordoir & Michael Waibel, 2024. "Should the IMF Charge 8 Percent a Year? The Evolution of the Fund’s Lending Rate Policy and a Proposal for Reform," Development, Palgrave Macmillan;Society for International Deveopment, vol. 67(3), pages 341-347, December.
    • Handle: RePEc:pal:develp:v:67:y:2024:i:3:d:10.1057_s41301-025-00425-x
    DOI: 10.1057/s41301-025-00425-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41301-025-00425-x
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41301-025-00425-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Morris, Stephen & Shin, Hyun Song, 2006. "Catalytic finance: When does it work?," Journal of International Economics, Elsevier, vol. 70(1), pages 161-177, September.
    2. Krahnke, Tobias, 2023. "Doing more with less: The catalytic function of IMF lending and the role of program size," Journal of International Money and Finance, Elsevier, vol. 135(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chahine, Salim & Panizza, Ugo & Suedekum, Guilherme, 2025. "IMF programs and borrowing costs does size matter?," European Economic Review, Elsevier, vol. 177(C).
    2. König, Philipp & Anand, Kartik & Heinemann, Frank, 2013. "The ‘Celtic Crisis’: Guarantees, transparency, and systemic liquidity risk," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79747, Verein für Socialpolitik / German Economic Association.
    3. Tatsuyoshi Miyakoshi, 2014. "Is the pragmatic response to International Monetary Fund quotas and credit limits favourable?," Applied Economics, Taylor & Francis Journals, vol. 46(33), pages 4075-4082, November.
    4. Toni Ahnert & Kartik Anand & Philipp Johann König, 2024. "Real Interest Rates, Bank Borrowing, and Fragility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(6), pages 1545-1571, September.
    5. Kasahara, Tetsuya, 2009. "Coordination failure among multiple lenders and the role and effects of public policy," Journal of Financial Stability, Elsevier, vol. 5(2), pages 183-198, June.
    6. Giancarlo Corsetti & Aitor Erce & Timothy Uy, 2017. "Official Sector Lending Strategies During the Euro Area Crisis," Discussion Papers 1720, Centre for Macroeconomics (CFM).
    7. Bastidon, Cécile & Gilles, Philippe & Huchet, Nicolas, 2008. "The international lender of last resort and selective bail-out," Emerging Markets Review, Elsevier, vol. 9(2), pages 144-152, June.
    8. Hugo Oriola & Jamel Saadaoui, 2024. "How do geopolitical interests affect financial markets reaction to international institution projects?," Working Papers of BETA 2024-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    9. Tito Cordella & Eduardo Levy Yeyati, 2005. "Country Insurance," IMF Staff Papers, Palgrave Macmillan, vol. 52(si), pages 1-6.
    10. repec:cdl:econwp:qt84s7r0jf is not listed on IDEAS
    11. Naqvi, Hassan, 2015. "Banking crises and the lender of last resort: How crucial is the role of information?," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 20-29.
    12. Goderis, Benedikt & Ioannidou, Vasso P., 2008. "Do high interest rates defend currencies during speculative attacks New evidence," Journal of International Economics, Elsevier, vol. 74(1), pages 158-169, January.
    13. Hippolyte Balima & Amadou Sy, 2021. "IMF-Supported Programs and Sovereign Debt Crises," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(2), pages 427-465, June.
    14. Kim, Young-Han, 2011. "International policy coordination mechanism with respect to the moral hazards of financial intermediaries," Economic Modelling, Elsevier, vol. 28(4), pages 1914-1922, July.
    15. Christian Grisse & Gisle J. Natvik, 2022. "Sovereign debt crises and cross-country assistance [A pyrrhic victory? Bank bailouts and sovereign credit risk]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 178-193.
    16. Gete, Pedro & Melkadze, Givi, 2020. "A quantitative model of international lending of last resort," Journal of International Economics, Elsevier, vol. 123(C).
    17. Graham Bird & Dane Rowlands, 2007. "The Analysis of Catalysis: IMF Programs and Private Capital Flows," School of Economics Discussion Papers 0107, School of Economics, University of Surrey.
    18. repec:zbw:bofrdp:2012_009 is not listed on IDEAS
    19. Silvia Marchesi & Emanuela Sirtori, 2011. "Is two better than one? The effects of IMF and World Bank interaction on growth," The Review of International Organizations, Springer, vol. 6(3), pages 287-306, September.
    20. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.
    21. Trebesch, Christoph & Reinhart, Carmen & Horn, Sebastian, 2020. "Coping with Disasters: Two Centuries of International Official Lending," CEPR Discussion Papers 14902, C.E.P.R. Discussion Papers.
    22. Bai, Ye & Banerji, Sanjay & Wang, Zilong & Zhang, Wenjing, 2024. "Can participation in IMF programs facilitate sovereign debt rescheduling? The role of program size," Journal of International Money and Finance, Elsevier, vol. 144(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:develp:v:67:y:2024:i:3:d:10.1057_s41301-025-00425-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.