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IMF has made €2.5 billion profit out of Greece loans

Ahead of the payment of €462 million by Greece to the IMF on Thursday 9 April, figures released by the Jubilee Debt Campaign show that the IMF has made €2.5 billion of profit out of its loans to Greece since 2010. If Greece does repay the IMF in full this will rise to €4.3 billion by 2024.

Christine Lagarde

Christine Lagarde, Managing Director of the International Monetary Fund. Photo: IMF Staff Photographer/Michael Spilotro

The IMF has been charging an effective interest rate of 3.6% on its loans to Greece. This is far more than the interest rate the institution needs to meet all its costs, currently around 0.9%. If this was the actual interest rate Greece had been paying the IMF since 2010, it would have spent €2.5 billion less on payments.

Out of its lending to all countries in debt crisis between 2010 and 2014 the IMF has made a total profit of €8.4 billion, over a quarter of which is effectively from Greece. All of this money has been added to the Fund’s reserves, which now total €19 billion. These reserves would be used to meet the costs from a country defaulting on repayments. Greece’s total debt to the IMF is currently €24 billion.

Tim Jones, economist at the Jubilee Debt Campaign, said:

“The IMF’s loans to Greece have not only bailed out banks which lent recklessly in the first place, they have actively taken even more money out of the country. This usurious interest adds to the unjust debt forced on the people of Greece.”

UPDATE:

As of 1 July 2015, Greece is in arrears to the IMF of €1.6 billion. So the IMF’s overall profit currently stands at €900 million.

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  • http://jayarava.blogspot.com Jayarava

    We ought to be ashamed to be so openly profiteering from the poorest countries in the world. I wonder what the aid budget to the countries with IMF loans comes to? More or less that what they owe to the IMF?

    I don’t understand how the IMF can fail to see that these loans are crippling Greece and other countries. This is worse than sub-prime.

    • Cinekpol

      Poorest countries in the world? According to CIA Greece is 47th richest country in the world out of 195 – that means there are 148 poorer countries than Greece. According to IMF it’s 44th richest country. According to World Bank it’s 40th richest country.

      Even within the European Union itself Greece isn’t one of the poorest countries.

      • Κυβέλη Ουρανού

        Depends what you mean ‘poor country’ We have one of the richest eltis in the world who don’t pay their taxes, and one of the poorest population in the world. Taxes for people rased 337% and for the elit only 9%. There, this is the problem and Lagard knows it. And instead of blackmailing the politicians for doing the right thing, they only ‘suggest’ and they ask for changes. Cause changes and selling our property is the goal.

        • Tim Jones

          Greece’s economy has shrunk by one-quarter since it started following IMF and EU enforced policies, so it’s certainly got a lot poorer. Also, the IMF’s funding model means it makes money out of all the countries it lends to except those with a national income per person of less than £650 a year. So it is currently making profit out of the people of Jamaica, Pakistan and Tunisia.

          • Λaconic

            Greece’s economy would have shrunk by 40% if the troika had not lent hem any money.

            Greece was running a budget deficit of 15% in 2010. Without the bailout the budgetary contraction (austerity) would have been 3x bigger.

        • concerned citizen

          Madame Lagarde is merely the talking head of this private bank. She takes her orders from her masters who revel in making money off the suffering of others. Those MPs in Greece who were complicit in the wording/conditions and passing of the MoU knew full well the damage this would do to Greece but they too have to please their patrons. The end goal may be to force Greece and its citizens to sell assets/property for a fraction of its true worth. Then again it may be something far more sinister that involves the rest of the EZ. You can be sure of one thing – Greece is the litmus test to determine how far ordinary citizens can be pushed (into poverty) before revolting. Many are asking – Are we there yet?

          • jackieK

            Yes this is so true, this is why the British government, have pushed our austerity as far as they can.

      • http://jayarava.blogspot.com Jayarava

        Fair enough. But when were those figures from? Their economy has been shrinking by for a few years. Certainly Greece is poor in Europe and they cannot afford the debts they have.

        • Cinekpol

          I already indicated in my post where these figures come from. And no – Greece isn’t poor in Europe. Kosovo, Moldova, Ukraine, Albania – these are a poor european countries.

          Greek economy was shrinking but it was relatively large and even after the whole crisis – it’s still relatively large and prosperous country. Currently, according to Hellenic Statistical Authority, Greek economy is on a raise, not shrinking any more.

          Problem is that Greeks are used to very high standard of living in a grand scope of things and now they are panicking because they have to significantly lower it (think: from very high down to high). But it doesn’t mean they are anywhere near being poor. If Greece would be even nearly as poor as Kosovo or Moldova is – it’d be kicked the hell out of Eurozone and probably collapse in a civil war.

          You have no idea what being poor means if you think that Greece is poor.

          • http://jayarava.blogspot.com Jayarava

            Not where. When.

          • http://jayarava.blogspot.com Jayarava

            According to the European Commission’s quarterly review on Employment and Social Situation, Greece is the poorest country in the European Union for 2013. – http://greece.greekreporter.com/2014/04/01/greece-poorest-country-in-eu/#sthash.5BXMSPnE.dpuf

            The poorest households in the debt-ridden country lost nearly 86% of their income, while the richest lost only 17-20%. The tax burden on the poor increased by 337% while the burden on upper-income classes increased by only 9% !!! This is the result of a study that has analyzed 260.000 tax and income data from the years 2008 – 2012. – http://www.keeptalkinggreece.com/2015/03/20/shocking-austerity-greeces-poor-lost-86-of-income-but-rich-only-17-20/

            EU commits $2.15 billion to help Greek poor deal with crisis – http://www.bostonglobe.com/business/2015/03/20/commits-billion-help-greek-poor-deal-with-crisis/Hfi91C5n4go6x4p7h0dYiK/story.html

            And so on.

          • Sheikh Yerboaby

            None of those poor countries are in the EU. Greece is a poor EU country

          • Golam Dawood

            You are missing the point. The point is that interest is charged on a global scale, that enters whole nations into a debt trap. That Greece isn’t the poorest is not the point. Whether you’re lower class of upper lower class, or lower middle class … when you lose your house, you’re still homeless.

          • John Moore

            Greece is a prosperous country? I’m speechless.

          • Cinekpol

            Comparing to some of the European countries – yes, it is. That’s what I wanted to point out in my post – people loose perspective in that whole drama. Greece is far from being the poorest country in Europe. It’s not even the poorest one in the EU, nor even Eurozone itself.

          • RiGeL

            learn before talking… At least, try to learn what countriesbelongs to EU. at the moment, you’re just ridiculous.

          • mike

            you are kidding right? Greece has a gdp of 250 billion.

          • mike

            I couldn’t care less about the battle flag of the confederacy.

      • Eleftheria

        … it is on the first elevetor down. … we have a triple loss…. 1) 60% of the income is cut 2) 300% more taxes and 3) 50% increse in products and services. ( which no one can afford anyway…) – I am huppy to hear there is future in decending …. one day maybe we will make it to number one!!! yey!!!

      • murrayzz1

        Say what? So it is OK to extort money from any country, as long as they’re not the poorest in the world? Do you think you might be ever so slightly missing the point here?

      • KesterR

        When was the data that statistic was based on collected? Several years ago perhaps?

        • Cinekpol

          End of 2014.

    • jackie K.

      Just despicable, these people have suffered enough, without these punitive amounts being taken from them, shame on you, you are no better than loan sharks.

    • John Moore

      They see it. They are doing it on purpose. They have taken everything that will produce income for Greece for decades. It has been a successful, large scale theft.

  • Joshua1

    How did you estimate the 3.6% interest rate? My calculations bring it closer to 4.55%. Can you send the source please?

  • D. Gabriel

    “THE RACKET” by Matt Kennard

  • ArtofRecruitment

    Greece should default and show up the IMF for what it is – a profit vehicle for major multinational banks. If Wonga are fined for overcharging why is it that the IMF are allowed to decide a “rate for the job” for each loan. If Ireland, Spain Italy and Portugal demanded repayment of the interest on their loans down to a current market rate how much of a Eurozone crisis would there actually be for the poorer nations. 19 billion is an obscene amount to have set aside – especially when you think about how much the IMF spent on a new building in 2006.

    Also do they care about Health and Safety? Aparently not reports state as follows: A 2009 study concluded that the strict conditions resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by 16.6%.

    Isn’t it time to get rid of an organisation that supports despots (Zimbabwe has been in default on loans since 1999), impoverishes the most needy and pays all of its Washington staff a 40% bonus to local salaries.

    • David lim

      The illuminati control this institution, the central bank and the IMF , federal reserve of America

    • http://www.myseniormoment.org/ SeniorMoment (pen name)

      The IMF is owned by the national governments, including one of its biggest stakeholders, the USA. It has no multinational bank stakeholders at all.

      • RiGeL

        Yep, you’re perfectly right… as long as we assume us Government has not been hold by banks, which is every day less obvious.

  • Neelofer Farid

    Debt Trap not Loan

  • Golam Dawood

    That’s not for an individual. That’s for a whole country i.e. the nation has to grow at that rate to afford that rate in the first place.

  • thequill

    It’s time to pay the piper. If Greece can’t support their lifestyle they need to make changes. Maybe George Soros can bail them out.

  • garofulaar

    This article is economically illiterate. Greece’s long term cost of borrowing in the market is over 12%, so the IMF rate is very low (as it is supposed to be). Interest from a lender comprises the cost of the money, admin costs, profit margin (none in the IMF case), and an amount related to how risky the loan is. The higher the risk of default, the more the lender must put in its reserves. This is exactly what the IMF has done. If lenders could not do this there would be virtually no loans – no mortgages, no car loans, no companies could operate or invest. In short complete economic collapse.

    • Roger Kamben

      hogwash. You talk as if banks and markets are some part of nature like gravity. It’s a man made system that’s currently very effective at screwing over those at the bottom. And we’re talking about a whole country here, not your corner store or local car dealership. Why do institutions like IMF need reserves and profits for anyway? They answer to the central bank of GOD himself? They even have their own currency they can print out of thin air called special drawing rights so they will never go broke. This is like a Red Cross run for profit with dividends paid out to stockholders. Perhaps even you would find that absurd. But that’s not as absurd as having a debt based monetary system. Yes that’s right, 97% of all money out there is debt and today it’s all digital like a virtual game. You all know it will eventually end in a crash when not even the “stupid” players can or want to take on more debt. Even the Babylonians knew this and burned their debt-ledgers regularly. You’d think we would have ironed out the kinks by 2015 but people seem completely oblivious to the alternatives and just takes the financial system for granted as the weather. Now we even try to pretend the first into the ponzi-pyramid have some moral high ground compared to the hobo who came in last and is stuck with the bill. Politicians lie and appeal to your economic understanding from your household perspective which is completely wrong when it comes to national and global economies. Pick up a book about macro-economics or be forever screwed by the global elite.

    • John Moore

      Go away, IMF troll.

    • Nikos Santis

      According to the economic theories, an interest of 12% or any (high) rate that Greece had borrowed and continuous to borrow entails a higher risk of non-payment. This risk premium means that the higher risk of non-payment is rewarded for lending countries like Greece (and a higher risk=profit in anticipation for countries with a higher probability of default, i.e African countries etc.). SO, why Greece has to pay its debt no matter what, when at the same time it pays for the probability of non-payment? Why, it is supposed that Greece has to pay, no matter if this implies inhumane austerity,when it pays this premium? If Greece must definitely pay then it is a free ride, a moral hazard on the lender’s side…and the interest would be close to zero (as the German bonds are).
      Who is economically illiterate?

  • Clark

    If the interest rate guarantees probability of no payment, and the loan was made to monetize gambling banks within a country by using the population as collateral, because they guarantee it, the lender then imposes austerity by downsizing pensions, wages and privatizing public owned equities, then the purpose of the loan is certainly not help or stabilize an economy or nation, but simply make it chattel for the default that eventually comes.
    This is simply a means of buying, thru default properties and equity in public property and the nation itself. Just disguised where the public or average citizen of that victim country doesn’t understand the mechanics. Nevertheless, effectively accomplish dispossessing them of what they own.
    In reality, much of this has already happened in the US, but lesser degree in some states lest discovery upend the scheme. This is the reason why the actual jobless rate approaches 30% and there were 45 million homeowners lost homes from 2007 – 2010.
    It is unfortunate, these faceless Elites operate with impunity within and from the United States of America.

  • John Moore

    The IMF was designed to prey on vulnerable countries. Until you understand this, it will be impossible to make sense of these situations.
    The IMF is a vehicle for extracting the wealth from poor, weak countries. Instead of me trying to explain it here, just google it. In this current example, other countries and banks now OWN Greek assets and future revenue streams. China owns the harbors of Greece. Landing fees at the airports have been have been sold off decades into the future. It’s simple looting. Even if they don’t pay the loans back, which of course they shouldn’t, they will have problems getting their sovereignty back, as their means of generating income have been stolen.

  • http://www.myseniormoment.org/ SeniorMoment (pen name)

    Congress is unlikely to replace any funds the IMF loses from Greek default, and it has only been charging Greece and effective interest rate of 3.6%,much less than what Greece’s European neighbors are charging it. The purpose of the IMF is to stabilize the economies of faltering nations and that cannot happen with a nation continuing to import vastly more than it exports and gains in tourism. It is the lender of last resort for a developed nation which cannot expect any loans from the World Bank.

    Shares in the IMF are owned by the nations that provide the IMF capital to lend, and one of the larger shares is owned by the USA, Votes are given nations in proportion to the capital they advance to the IMF. It is not owned by banks.

  • Greek-o-File

    IMF should take the €1.60b from the €2.5b profit & put remaining €0.9b towards next payment. Simple maths!

  • Dylan Thomas McCall

    Wait a minute… You’re trying to tell me a lender is making money off of interest of a loan they gave to a borrower?!?!? MY GOD! PURE EVIL!!! … idiot.

  • James

    This
    amount is the then its =TVM.

    Think before you speak

    Cry about IMF if you loan money the value of your lone decreases
    with time unless you applied interest upon that lone. I.e. a dollar today is
    worth more than a dollar tomorrow don’t you know that

  • James

    I wonder how
    many people on this have an education level above sixth grade. I get that you
    like Greece and you don’t think they should pay there lenders

  • Jim Newsham

    Utterly disgusting! To call it a ‘bail-out’ is a joke. It is a business deal which suits the IMF & NOT Greece! Appalling!!

  • guymark

    Oh dear. Off we go again. The IMF KNOWS that any countries will default on their debts, as such in order to be able to help out the next ailing and failing country, a small (tiny really) level of interest is added so that it is able to keep afloat when places like Greece default on hundreds of millions.

    Assuming Greece doesn’t repay the debt, it will take AGES for the IMF to recover the oney it entrusted to Greece. Sure if you don’t want an IMF just say so, but then Greece would have been in the mire YEARS ago wouldn’t it.

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