1998 IMF Survey Supplement on the Fund / September 1998
Quotas Determine Members’ Voting Power, Financial Access, Share in SDR Allocations
Each member of the IMF is assigned a quota, which is expressed in SDRs and is equal to its subscription of capital to the IMF. Members’ quotas, apart from providing the IMF with its financial resources, serve several other functions with respect to their financial and organizational relations with the IMF. A member’s quota determines its voting power in the IMF; each member has 250 basic votes plus one additional vote for each SDR 100,000 of quota. The quota also determines the maximum amount of balance of payments assistance that a member can normally obtain from the IMF. Finally, the quota determines a member’s share in allocations of SDRs. When quotas are increased, 25 percent of the increase is normally payable in SDRs, although the IMF may prescribe payment in whole, or in part, in other members’ currencies, with their concurrence, or in the member’s own currency; the balance of the quota increase is payable in the member’s currency.
Determination of Initial Quotas
The initial quotas of the original members of the IMF were determined at the Bretton Woods Conference in 1944 (Schedule A of the IMF Articles of Agreement), and those of subsequent members are determined by the IMF’s Board of Governors, based on principles consistent with those applied to existing members. In other words, the determination of an applicant’s quota should not be discriminatory, and an applicant’s quota should be in the same range as the quotas of existing members considered by the IMF to be in a comparable situation. When a country applies for membership, data on its economy (GDP, current account transactions in its balance of payments, and official reserves) are collected, and the staff recommends a quota for the new member that is within the range of the quotas of existing members of comparable economic size and characteristics. The staff’s recommendations regarding the quota and other terms and conditions of membership are considered by a membership committee of the Executive Board. This committee prepares a report for adoption by the Executive Board, which forwards a membership resolution for approval by the Board of Governors. The country becomes a member of the IMF when it signs the Articles of Agreement following the enactment of the requisite enabling domestic legislation. It becomes eligible to use the IMF’s resources when it has paid its quota subscription and has met all other requirements of the membership resolution. As of September 1, 1998, IMF membership comprised 182 countries, adding most recently Brunei Darussalam (October 1995) and the Republic of Palau (December 1997). Total quotas were SDR 146 billion (about $199 billion).
Review and Adjustment of Quotas
The main issues that have been dealt with in general quota reviews generally include the size of an overall increase in quotas and the combination of equiproportional and selective adjustments within the overall increase. Of the 12 general reviews of quotas since 1950, the date of the first quinquennial review, 4 reviews, including the Tenth Review of 1994–95, concluded that no increase in quotas was needed. The bulk of quota increases have taken the form of equiproportional increases in quotas, whose main impact is to stabilize the quota shares of individual members. However, the IMF has also permitted selective and/or ad hoc increases in quotas with the goal of bringing the quotas of members better into line with their relative economic size and, on some occasions, to strengthen specifically the liquidity position of the IMF (if the increase in quota represents an inflow of usable assets).
Eleventh General Review
The most recent general review of quotas—the Eleventh—was completed in January 1998 when the Board of Governors adopted a resolution proposing an increase in the total of IMF quotas by 45 percent (from SDR 146 billion to SDR 212 billion). In assessing the IMF’s need for resources over the medium term, the Executive Board stressed in its report to the Board of Governors that the IMF must have adequate financial resources to deal with members’ payments difficulties.
The main considerations underlying the size of the agreed increase in quotas took into account a range of factors, including the growth of world trade and payments; the scale of potential payments imbalances, including those that may stem from sharp changes in private capital flows; the prospective demand for IMF resources in support of members’ adjustment programs; the rapid globalization and the associated liberalization of trade and payments, including on capital account, that characterized the development of the world economy since the last increase of quotas was agreed in 1990; and the weakening of the IMF’s liquidity position, especially in light of the crisis in Asia.
The agreed distribution of the overall increase in quotas was guided by the views expressed by the Interim Committee in April 1997, in support of a distribution that would be predominantly equiproportional while contributing to a correction of the most important anomalies in the quota distribution. In September 1997, the Interim Committee agreed that 75 percent of the overall increase would be distributed in proportion to present quotas; 15 percent would be distributed in proportion to members’ shares in calculated quotas (based on 1994 data), so as to better reflect the relative economic positions of members; and the remaining 10 percent would be distributed among members whose present quotas are out of line with their positions in the world economy (as measured by the excess of their share in actual quotas), of which 1 percent of the overall increase would be distributed among five members whose current quotas are far out of line with their relative economic positions and that are in a position to contribute to the IMF’s liquidity over the medium term.
The quota increases will become effective once members representing 85 percent or more of the total of quotas on December 23, 1997, have consented to their proposed increases in quotas. A member with overdue repurchases, charges, or assessments to the IMF’s General Resources Account may neither consent to nor pay for the increase in its quota under the Eleventh Review until it becomes current in respect of these obligations. The resolution approved by the Board of Governors asks members to consent to the quota increase before January 29, 1999.