## ppea2021009

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---

### Executive summary and purpose
- Paper prepared as background for the Fifteenth General Review of Quotas (the 15th Review); no proposals presented.  
- Date in document: January 5, 2018.  
- Objectives:
  - Revisit adequacy and composition of Fund resources.
  - Take stock of quota formula discussions and approaches to distributing quota increases.
  - Provide illustrative simulations for quota increase sizes of 50 percent, 75 percent, and 100 percent.
- Supplementary technical material in Annexes issued as Supplement 1.

### Adequacy of Fund resources — context and headline numbers
- Shared commitment: a strong, quota-based and adequately-resourced IMF at the center of the global financial safety net.
- Without further action, the Fund’s lending capacity would fall sharply by end-2019 or end-2020 at the latest.
- If the 2016 Bilateral Borrowing Agreements (BBAs) expire, the Fund’s total lending capacity would decline by a third to SDR 463 billion.
- Without renewal of the NAB resources, lending capacity would decline further to SDR 320 billion by end-2022.
- A general quota increase as part of the 15th Review would:
  - Ensure adequate permanent resources before the next systemic crisis.
  - Rebalance the mix of Fund resources more in line with past practice.
  - Continue realigning members’ quota shares with evolving relative positions in the world economy.

### Two-pillar framework — update overview
- Directors requested:
  - Update quantitative pillar with alternative assumptions and a longer-term perspective.
  - Revisit qualitative pillar to give more prominence to factors that could reduce demand on Fund resources.
- Simulations cover three illustrative quota increase sizes: 50 percent, 75 percent, and 100 percent — centered on broadly maintaining Fund resources — assuming NAB maintained at its current level and BBAs expire.

### Quantitative pillar — methodological refinements and results
- Key refinements:
  - Traditional metrics: weighted average of the ratios at the time of the last four quota reviews; weights increase over time.
  - Access-based approach: assume top six borrowers approach Fund simultaneously (instead of top 12); program sizes of 4 to 8 percent of GDP unchanged.
  - Global scenarios: allow reserve drawdowns up to 40 percent of reserves provided they remain above 80 percent of the ARA metric for EMs; include active RMB swap lines as additional non‑Fund financing.
- Impact on potential demand for Fund resources (Table 1 summary, In SDR billions):
  - Metric-based (To restore quota ratios): 222-636 (2017 Paper, revised data) → 251-596 (Refinement)
  - Access-based (Top borrowers): 371-743 (2017 Paper) → 279-559 (Refinement)
  - Global scenarios: 143-1,391 (2017 Paper) → 133-1,065 (Refinement)
- Note: Metric-based results assessed with respect to quotas; Access-based and global scenarios assessed with respect to total lending capacity, excluding BBAs.

### Quantitative pillar — longer-term perspective through 2025
- Extending analysis through 2025 raises demand estimates substantially (Table 2 summary, In SDR billions):
  - Access-based — Top borrowers: 371-743 (2017 Paper) → 465-931 (Refinement and longer-term perspective)
  - Access-based — Panel logit model: 282-1,176 (2017 Paper) → 439-1,870 (Refinement and longer-term perspective)
  - Global scenarios: 143-1,391 (2017 Paper) → 231-1,984 (Refinement and longer-term perspective)
- Implication: Longer-term perspective leads to much higher resource demands than indicated in the 2017 paper.

### Box 1 — Additional approach to estimate potential calls
- Scenario based on past crisis resource needs (builds on 14th Review approach):
  - Borrowers’ GDP share of global GDP in line with average during past crises since the 1980s excluding the GFC: 10.8 percent of global GDP.
  - Average program size (access): 6 percent of members’ GDP.
  - Financing needs under this scenario: SDR 548 billion.
- Note: Including the GFC, average global GDP coverage of borrowers during past crises was 8.8 percent.

### Global shock and access-based scenarios — Annex summaries
- Annex II (Access-based scenarios) common assumptions:
  - Horizon: projections for 2025 from Fall 2017 WEO baseline through 2022 and staff extrapolations for 2023-25.
  - Fund lending capacity for 2025 assumed to comprise current quotas plus NAB (SDR 463 billion), assuming NAB renewal beyond end-2022.
  - Program sizes presented: 4 to 8 percent of GDP; historical average about 6 percent.
- Approach A (past top borrowers):
  - Scenarios consider simultaneous requests from top nine, six, or three past borrowers.
  - Result: quotas plus NAB do not cover all scenarios where the top three past borrowers seek financing; no scenario with top six borrowers is covered by quotas plus NAB.
- Approach B (panel logit, global volatility shock, VIX=30):
  - Potential calls (SDR billions) under arrangement-size mappings (examples):
    - 1:1 Threshold (4.8 percent): 935, 1,169, 1,403, 1,637, 1,870.
    - 2:1 Threshold (6.4 percent): 760, 951, 1,141, 1,331, 1,521.
    - 3:1 Threshold (16.1 percent): 439, 549, 659, 769, 879.
  - Updated scenarios show considerably larger potential demand reflecting extension to 2025; only one scenario can be covered with quotas plus NAB compared with four scenarios in 2017 paper.

### Global shock scenarios — Annex III key refinements and figures
- Lending capacity assumption: quotas plus NAB only (SDR 463 billion), excluding BBAs.
- Reserve and swap assumptions:
  - Reserves may be drawn down to 40 percent of initial reserves provided they remain above 80 percent of ARA metric for EMs (vs 25 percent and 100 percent ARA in 2017 paper).
  - Active RMB swap lines included as non‑Fund financing.
- Baseline revised range: estimated potential calls decline modestly to SDR 133 billion to SDR 1,065 billion (from SDR 143 billion to SDR 1,391 billion in 2017 paper).
- Longer-term (2024–25) results (SDR billions):
  - Systemic crisis: 231, 309, 450, 538.
  - Pervasive systemic crisis: 470, 598, 900, 1,173.
  - Very pervasive systemic crisis: 583, 774, 1,165, 1,513.
  - Extremely pervasive global systemic crisis (65th–90th percentiles): 636, 878, 1,463, 1,984.
- Caveats:
  - Mechanical residual approach does not pre-judge how countries access financing.
  - Assumption that RFAs and BSA shares of total demand remain the same as baseline is strong.

### Qualitative pillar — summary of reforms, risks, and GFSN developments
- Updated qualitative pillar highlights:
  - Reforms since the global financial crisis and uncertainties in the global environment.
  - Surveillance: upgraded framework, Regular publication of External Sector Report; surveillance impact depends on implementation.
  - Financial regulatory reforms: banks have higher quality capital and liquidity buffers; progress uneven; emerging risks include cybersecurity and fintech.
  - GFSN:
    - Reserves remain high relative to pre-GFC average.
    - Resources under existing RFAs increased; new RFAs/facilities established.
    - NAB renewed through November 2022; BBAs agreed through 2019-2020.
    - Concerns: overaccumulation of reserves has systemic costs; RFAs largely untested in systemic shocks; coordination challenges.
  - IMF lending toolkit: access limits doubled; new precautionary and rapid instruments; use of precautionary instruments remains limited due to stigma.
  - Sovereign debt restructuring: updated frameworks and CACs progress; outstanding stock of bonds without enhanced clauses remains a challenge.
- Conclusion from qualitative pillar: reforms since the GFC are not sufficient to offset risks and uncertainties; Fund resources should not decline.

### Composition of resources and quota considerations
- Staff view: the Fund’s traditional model—relying primarily on permanent quota resources supplemented by standing borrowing arrangements—has served members well.
- Advantages of quota resources over borrowing:
  - Permanence and reliability; broader burden-sharing; greater operational flexibility.
- Borrowed resources considerations:
  - Activation of NAB/BBAs requires higher bar and supermajority support; mobilizing new borrowed resources takes considerable time.
  - Excessive reliance on borrowing from subset of members could raise governance concerns.
- Historical borrowing precedent:
  - Past reliance on borrowing typically signaled need for and preceded quota increases (examples: 1998 GAB/NAB, post-GFC borrowing preceding 14th Review).

### Quota formula discussions, technical work, and findings
- Principles many Directors supported for a new formula:
  - (i) be simple and transparent; (ii) be consistent with multiple roles of quotas; (iii) produce broadly acceptable results; (iv) be feasible statistically.
- Divergent views:
  - One view: current formula works well and benefits dynamic economies.
  - Another: requires major overhaul toward a GDP-centered formula.
- Areas debated:
  - GDP weight and blend; dropping variability (majority support with some dissent); openness weight and treatment; reserves and compression.
- Technical staff findings:
  - Variability: updated analysis shows correlations between variability and Fund arrangements are very weak (correlations range 0.029–0.043 in updated dataset); variability does not capture intended purposes.
  - MER and PPP GDP convergence: convergence modest; ratio of MER to PPP GDP shares for EMDCs rose from 0.57 in 2005 to 0.71 in 2015; average price level for EMDCs converged from 43 percent in 2005 to 48 percent in 2015.

### Simulations and illustrative allocation scenarios
- Illustrative quota increase sizes: 50 percent, 75 percent, 100 percent (centered on broadly maintaining Fund resources, NAB maintained, BBAs expiring).
- Statement: To maintain the Fund’s current resource envelope an increase in quotas of somewhat above 75 percent would be needed.
- Historical context: excluding the “lost” 2000 decade, average quota increase was 86 percent per decade for previous 50 years; over 100 percent per decade during 1970-2000.
- Table of illustrative resource aggregates (values preserved):
  - December 2017 (Current): Total Resources: 977; Total Quotas: 477; Quotas share in Total resources: 49; Total Lending Capacity: 715.
  - Mid-2020s (Quotas + NAB) — No quota increase: Total Resources: 659; Total Quotas: 477; Quotas share in Total resources: 72; Total Lending Capacity: 463.
  - Mid-2020s — 50 percent quota increase: Total Resources: 898; Total Quotas: 716; Quotas share in Total resources: 80; Total Lending Capacity: 623.
  - Mid-2020s — 75 percent quota increase: Total Resources: 1017; Total Quotas: 835; Quotas share in Total resources: 82; Total Lending Capacity: 702.
  - Mid-2020s — 100 percent quota increase: Total Resources: 1136; Total Quotas: 954; Quotas share in Total resources: 84; Total Lending Capacity: 782.
- Illustrative selective increase results (select summary figures):
  - EMDCs aggregate quota share increases (pp) across formulas and overall increases range from 2.7 to 4.4 pp depending on size of overall increase and formula.
  - Initial Aggregate Out-of-lineness (p.p.): 12.1 across formulas; Final Aggregate Out-of-lineness (p.p.) declines to ranges such as 8.2, 7.0, 6.2 for Midpoint Set C at 50%/75%/100%.
  - Reduction in Out-of-lineness (percent) examples: 32%, 42%, 49% for Midpoint Set C at 50%/75%/100%.
- Formula specifications (as presented):
  - Formula 1.2: (0.60*GDP + 0.35*Openness + 0.05*Reserves)^0.95, with 60/40 GDP blend (MER/PPP).
  - Formula 3.2.c: same weights as Formula 1.2 with openness-to-GDP-blend share cap at 1.8.
  - Midpoint Set C Formula: (0.775*GDP + 0.200*Openness + 0.025*Reserves)^0.975, with 60/40 GDP blend (MER/PPP).
- Equivalence of equiproportional and selective mixes:
  - Example: a 50 percent overall increase distributed fully selectively yields same AQS as a 75 percent increase with a 22/78 equiproportional/selective split, and a 100 percent increase with a 33/67 split.
- Ad hoc elements:
  - Ad hoc increases can protect poorest, secure broad support, and address formula misgivings; may create anomalies requiring corrective ad hoc adjustments.
  - Simulation with 5 percent ad hoc allocated to VFCS II (voluntary contributions) changes redistribution modestly — dampens AE to EMDC shifts by 0.4 to 0.7 pp and raises resulting out-of-lineness by 0.3 to 0.9 pp depending on formula.

### Protection of poorest and small states — Annex VIII highlights
- 14th Review poorest-members definition covered 52 members plus Zimbabwe and South Sudan; combined post-14th Review quota share: 3.3 percent (54 countries).
- Alternative definitions discussed:
  - Updated 14th Review definition (FY 2017 IDA per capita GNI threshold US$1,185).
  - Full PRGT-eligible list (70 members).
  - UN LDCs and WEO LIDCs.
- Small developing states: IMF definition population below 1.5 million; 34 small-state members; combined lists produce different protected-group counts and combined AQS (examples: PRGT-eligible plus small developing states = 84 members with combined AQS of 3.6 percent; updated 14th Review criteria plus small states = 66 members with combined AQS of 2.1 percent).
- Cost of protection estimates vary from 0.8 to 1.6 percent.

### Voluntary Financial Contributions (VFCS) — Annex IX key points and aggregates
- Three VFCS aggregates defined:
  - VFCS I: simple average of member contribution shares to five voluntary financial contributions (NAB, 2016 BBAs, PRGT loans, subsidies for concessional financing, capacity development).
  - VFCS II: weighted average with fixed weights NAB 0.3, BBAs 0.3, PRGT loans + subsidies 0.2, CD 0.2.
  - VFCS III: greater of 14th Review quota share or VFCS I share rebased to sum to 100 percent.
- Aggregate measures by country group (In percent, Table 2 examples):
  - Advanced Economies — VFCS I: 78.9; VFCS II: 76.7; VFCS III: 67.8.
  - Emerging Market and Developing Countries — VFCS I: 21.1; VFCS II: 23.3; VFCS III: 32.2.
- Use in simulations:
  - One scenario allocates 5 percent of overall quota increase in proportion to VFCS II.
  - Impact: shifts allocation in favor of members with substantial voluntary contributions; example selective-plus-VFCS-II simulation shows EMDCs gains of 2.3–3.7 pp across increases while AEs declines are modestly dampened.

### Limits, maximum changes, and anomalies
- 14th Review limits implemented:
  - Maximum declines limited to 30 percent or 0.85 percentage points.
  - Maximum nominal increases limited to 220 percent (translated to maximum quota share increase of 60 percent given 100 percent overall increase).
- Illustrative maximum absolute changes (pp) from simulations (selective increase examples):
  - Maximum increase (pp) — 50%/75%/100%: 2.28, 2.93, 3.42 (Midpoint Set C column examples).
  - Maximum decline (pp) — 50%/75%/100%: -0.79, -1.01, -1.18.
  - Number of members with decline greater than 30%: varies by formula and overall increase (examples: 0, 2, 6 for Midpoint Set C across 50%/75%/100%).
- Ad hoc anomalies:
  - Ad hoc elements can create anomalies affecting a small number of members; empirical ranges: selective increases with protection affect 1–4 members; VFCS-based ad hoc increases can affect up to 14 members with distortions up to about 3 percent of the “floor.”

### Conclusions, implications, and questions for Directors
- Updated two-pillar analysis and longer-term perspective support at minimum maintaining existing Fund resources and point to potentially substantial additional resource needs through middle of next decade.
- Allowing 2016 BBAs to expire without offsetting quota increases would leave the Fund under-resourced in more than half of access-based and global scenarios.
- No proposals made; paper intended to inform Board deliberations and narrow differences ahead of 15th Review.
- Questions for Directors include agreement on usefulness of updated two-pillar framework; views on reliance on quotas vs borrowing; preliminary views on size of permanent resources needed through middle of next decade; additional quota formula reforms to explore; approaches to realigning quota shares; definition of poorest members for protection; and treatment of voluntary financial contributions.

*Source: ppea2021009 — FIFTEENTH GENERAL REVIEW OF QUOTAS—FURTHER CONSIDERATIONS (excerpt).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Introduction
- Paper provides background for further discussions on the Fifteenth General Review of Quotas (the 15th Review).  
- No proposals are made at this stage, pending further Board guidance.  
- Paper revisits adequacy and composition of Fund resources, takes stock of quota formula discussions, and reviews approaches to distributing quota increases.  
- Supplementary technical material is in Annexes issued as Supplement 1.  
- Date in document: January 5, 2018.

### Adequacy of Fund Resources — Context
- Shared commitment: a strong, quota-based and adequately-resourced IMF at the center of the global financial safety net.  
- Without further action, the Fund’s lending capacity would fall sharply by end-2019 or end-2020 at the latest.  
- If the 2016 Bilateral Borrowing Agreements (BBAs) expire, the Fund’s total lending capacity would decline by a third to SDR 463 billion.  
- Without a renewal of the NAB resources, the lending capacity would decline further to SDR 320 billion by end-2022.  
- A general quota increase as part of the 15th Review would:
  - Ensure adequate permanent resources are available before the next systemic crisis.
  - Rebalance the mix of Fund resources more in line with past practice (historically quotas financed most non-concessional lending).
  - Continue realigning members’ quota shares in line with evolving relative positions in the world economy.

### Two-Pillar Framework — Update Overview
- The two-pillar framework (quantitative and qualitative) is revisited:
  - Directors requested: (1) update the quantitative pillar with alternative assumptions and a longer-term perspective; (2) revisit the qualitative pillar to give more prominence to factors that could reduce demand on Fund resources.
- Simulations in the paper cover three illustrative sizes for quota increases: 50, 75, and 100 percent — centered on broadly maintaining Fund resources — assuming the NAB is maintained at its current level and BBAs expire.

### Quantitative Pillar — Refinements and Results
- Staff explored refinements including: alternative weighting of traditional metrics, changes to the access-based approach, and broader global scenario assumptions (including higher allowable reserve drawdowns and active RMB swap lines).
- Key methodological refinements:
  - Traditional metrics: alternative weighting that assigns greater weight to more recent reviews (weighted average of the ratios at the time of the last four quota reviews; weights increasing over time).
  - Access-based approach: assume top six borrowers approach the Fund simultaneously (instead of top 12), program sizes of 4 to 8 percent of GDP unchanged.
  - Global scenarios: allow reserve drawdowns of up to 40 percent of reserves provided they remain above 80 percent of the ARA metric for emerging market economies; include active RMB swap lines as additional non-Fund financing.
- Table 1 summary (Impact of Refinements on Potential Demand for Fund Resources, In SDR billions):
  - Metric-based (To restore quota ratios): 222-636 (2017 Paper, revised data) → 251-596 (Refinement)
  - Access-based (Top borrowers): 371-743 (2017 Paper) → 279-559 (Refinement)
  - Global scenarios: 143-1,391 (2017 Paper) → 133-1,065 (Refinement)
- Notes on Table 1:
  - Metric-based results are assessed with respect to quotas. Access-based and global shock scenarios are assessed with respect to total lending capacity, excluding BBAs.
  - Access-based assumes program sizes of 4 to 8 percent of GDP.
  - Global scenarios use shocks at the 65th-90th percentile of past crises and crisis country identification using crisis probabilities of 1-10 percent from the IMF Vulnerability Exercise.

### Quantitative Pillar — Longer-term Perspective
- Extending analysis through 2025 (reflecting that the 15th Review outcome likely determines permanent resources through at least the middle of the next decade) substantially raises demand estimates:
- Table 2 summary (Impact of a Longer-term Perspective on Potential Demand for Fund Resources, In SDR billions):
  - Access-based — Top borrowers: 371-743 (2017 Paper) → 465-931 (Refinement and longer-term perspective)
  - Access-based — Panel logit model: 282-1,176 (2017 Paper) → 439-1,870 (Refinement and longer-term perspective)
  - Global scenarios: 143-1,391 (2017 Paper) → 231-1,984 (Refinement and longer-term perspective)
- Implication: Applying a longer-term perspective leads to much higher resource demands than indicated in the 2017 paper.

### Qualitative Pillar — Summary
- Updated qualitative pillar highlights:
  - Reforms since the global financial crisis.
  - Uncertainties in the global environment.
  - Assessment of the general impact of various qualitative considerations.
- Taken together, the two pillars continue to make a case for at least maintaining existing Fund resources.

### Composition of Resources and Quota Considerations
- Paper supports the view that the Fund’s traditional model — relying primarily on permanent quota resources supplemented by standing borrowing arrangements — has served members well.  
- Paper takes stock of recent discussions on the quota formula and responds to Directors’ requests for further technical work on variability and PPP GDP.  
- Provides overview of approaches to quota adjustments that have facilitated broad consensus in previous general reviews.  
- Limited simulations illustrate potential impact of different quota increases, quota formulas, and allocation mechanisms on distribution of actual quota shares, to inform ongoing discussions.

### Simulations and Illustrative Scenarios
- Simulations cover three illustrative quota increase sizes: 50 percent, 75 percent, and 100 percent — centered on broadly maintaining Fund resources, with NAB maintained and BBAs expiring.  
- A limited set of illustrative allocations and combinations (e.g., equiproportional and selective increases) are provided in the paper to facilitate discussions on formula parameters and allocation mechanisms.

### Conclusions and Implications for the 15th Review
- The updated two-pillar analysis (quantitative refinements and qualitative reassessment), and the longer-term perspective, together support at minimum maintaining existing Fund resources and point to potentially substantial additional resource needs through the middle of the next decade.  
- The paper refrains from proposals and is intended to inform further Board deliberations and narrowing of differences of views ahead of the 15th Review.

*Prepared by the Finance and Strategy, Policy, and Review Departments; approved by Andrew Tweedie (FIN) and Martin Mühleisen (SPR).*

### 9.      An additional approach suggests that potential demand for Fund financing in a

### 9.      An additional approach suggests that potential demand for Fund financing in a

### Box 1 — An Additional Approach to Estimate Potential Calls for Fund Financing
- Approach draws on past crisis resource needs and builds on an approach used in the 14th Review.
- Scenario assumptions and result:
  - Borrowers’ GDP as a share of global GDP in line with the average during past crises since the 1980s excluding the GFC: 10.8 percent of global GDP.
  - Average program size (access): 6 percent of members’ GDP.
  - Financing needs under this scenario: SDR 548 billion.
- Note on metrics: the metric-based approach has traditionally been backward-looking and is assessed for the reference period 2015-2019 and not extended to 2025.
- Comparative note: including the GFC, the average global GDP coverage of borrowers during past crises was 8.8 percent.

### Qualitative Pillar — Key Points on Systemic Risks, Reforms, and the GFSN
- Global transitions and increased interconnectedness raise uncertainty and could lead to spillovers, contagion, and systemic risks; implications for adequacy of Fund resources are material.
- Directors’ reflections:
  - Appreciation for qualitative analysis complementing quantitative approaches.
  - Request to give more prominence to factors that could reduce demand on Fund resources, such as expansion of the GFSN and post-GFC reforms.
- Post-crisis reforms and remaining vulnerabilities:
  - Fund surveillance: upgraded framework with deeper assessments of risk, spillovers, and interconnections; Regular publication of the External Sector Report; members view surveillance as improved since 2014. Surveillance impact depends on implementation of advice.
  - Financial regulatory reforms: banks have built higher and better quality capital and liquidity buffers; implementation of frameworks for global systemically important banks and derivatives advancing. Progress uneven; risks of pushbacks and incomplete reforms noted. Emerging risks include cybersecurity and fintech.
  - Global Financial Safety Net (GFSN):
    - Reserves remain high relative to pre-GFC average.
    - Resources under existing RFAs have increased; new RFAs and facilities established.
    - Effectiveness of the 14th General Review of Quotas doubled the Fund’s permanent resources.
    - NAB renewed through November 2022; BBAs agreed through 2019-2020.
    - Concerns: overaccumulation of reserves has systemic costs; RFAs largely untested in systemic shocks; coordination challenges across GFSN layers.
  - IMF lending toolkit: access limits doubled; introduction of precautionary and rapid instruments (Flexible Credit, Precautionary Liquidity Lines, Rapid Financing Instruments, Rapid Credit Facility, Policy Coordination Instrument). Use of precautionary instruments limited due to stigma. Proposal for short-term liquidity swap (SLS) lacked sufficient support.
  - Sovereign debt restructuring: updated frameworks and enhanced collective action clauses progress; outstanding stock of bonds without enhanced clauses remains a challenge. Need to strengthen debtor-creditor engagement, official creditor coordination, and public debt data standards.

### Conclusions from the Two-Pillar Framework
- The two-pillar framework continues to make a case for at least maintaining existing Fund resources.
- Quantitative estimates are somewhat lower after refinements, but when extended through the middle of the next decade reductions are more than outweighed.
- Allowing the 2016 BBAs to expire without offsetting quota increases would leave the Fund under-resourced to meet needs of crisis countries in more than half of access-based and global scenarios.
- Qualitative considerations emphasize that reforms since the GFC are not sufficient to offset risks and uncertainties; Fund resources should not decline.

### Potential Calls on IMF Financing — Illustrative Quantities and Benchmarks
- Box 1 outcome reiterated: financing needs could reach SDR 548 billion in a moderate crisis scenario described above.
- Access-based and global scenarios assessed at 2025 (Panel logit and top borrowers scenarios considered in staff calculations).
- Current lending capacity is presented both including and excluding BBAs in staff figures (see staff-calculated charts and scenarios in source).

### Illustrative Scenarios and Simulations — Quota Increase Options
- Objective: three illustrative quota increases centered on broadly maintaining Fund resources, assuming NAB stays at current level and BBAs expire over 2019-20.
- Statement: To maintain the Fund’s current resource envelope an increase in quotas of somewhat above 75 percent would be needed.
- Illustrative symmetric scenarios for simulations: 75 percent quota increase ± 25 percentage points (i.e., 50 percent, 75 percent, 100 percent quota increases).
- Historical context: excluding the “lost” 2000 decade, the average quota increase was 86 percent per decade for the previous 50 years; over 100 percent per decade during 1970-2000.
- Summary of implications of illustrative quota increases:
  - 50 percent quota increase:
    - Would be seen as the floor suggested by traditional metrics for reference period 2015-19; would bring quotas to just about historical levels relative to GDP.
    - Would leave the share of quotas in total Fund resources significantly below the long-term average.
    - Not sufficient to cover some central top borrowers scenarios and limited coverage of global and panel logit scenarios.
  - 75 percent quota increase:
    - Would broadly maintain overall lending capacity by replacing BBAs after they expire.
    - Would allow Fund to cover central top borrowers scenarios and part of central range of global scenarios.
    - Would only cover the lower range of the panel logit approach.
    - Would not restore historical ratios of quotas to traditional external indicators.
    - Would leave share of quotas to total Fund resources below the long-term average of 84 percent over 1978-2008.
  - 100 percent quota increase:
    - Would cover more central global scenarios and some panel logit scenarios, but still not allow Fund to cover bigger crises.
    - Would raise quotas to just below historical levels relative to current payments, but fall short relative to other external indicators.
    - Would bring the share of quotas in total resources to its long-term average.
  - 125 percent quota increase (not part of illustrative scenarios below): could help cover additional scenarios and restore the resource envelope of quotas relative to global indicators for 2015-19 (namely, 112 percent using the simple average of reference ratios).
- Table of illustrative resource aggregates (values as presented):
  - December 2017 (Current)
    - Total Resources: 977
    - Total Quotas: 477
    - Quotas share in Total resources: 49
    - Total Lending Capacity: 715
  - Mid-2020s (Quotas + NAB) — No quota increase
    - Total Resources: 659
    - Total Quotas: 477
    - Quotas share in Total resources: 72
    - Total Lending Capacity: 463
  - Mid-2020s — 50 percent quota increase
    - Total Resources: 898
    - Total Quotas: 716
    - Quotas share in Total resources: 80
    - Total Lending Capacity: 623
  - Mid-2020s — 75 percent quota increase
    - Total Resources: 1017
    - Total Quotas: 835
    - Quotas share in Total resources: 82
    - Total Lending Capacity: 702
  - Mid-2020s — 100 percent quota increase
    - Total Resources: 1136
    - Total Quotas: 954
    - Quotas share in Total resources: 84
    - Total Lending Capacity: 782
- Footnotes and assumptions:
  - Current total resources comprise quotas, the NAB, and BBAs; assumed that all commitments under the 2016 BBAs as of end-November become effective by end-April 2018.
  - Projections for mid-2020s assume NAB renewed at current level for another five-year period from November 2022 and BBAs permitted to expire.
  - Total resources refer to quotas and effective borrowing agreements under NAB and BBAs. Lending capacity represents usable resources for non-concessional lending, net of prudential balance.

### Composition of Resources — Policy Observations
- The Fund has traditionally handled most crises using permanent quota resources.
- Advantages of quota resources over borrowing:
  - Permanence and reliability.
  - Broader burden-sharing.
  - Greater operational flexibility.
- Borrowed resources considerations:
  - Activation of the NAB (and BBAs) requires higher bar—support from a supermajority of lenders under conditions that threaten the stability of the IMS.
  - Mobilizing new borrowed resources traditionally takes considerable time.
  - Excessive reliance on borrowing from a subset of members could raise issues about the cooperative character and governance of the Fund.

*Source: ppea2021009 - 9.      An additional approach suggests that potential demand for Fund financing in a*

### 16.      Previous occasions where the Fund has relied on borrowing have typically signaled a

### 16.      Previous occasions where the Fund has relied on borrowing have typically signaled a

### Borrowing history and role
- Past reliance on borrowing has typically signaled a need for and preceded general quota increases.
- Examples:
  - Borrowed under the GAB in July 1998 in connection with the augmentation of the Extended Arrangement for Russia, and subsequently under the NAB in December 1998 in connection with the Stand-By Arrangement for Brazil; amounts borrowed in both cases were fully repaid in early 1999 when the quota increases under the 11th Review took effect.
  - Extensive reliance on BBAs and the NAB in the wake of the GFC preceded the quota increases under the 14th Review.
  - Heavy borrowing between 1974 and 1984 reflected strong demand for Fund resources and the need to bridge to quota increases under the 7th and 8th Reviews.
- Staff view: the Fund’s traditional model—relying primarily on permanent quota resources supplemented by standing borrowing arrangements—has served the membership well, providing flexibility to respond quickly to a wide range of shocks and supporting the Fund’s central role in the GFSN.
- Judgment remains required on the appropriate mix between quotas and borrowed resources; past decisions point to a consistent preference for quotas constituting the predominant share.

### Quota formula — key themes from discussions
- Objective: continue realigning members’ quota shares in line with evolving relative positions in the world economy; formula serves as a guide rather than a mechanical rule.
- Principles many Directors supported for a new formula:
  - (i) be simple and transparent;
  - (ii) be consistent with the multiple roles of quotas;
  - (iii) produce results broadly acceptable to the membership; and
  - (iv) be feasible to implement statistically based on timely, high quality and widely available data.
- Divergent views on the current formula:
  - One view: formula is working well and continues to deliver higher calculated quota shares to dynamic economies.
  - Another view: formula fails to reflect realities and requires a major overhaul toward a GDP-centered formula.
- Areas of continued debate:
  - GDP should remain the most important variable, but weight and composition of GDP blend are contested.
  - Continued support from most Directors for dropping variability (some conditionally), though a few oppose.
  - Openness: views range from increasing its weight and maintaining current methodology, to lowering its weight, introducing a cap, and excluding intra-currency union trade.
  - Reserves and compression: views differ on maintaining, adjusting, or eliminating them.
- Staff’s technical “midpoint” exercise:
  - Sought reforms near the midpoint between current formula and a GDP-only formula; elicited mixed reactions—useful to some but seen as giving too much prominence to GDP-only by others.
- Voluntary financial contributions:
  - Views divided on whether and how to account for voluntary contributions; some Directors support inclusion in quota adjustments or formula, others oppose.
- Protection of poorest members:
  - Directors reiterated commitment to protect quota and voting share of the poorest under the 15th Review; views vary on precise definition of poor countries and calls for protection of small member states.

### Technical staff work and empirical findings
- Variability and balance of payments difficulties:
  - Staff updated analysis using most recent data and explored country group disaggregation; calculated correlations between variability and Fund arrangements are very weak and sometimes negative.
  - Conclusion: variability does not capture its intended purposes in the formula.
- MER GDP and PPP GDP convergence:
  - Assessed convergence since PPP GDP inclusion in 2008.
  - Finding: convergence between levels of MER and PPP GDP (price level convergence) has been modest; the ratio of MER to PPP GDP shares for EMDCs as a whole has converged more markedly, mainly driven by higher GDP growth in EMDCs relative to AEs as a whole.

### Realigning quota shares — process and past patterns
- Achieving an 85 percent majority of total voting power in the Board of Governors is required for quota changes, necessitating broad compromise on overall size and distribution of increases.
- Past reviews produced only partial shifts toward calculated quota shares (CQS); degree of adjustment measured by the adjustment coefficient.
  - Adjustment coefficients ranged between 1.7 and 28.0 percent from the 5th to the 11th Reviews, and reached 55.7 percent in the 14th Review.
  - Example: 2008 Reform resulted in an adjustment coefficient of 25.6 percent and a reduction of 28.9 percent in OOL (from 15.0 to 10.6 percentage points). The 14th Review resulted in an adjustment coefficient of 55.7 percent and a reduction of 50.6 percent in OOL (from 10.7 to 5.3 percentage points).
- Factors limiting full realignment:
  - Need for broad consensus, including from members whose shares would decline.
  - Technical effect of selective increases producing weighted averages between AQS and CQS (e.g., a 100 percent quota increase distributed solely based on the formula results in a 50 percent adjustment toward CQS).
  - Questions about reasonableness of formula results.
  - Other considerations: increasing overall resource base, preserving members’ voice and access.
  - Voluntary member choices to forego part of eligible increases.
- Distribution methods used in past general quota increases:
  - (i) Equiproportional increases: go to all members and leave existing quota shares unchanged.
  - (ii) Selective increases: go to all members in proportion to their calculated quota shares under the formula.
  - (iii) Ad hoc increases: distributed to a subset of members based on agreed criteria (used to protect poorest or limit declines in shares).
- Historical patterns:
  - Prior to the 14th Review, a sizable equiproportional element was typically included, dampening adjustments.
  - The 14th Review allocated 40 percent of the overall increase primarily to members under-represented relative to the compressed GDP blend variable, reflecting misgivings about the formula and urgency post-GFC.
  - The 2008 Reform achieved a sizeable adjustment (25.6 percent) with a relatively small overall increase through targeted ad hoc increases for 54 under-represented members.

### Illustrative simulations under the 15th Review
- Purpose: illustrate how different quota formulas, sizes of overall increases, and allocation methods may interact and affect distribution of actual quota shares.
- Simulation design:
  - Quota increases of 50, 75 and 100 percent.
  - Assumes NAB maintained at current level and BBAs expire.
  - Three illustrative formulas from August 2017 paper:
    - Formula 1.2: eliminates variability and redistributes two-thirds of its weight to GDP and one-third to openness (broadly in proportion to current weights); represents view that current formula works well while dropping variability.
    - Formula 3.2.c: same weights as Formula 1.2 but includes a cap on openness (ratio of openness shares to GDP blend shares capped at 1.8) to limit boost from openness.
    - Midpoint Set C Formula: results from least restrictive set of constraints in midpoint approach; illustrates reforms generating shares near the midpoint of views expressed.
  - All simulations include an ad hoc element to protect quota and voting shares of the poorest: based on updated definition from the 14th Review (the 37 PRGT-eligible countries that meet the IDA per capita GNI cut-off).
  - Alternative eligibility lists (e.g., full PRGT-eligible list of 70 members; adding small member states) discussed in Annex VIII.
- Purely selective increases (with protection for poorest):
  - Selective increases produce uniform proportional adjustment of actual quota shares toward CQS; new shares remain within AQS and CQS ranges, avoiding anomalies.
  - Main findings (summary from Tables 5 and 6):
    - Increase in quota shares for EMDCs as a group ranges from 2.7 to 4.4 pp, mostly depending on size of overall increase, and is only modestly affected by formula used.
    - Distribution of decline in AE shares between major and other AEs differs by formula:
      - For Formula 1.2, major AEs bear nearly 90 percent of the loss.
      - For Formulas 3.2.c and Midpoint Set C, major AEs account for about two-thirds of the decline.
      - By comparison, major AEs represent 75 percent of current AQS of AEs.
    - Aggregate share of low-income countries (LICs) declines modestly (0.1 to 0.2 pp), reflecting net declines for LICs not eligible for protection under the updated 14th Review criteria.
- Note on allocation shares and protection:
  - Example: under updated 14th Review criteria for protection, approximately 99.2 percent of the increase is made in a selective manner using Formula 1.2 and the remainder (0.8 percent) is allotted for protection. For an overall quota increase of 100 percent, this translates into a reduction in quota shares of non-protected members of up to

*FIFTEENTH GENERAL REVIEW OF QUOTAS—FURTHER CONSIDERATIONS (excerpt).*

### 0.06 pp in absolute terms, or up to 0.54 percent in relative terms. If the protection list is expanded to the broadest

### ppea2021009 - 0.06 pp in absolute terms, or up to 0.54 percent in relative terms. If the protection list is expanded to the broadest

### Selective Increase — Summary Results and Key Statistics
- Changes in quota shares (selective increases) for 50%, 75%, 100% overall increases under three formula specifications (Midpoint Set C Formula / Formula 3.2.c / Formula 1.2):
  - Major Advanced Economies: -2.4, -3.1, -3.6 / -2.0, -2.6, -3.0 / -1.8, -2.3, -2.7 (50%/75%/100%)
  - Other Advanced Economies: -0.3, -0.4, -0.5 / -0.9, -1.2, -1.4 / -0.9, -1.2, -1.4
  - Emerging Market and Developing Countries: 2.8, 3.5, 4.1 / 2.9, 3.8, 4.4 / 2.7, 3.5, 4.1
  - Low Income Countries (of which): -0.1, -0.1, -0.2 / -0.1, -0.1, -0.2 / -0.1, -0.2, -0.2
- Overall quota shares realignment:
  - Initial Aggregate Out-of-lineness (p.p.): 12.1 / 12.1 / 12.1 (Midpoint Set C / Formula 3.2.c / Formula 1.2)
  - Final Aggregate Out-of-lineness (p.p.): 8.2, 7.0, 6.2 / 8.1, 7.0, 6.1 / 8.3, 7.1, 6.3 (50%/75%/100%)
  - Reduction in Out of-lineness (percent): 32%, 42%, 49% / 33%, 42%, 49% / 32%, 41%, 48%

- Specifications of illustrative formulas:
  - Formula 1.2: (0.60*GDP + 0.35*Openness + 0.05*Reserves)^0.95, with 60/40 GDP blend (MER/PPP).
  - Formula 3.2.c: (0.60*GDP + 0.35*Openness + 0.05*Reserves)^0.95, with 60/40 GDP blend (MER/PPP) and the ratio of openness shares to GDP blend shares capped at 1.8.
  - Midpoint Set C Formula: (0.775*GDP + 0.200*Openness + 0.025*Reserves)^0.975, with 60/40 GDP blend (MER/PPP).

### Illustrative Allocations — Selected Percent Shares (Selective Increase)
- Advanced economies total shares shown for three overall increases (selected highlights):
  - Advanced economies: 57.6, 50.2, 49.8 / 54.9, 54.1, 53.5 / 49.2, 54.7, 53.5 (50%/75%/100% across formula columns as in source tables)
- Major advanced economies and individual members (examples, values preserved as in source table):
  - Major advanced economies: 43.4, 35.7, 36.4 / 40.9, 40.2, 39.7 / 37.7, 41.4, 40.8
  - United States: 17.4, 14.5, 15.2 / 16.6, 16.4, 16.2 / 15.6, 15.6, 16.8
  - China (including P.R., Hong Kong SAR, and Macao SAR grouping noted in source): 6.4, 12.6, 13.3 / 8.7, 9.3, 9.8 / 8.8, 9.5, 10.3
- Memorandum items:
  - EU-28: 30.4, 27.0, 26.0 / 28.8, 28.4, 28.1 / 24.8, 27.9, 27.5
  - LICs: 3.3, 2.3, 2.2 / 3.2, 3.1, 3.1 / 2.1, 3.2, 3.1
  - Updated 14th Review Poorest: 1.7, 1.1, 1.0 / 1.7, 1.8, 1.8 / 1.1, 1.7, 1.8

### Equiproportional Increases — Key Findings and Equivalence
- Historical role: Equiproportional increases played a significant role prior to the 14th Review and sometimes comprised more than half of the overall increase.
- 14th Review: No equiproportional element was included in the 14th Review due to governance reform emphasis.
- Out-of-lineness developments: Out-of-lineness increased since the 14th Review and is now more concentrated, with China accounting for half to two-thirds of total under-representedness (compared with just over one-third prior to the 14th Review).
- Equivalence principle: The impact on AQS of a combination of equiproportional and selective increases is equivalent to the impact of a smaller overall increase distributed purely selectively. Example from the source:
  - A 50 percent overall increase distributed fully selectively yields the same AQS as:
    - a 75 percent increase with a 22/78 equiproportional/selective split, and
    - a 100 percent increase with a 33/67 split.
- Table 7 illustrative combinations (selected entries preserved):
  - For a 50 percent increase: 0/100 (all selective) -> Equivalent Purely Selective Increase 50.0; 20/80 -> 36.4; 40/60 -> 25.0; 60/40 -> 15.4; 80/20 -> 7.1; 100/0 (all equiproportional) -> 0.0.
  - For a 75 percent increase: 0/75 -> 75.0; 15/60 -> 52.2; 30/45 -> 34.6; 45/30 -> 20.7; 60/15 -> 9.4; 75/0 -> 0.0.
  - For a 100 percent increase: 0/100 -> 100.0; 20/80 -> 66.7; 40/60 -> 42.9; 60/40 -> 25.0; 80/20 -> 11.1; 100/0 -> 0.0.

### Ad Hoc Increases and Voluntary Financial Contributions
- Purpose and uses:
  - Ad hoc increases can help secure broad support, protect the poorest, facilitate convergence toward the formula, focus increases on specific member groups, and set constraints on maximum quota share increases or declines.
  - Ad hoc elements can create anomalies in quota shares that may require corrective ad hoc adjustments.
- Simulation with voluntary financial contributions (5 percent of overall quota increase allocated proportionally to a measure of voluntary contributions — VFCS II):
  - VFCS II aggregates each member’s share across four contribution types with weights: 0.3 for the NAB, 0.3 for BBAs, 0.2 for PRGT loans and concessional financing subsidies combined, and 0.2 for capacity development.
- Summary results (selective increase with 5 percent ad hoc for VFCS II):
  - Changes in quota shares (50%/75%/100%):
    - Major Advanced Economies: -2.1, -2.7, -3.2 / -1.7, -2.2, -2.5 / -1.5, -1.9, -2.2
    - Other Advanced Economies: -0.2, -0.3, -0.3 / -0.8, -1.0, -1.2 / -0.8, -1.0, -1.2
    - Emerging Market and Developing Countries: 2.3, 3.0, 3.5 / 2.5, 3.2, 3.7 / 2.3, 2.9, 3.4
    - Low Income Countries (of which): -0.1, -0.2, -0.2 / -0.1, -0.2, -0.2 / -0.2, -0.2, -0.2
  - Overall quota shares realignment:
    - Initial Aggregate Out-of-lineness (p.p.): 12.1 / 12.0 / 12.2 (depending on formula)
    - Final Aggregate Out-of-lineness (p.p.): 8.5, 7.4, 6.7 / 8.5, 7.5, 6.7 / 8.8, 7.9, 7.2
    - Reduction in Out of-lineness (percent): 30%, 39%, 45% / 30%, 39%, 45% / 28%, 35%, 41%
- Impact of the ad hoc VFCS II element:
  - Dampens the decline in quota share for members with substantial voluntary contributions and increases shares for those members relative to a purely selective increase.
  - Aggregate effect: reduces size of shifts from Advanced Economies (AEs) to Emerging Market and Developing Countries (EMDCs) by between 0.4 and 0.7 pp for the simulations presented.
  - Resulting out-of-lineness is 0.3 to 0.6 pp higher for formulas 1.2 and 3.2.c, and 0.6 to 0.9 pp higher for the Midpoint Set C formula compared with the purely selective cases.

### Maximum Changes in Quota Shares — Limits and Illustrative Impacts
- 14th Review limits (as implemented previously):
  - Maximum declines in quota shares limited to 30 percent or 0.85 percentage points.
  - Maximum nominal increases limited to 220 percent, which translated into a maximum quota share increase of 60 percent given the overall quota increase of 100 percent under the 14th Review.
- Considerations for the 15th Review:
  - Whether to include similar limits depends on other design elements; limits are more likely to be “needed” with larger overall adjustments.
  - An equiproportional element dampens distributional shifts and could reduce the case for additional limits.
- Illustrative statistics from simulations (selective increase and selective increase with VFCS II ad hoc element):
  - Absolute change (in pp) — Maximum increase (50%/75%/100%): 2.28, 2.93, 3.42 / 2.41, 3.10, 3.62 / 2.58, 3.32, 3.88
  - Absolute change (in pp) — Maximum decline (50%/75%/100%): -0.79, -1.01, -1.18 / -0.63, -0.81, -0.94 / -0.40, -0.52, -0.60
  - Relative change (in percent) — Maximum increase: 44%, 57%, 66% / 48%, 62%, 72% / 40%, 52%, 61%
  - Relative change (in percent) — Maximum decline: -26%, -34%, -39% / -27%, -34%, -40% / -28%, -36%, -42%
  - Number of members with decline greater than 30% (50%/75%/100%): 0, 2, 6 / 0, 3, 10 / 0, 7, 15 (for the three formula columns)
  - With selective increase plus ad hoc VFCS II: Number of members with decline greater than 30%: 0, 2, 8 / 0, 3, 10 / 0, 8, 18

### Stylized Allocation Methods and Correcting Anomalies
- Stylized presentation (based on a hypothetical distribution of CQS and a 100 percent quota increase) compares:
  - purely selective increase,
  - combination of equiproportional and selective increases with a 1:2 ratio (equivalent to a purely selective increase of 50 percent),
  - selective increase with limits on maximum relative increase (60 percent) and maximum relative decline (30 percent).
- Ad hoc increases can be used to correct anomalies that arise from selective allocations, but may require further ad hoc adjustments.

*Source: Finance Department — Fifteenth General Review of Quotas—Further Considerations (excerpt).*

### 45.      The inclusion of ad hoc elements can lead to some “anomalies” that may need to be

### ppea2021009 - 45.      The inclusion of ad hoc elements can lead to some “anomalies” that may need to be

### Ad hoc elements and resulting “anomalies”
- Inclusion of ad hoc elements can create “anomalies” that may need additional ad hoc adjustments.
- Ad hoc increases for a sub-set of members reduce the share of the overall increase available for other members.
- For members with current AQS and CQS very close to each other who do not benefit from ad hoc elements:
  - The reduction may result in a loss of quota share for some under-represented members, or in some over-represented members falling below their calculated quota shares.
- The extent and size of such possible “anomalies” vary by specification of the ad hoc element and typically affect a relatively small number of members.
- Empirical ranges noted:
  - In selective increases with protection of the poorest, the number of members affected ranges from one to four, depending on the formula used, and the relative distance from the “natural floor” (AQS for under-represented or CQS for over-represented) is at most 0.4 percent of the floor.
  - The inclusion of a VFCS-based ad hoc increase has a larger impact: up to 14 members are affected, with maximum distortions close to 3 percent of the “floor.”

### How the 14th Review addressed anomalies
- In the 14th Review the design of the ad hoc element addressed these anomalies by:
  - Protecting over-represented members from falling below their CQS (or the compressed GDP blend).
  - For under-represented members, guaranteeing that gains from the selective increase were preserved in the ad hoc round so that resulting actual quota shares would be above their initial AQS.

### Summary and issues for discussion (overview of paper’s purpose)
- Purpose:
  - Provide background for further discussion on the 15th Review.
  - Build on staff’s earlier work and Directors’ feedback.
  - Present additional work on adequacy and composition of Fund resources, selected quota formula issues, and distribution of quotas.
  - Present a limited set of purely illustrative simulations showing how distribution of actual quota shares may vary depending on overall quota increase size, agreed quota formula, and specific approaches to distributing the quota increase.
- No proposals are presented at this stage; further work will follow Directors’ guidance and the Executive Board’s agreed work plan for the 15th Review.

### Questions for Directors (as listed)
- Do Directors agree that the updated two-pillar framework provides a useful basis for further discussions on the adequacy and composition of the Fund’s resources?
- Do Directors agree that the Fund’s traditional model of relying primarily on its permanent quota resources, supplemented by standing borrowing arrangements, has served the membership well over several decades?
- In light of the additional analysis presented in this paper, do Directors have preliminary views on the size of the Fund’s permanent resources that would allow it to continue to play its central role in the GFSN through at least the middle of the next decade?
- Are there other possible reforms of the quota formula beyond those considered to date that staff should explore to help narrow remaining differences of views?
- What are Directors’ views on the possible approaches to realigning quota shares, and what do they see as the most promising areas for further work? What types of allocation mechanisms, or other elements that have a bearing on the distribution of quota increases, should be explored?
- Do Directors have any further views on how to define the list of the poorest members (discussed in Annex VIII) that would be eligible for protection under the 15th Review? What are Directors’ views on extending protection also to small developing states?
- What are Directors’ views on whether, and if so how, to recognize voluntary financial contributions in the context of the 15th Review?

### Annex I — Additional information on metrics and resource adequacy indicators
- Reference levels and data:
  - New reference level considered in addition to the simple average of previous quota ratios: a weighted average giving greater weight to recent quota increases.
  - Reference period: 2015-19 considering the 2019 deadline for completion of the 15th Review.
  - Results based on data from the October 2017 WEO database.
  - Complementary analysis of quota resources needed to restore Fund resources is based on quotas and the NAB only (excludes BBAs).
- Main findings on quota increases required to restore ratios to reference levels:
  - GDP:
    - The ratio of quotas to global GDP is projected to decline by 2019 to close to the 13th Review levels.
    - Restoring this ratio to the two reference levels would require a quota increase of about 50 percent.
    - A doubling of quotas would be required if EMDCs’ GDP is used instead of global GDP.
    - Higher quota increases of about 80-100 percent would be needed to restore the larger resource envelope of current quota plus NAB resources to global GDP.
  - Trade and capital flows:
    - The decline in Fund quotas relative to global current payments and capital inflows to EMDCs is much steeper than relative to GDP.
    - Restoring quotas to these indicators would require quota increases of about 75-135 percent, depending on the reference level used.
    - Restoring quota and NAB resources relative to these external variables would require higher increases between about 115-175 percent.
  - Past borrowers’ external financing needs (EFN):
    - Restoring quotas relative to projected EFN requires much steeper quota increases than suggested by GDP.
    - A more than doubling of quotas is required to restore the ratio of quotas-to-EFN under the most conservative reference level.
    - Almost a trebling of quotas would be needed to restore quota and NAB resources relative to EFN.

### Data and methodological notes (Annex I)
- Weighted average specification:
  - Weighted average of the ratios at the time of the last four general quota reviews with quota increases (8th, 9th, 11th, and 14th Reviews).
  - Weights increase over time and are calculated as the inverse of the number of years since the quota review took place (normalized).
- Data revisions and scope:
  - Use of an outdated WEO BPM6 database generated errors in earlier metrics analysis; corrected data do not affect GDP-based metrics but lower other measures.
  - Numbers for August 2017 revised with April 2017 WEO; December 2017 figures use October 2017 WEO.
  - For the paper’s metrics-based analysis, Fund resources are defined as quotas and NAB only, excluding BBAs.

*Source: Excerpt from ppea2021009 — FIFTEENTH GENERAL REVIEW OF QUOTAS—FURTHER CONSIDERATIONS—ANNEXES (January 5, 2018).*

### Annex II. Access-based Scenarios: Estimating the Demand for

### Annex II. Access-based Scenarios: Estimating the Demand for Fund Resources Through 2025

### Common assumptions and methodological framework
- Horizon:
  - Potential calls for Fund financing are based on projections for 2025 from the Fall 2017 WEO baseline going through 2022 and simple staff extrapolations for 2023-25.
- Fund lending capacity:
  - Assessed as of 2025 and assumed to comprise current quotas plus NAB (SDR 463 billion), assuming the renewal of the NAB for its current amount in SDR terms, beyond end-2022.
  - A minimal quota buffer scenario is discussed as a sensitivity: buffer of SDR 50 billion.
- Color coding (results tables):
  - Dark green: scenarios covered by quota alone.
  - Light green: scenarios covered by quota and NAB.
  - No color: scenarios not covered.
- Program sizes:
  - Program sizes of 4 to 8 percent of GDP are presented.
  - The average program size based on historical crises is about 6 percent of GDP.

### Approach A — Past Top Borrowers Seeking Assistance During the Last Five Crises
- Set of scenarios:
  - Scenarios consider simultaneous Fund financing requests from the past top borrowers: nine, six, or three of the past top borrowers (top borrowers defined as largest members by 2025 GDP that had a GRA arrangement or requested outright disbursements since 1990).
  - Rationale: several past top borrowers have vulnerabilities; future crises could entail at least the top three seeking financing (contrast to two top borrowers during the GFC).
- Results and implications:
  - Fund resources based on quotas and the NAB do not cover all scenarios where the top three past borrowers avail themselves of Fund financing.
  - No scenario with the top six borrowers is covered by quotas plus NAB.
  - Fewer scenarios are covered if a minimal quota buffer of SDR 50 billion is factored in.
- Arrangement sizing:
  - The size of the arrangement is expressed as a percentage of the member’s forecasted 2025 GDP.
  - Arrangement sizes presented in the Annex follow the mapping to historical arrangement sizes.

### Approach B — Panel Logit Scenarios (global volatility shock)
- Set of scenarios:
  - Econometric panel logit model updated for potential calls on Fund financing under a global volatility shock where the VIX index reaches an average level of 30 during the year of the shock.
  - Key differences from the 2017 paper:
    - Size of potential calls is based on projected global GDP in 2025 rather than in 2017.
    - Lending capacity is based on quota plus the NAB (SDR 463 billion) rather than quotas, NAB, and BBAs.
- Results (potential calls under different arrangement-size mappings and thresholds):
  - For the 1:1 Threshold (4.8 percent arrangement size as percent of member's GDP), potential calls (SDR billions): 935, 1,169, 1,403, 1,637, 1,870.
  - For the 2:1 Threshold (6.4 percent), potential calls (SDR billions): 760, 951, 1,141, 1,331, 1,521.
  - For the 3:1 Threshold (16.1 percent), potential calls (SDR billions): 439, 549, 659, 769, 879.
- Comparison with 2017 paper:
  - Updated scenario shows considerably larger potential demand reflecting extension from 2017 to 2025.
  - Only one scenario can be covered with lending capacity based on quota and NAB compared with four scenarios in the 2017 paper.

### Annex III summary (Global Shock Scenarios — refinements relevant to access-based estimates)
- Lending capacity assumption:
  - Assumed to comprise current quotas plus NAB only (SDR 463 billion), excluding BBAs.
- Section A — Greater use of international reserves and bilateral swap lines:
  - Self-insurance/reserve use adjustments:
    - Reserves assumed to remain above 80 percent of the level suggested by the Fund’s ARA metric for EMs (vs 100 percent in 2017 paper).
    - A country can use reserves subject to a maximum level of 40 percent relative to their initial level (vs 25 percent in 2017 paper).
  - Bilateral swap arrangements:
    - Countries with active swap agreements with China are included and assumed to use their swap fully to meet potential financing demand; beyond these active swap agreements, no additional bilateral borrowing is assumed.
- Results — baseline comparison:
  - Estimated potential calls for Fund resources decline modestly compared to baseline 2017 paper.
  - Estimated potential calls under revised assumptions range from SDR 133 billion to SDR 1,065 billion, compared to a range from SDR 143 billion to SDR 1,391 billion in the 2017 paper.
- Section B — Longer-term perspective (2024–25):
  - Assumptions:
    - Vulnerable countries, shock intensities, and domestic adjustments same as in the baseline.
    - Domestic adjustment assumed at 0.7 percent of GDP per annum over two years.
    - BOP variables grow in line with nominal GDP; nominal GDP in 2024-25 extrapolated assuming the same annual growth rate as in 2022 from the Fall 2017 WEO.
    - Shares of RFAs and bilateral swaps to total demand assumed same as baseline (requires financing by RFAs and BSAs to grow on average by almost 60 percent compared to baseline).
  - Results:
    - Compared to the baseline, mid-decade estimates almost double due to larger global economy and higher financing needs.
    - After accounting for RFAs and BSAs and reserve usage, resulting Fund financing ranges from SDR 231 billion to SDR 1,984 billion — an 80 percent increase compared to the baseline.
  - Detailed figures (SDR billions) by crisis intensity (percentiles):
    - For 2017-18 (reported for reference):
      - Extremely pervasive global systemic crisis (65th–90th percentiles): 311, 474, 750, 1,065.
      - Very pervasive systemic crisis: 308, 448, 654, 876.
      - Pervasive systemic crisis: 268, 355, 517, 692.
      - Systemic crisis: 133, 184, 243, 288.
    - For 2024-25 (middle of the next decade):
      - Extremely pervasive global systemic crisis (65th–90th percentiles): 636, 878, 1,463, 1,984.
      - Very pervasive systemic crisis: 583, 774, 1,165, 1,513.
      - Pervasive systemic crisis: 470, 598, 900, 1,173.
      - Systemic crisis: 231, 309, 450, 538.
- Caveats and limitations highlighted:
  - The mechanical residual approach (Fund size = demand minus other financing sources) does not pre-judge how countries access financing.
  - The set of vulnerable countries could change with evolving global environment.
  - Estimates use 2017/18 openness of the world; increased interconnectedness or EMDCs catching up in financial openness could raise financing needs.
  - Assumption that RFAs and BSA shares of total demand remain the same as baseline is a strong one.

### Key takeaways for resource adequacy and policy implications
- Under baseline assumptions with quotas plus NAB (SDR 463 billion), the Fund would be unable to cover many plausible access-based scenarios projected for 2025, including scenarios with simultaneous requests from the top three or more past borrowers and multiple global shock scenarios.
- Incorporating greater use of reserves and active swap lines modestly reduces estimated Fund demand but does not eliminate large unfunded scenarios under severe crises.
- Longer-term growth of global GDP substantially increases potential financing needs through 2024-25, with Fund financing requirements rising up to SDR 1,984 billion in the most pervasive crisis scenario.
- Sensitivities to minimal quota buffers (e.g., SDR 50 billion) further reduce the set of scenarios that can be covered by current lending capacity.

*Source: IMF staff estimates and analysis as presented in Annex II (Access-based Scenarios) and related Annex III (Global Shock Scenarios) of the Fifteenth General Review of Quotas—Further Considerations — Annexes.*

### 2.      As in previous analyses, an index of exchange market pressure (“EMP”) was used as a

### 2.      As in previous analyses, an index of exchange market pressure (“EMP”) was used as a proxy for balance of payment difficulties.

### EMP index: definition, construction, and thresholds
- EMP index calculated as the weighted average of:
  - changes in exchange rates (national currency per US dollar)
  - and the negative of the changes in international reserves
- Data: quarterly data from the IMF’s International Financial Statistics database for the period 1995-2015
- Weights: set equal to the inverse of the standard deviations of the individual country time series
- EMP index transformed into a binary variable using thresholds based on 1, 1.5 and 2 standard deviations from the mean
- Annual aggregation: the annual EMP variable takes the value of one if at least one of the quarterly observations equals to one

### Correlation between adjusted variability and EMP (balance of payments difficulties)
- Original variability variable for each country adjusted by subtracting the country’s share in global GDP
- Correlation results (updated dataset, 1995-2015):
  - correlations range between 0.029 and 0.043
- Comparison to previous analysis (1995-2011):
  - previous correlations ranged between 0.035 and 0.046
- Interpretation: relationship between adjusted variability and balance of payments difficulties remains very weak; appears even weaker in the updated dataset

### Alternative external sector vulnerability indicators and correlations
- Four external sector indicators used as alternative proxies (from the vulnerability exercise for EMs):
  1. reserves in percent of short-term debt at remaining maturity plus current account deficit
  2. current account balance (in percent of GDP)
  3. external debt (in percent of GDP)
  4. external debt (in percent of exports)
- These ratios converted into binary variables using the thresholds identified in the vulnerability exercise for EMs
- Correlation findings:
  - correlations of the individual vulnerability indicators with the variability measure remain either not significantly different from zero, or negative
  - an indicator variable equal to 1 if any of the four vulnerability indicators breaches its threshold does not appear to be correlated with variability

### Correlation between adjusted variability and approval/use of Fund arrangements
- Fund arrangement binary variable: 1 if a Fund arrangement was approved in any given year, 0 otherwise; period covered: 1995-2015 (covers all facilities, GRA and PRGT, including precautionary arrangements)
- Correlation between adjusted variability and approval of a Fund arrangement (all countries): 0.024
- Correlations by country groupings (adjusted variability vs. use of Fund resources):
  - All Countries: 0.024 (updated 1995-2015)
  - Advanced Economies: 0.032 (updated 1995-2015) [figure shows 0.032 as one subgroup value]
  - Emerging Markets: 0.032 (updated 1995-2015) [figure shows 0.032 as one subgroup value]
  - Low Income Countries: 0.023 (updated 1995-2015) [figure shows 0.023 as one subgroup value]
- Interpretation: correlations are close to zero and not statistically significant, implying a weak relationship between adjusted variability and the demand for Fund resources across country groups

### Overall conclusion on the variability measure
- Results of the correlation analysis are consistent with earlier staff work indicating that the current measure of variability does not capture its intended purposes in the formula

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### Annex VI. Convergence between GDP Measured at Market and PPP Exchange Rates

### Background and context
- 2008 Quota and Voice Reform: introduced a GDP blend variable to the quota formula with weights:
  - 60 percent weight to GDP at market prices
  - 40 percent weight to GDP at PPP prices
- Agreement: scope for retaining PPP GDP in the formula to be reviewed after 20 years (i.e., until 2028) in light of progress toward convergence between market rate and PPP GDP in emerging market and developing countries (EMDCs)
- Request: examine whether market and PPP GDP have been converging since the introduction of the GDP blend variable

### Conceptual linkage: convergence of GDP measures and prices
- Convergence of GDP at PPP to GDP at market exchange rates (MER) is equivalent to convergence of PPP exchange rates to market exchange rates
- Ratio R definition and approximation (WEO definitions):
  - R_i = NGDPD_i / PPPGDP_i = PPPEX_i / ENDA_i
  - ∆%R_i ≅ ∆%PPPEX_i − ∆%ENDA_i
- Harrod-Balassa-Samuelson proposition: higher productivity growth → higher per capita income growth → higher relative price levels; temporary setbacks possible if market exchange rate fluctuations are significant

### Empirical findings on convergence (2005-2015)
- Overall EMDCs:
  - Modest convergence between 2005 and 2011, with some reversal since then mainly due to strengthening of the US dollar
  - The reversal since 2014 coincided with a notable appreciation of the US dollar; market exchange rate depreciation against the U.S. dollar offset movements of relative price levels measured by PPP exchange rates
- Regional patterns:
  - Western Hemisphere EMDCs showed the fastest convergence among EMDCs, followed by Asian EMDCs
- Growth differentials and their role:
  - Earlier analysis (2007) assumed real per-capita GDP in all non-US economies would grow on average 2¾ pp faster per annum than in the US over the next twenty years
  - Actual mean growth over 2005-2015: 1.5 pp higher for all non-US economies compared to the US
  - For the fastest growing quartile of EMDCs: 4.8 pp higher
  - From 2005 to 2011, real GDP per capita of EMDCs grew at an average rate of 3.1 percent, compared to the U.S. at 0.4 percent and AEs as a whole at 0.2 percent
  - Sizable depreciation of market exchange rates vis-à-vis the U.S. dollar in recent years contributed to slow convergence in PPP and MER GDP levels

### Breadth and magnitude of convergence (2005-2015)
- Number of EMDCs exhibiting convergence increased:
  - from 78 (1995-2005) to 114 (2005-2015)
- Average price level for EMDCs (relative to US price level):
  - converged from 43 percent in 2005 to 48 percent by 2015 (EMDCs group mean)
- Projection under current trends:
  - If market exchange rates constant and relative price movements follow the past decade’s trend, by 2025 EMDCs expected to converge to a mean of 54 percent of the US price level (compared to a mean of 43 percent at the time of the 2008 Reform)

### Implications for calculated quota shares
- Ratio of MER to PPP GDP shares for EMDCs increased:
  - from 0.57 in 2005 to 0.71 in 2015 (based on quota formula data)
- Driver: between 2005 and 2015, GDP of EMDCs grew at an average rate that exceeded that of AEs by 2.9 percentage points
- Effect on GDP blend boost for EMDCs due to inclusion of PPP GDP:
  - average boost declined slightly from 4.7 basis points in 2005 to 4.3 basis points in 2015

### Caveats and limitations
- Sample period is relatively short for assessing convergence (about a decade since PPP GDP was introduced into the formula)
- Price level convergence sensitive to market exchange rate fluctuations (e.g., notable appreciation of the US dollar from 2014 to 2015)
- More time needed for a fuller assessment of MER and PPP GDP convergence

*Source: IMF staff calculations and analysis as presented in the text.*

### Annex VII. Realignment of Shares in Recent Quota Reforms

### Annex VII. Realignment of Shares in Recent Quota Reforms

### A. Quota Increases in the 2008 Reform — Description and Mechanisms
- The 2008 Reform comprised two rounds of increases:
  - First round (agreed in 2006): total quota increase of 1.8 percent.
  - Second round (agreed in 2008): further quota increases of 9.6 percent.
  - Overall increase across the two rounds: 11.5 percent.
- First round allocation (2006):
  - Allocated to four under-represented members: China, Korea, Mexico, and Turkey.
  - Reduced the gap between the AQS (Pre-Singapore) and the CQS (based on the five formulas) by one third.
- Second round allocation (2008):
  - Allocated to 54 members identified as under-represented under the new quota formula.
  - The gap between “Pre-Singapore” AQS and CQS (based on the new formula) was reduced by a uniform factor of almost 30 percent for eligible members (example: a 1 percentage point gap → increase of close to 0.3 percentage points).
  - Members not eligible for an increase had a relative decline in quota shares of 10.3 percent after the two rounds.
- Final-agreement elements adopted in 2008:
  - Foregoing: Several under-represented advanced countries agreed to forego part of eligible increases:
    - Ireland and Luxembourg agreed to a maximum nominal increase of 50 percent.
    - Germany, Italy, Japan, and the United States agreed to have a smaller uniform reduction factor (less than 20 percent).
  - Booster: Three under-represented EMDCs with global PPP GDP shares substantially larger than initial quota shares (by more than 75 percent) received a minimum nominal quota increase of 40 percent: Brazil, India, and Vietnam.
  - Minimum increase: The four countries that received the 2006 first-round increase were assured at least a minimum nominal quota increase of 15 percent in 2008.

### B. Quota Increases in the 14th Review — Structure and Protections
- Overall size and split:
  - Total quota increase agreed in 2010: 100 percent.
  - Allocation split into two main blocks:
    - Formula-based selective increase: 60 percent.
    - Ad hoc increase (to account for non-formula considerations): 40 percent.
- Ad hoc increase allocation mechanism:
  - Mainly used a uniform proportional reduction mechanism based on the gap between members’ quota shares after the selective increase and their shares in the GDP blend variable (with a compression factor of 0.95).
  - Advanced economies received half of the reduction factor applied to EMDCs, resulting in reduction factors of 27 percent for advanced economies and 54 percent for EMDCs.
- Ad hoc increase protections and limits:
  - The poorest countries were individually protected against a decline in their quota share.
  - No member’s nominal quota was increased by more than 220 percent (given the 100 percent total increase, this meant no member’s AQS increased by more than 60 percent).
  - No member’s AQS declined by more than 30 percent or by more than 0.85 percentage points.
  - Protections for members ineligible for the uniform reduction:
    - Those under-represented under the formula at least preserved the gain in quota shares from the selective increase.
    - Those over-represented under the formula were protected against falling below either their compressed GDP blend share or CQS, whichever was higher.
  - Final distribution included voluntary foregoing by advanced economies and voluntary transfers between members.

### Annex VIII — Protection of the Poorest and Smallest Members (Summary of Criteria, Lists, and Costs)
- 14th Review poorest-members definition:
  - Based on PRGT-eligibility and per capita GNI: PRGT-eligible countries with annual per capita GNI below the 2008 operational IDA cut-off of US$1,135 or below twice the IDA’s cut-off for “small country” under PRGT criteria.
  - Covered 52 members plus Zimbabwe (not PRGT-eligible at the time due to arrears); South Sudan met criterion and was protected through its membership resolution.
  - Combined post-14th Review quota share for these 54 countries: 3.3 percent.
- Alternative and updated definitions discussed (August 2017 paper options):
  - (i) 14th Review definition updated with FY 2017 IDA per capita GNI threshold of US$1,185.
  - (ii) Full list of currently PRGT-eligible countries.
  - (iii) United Nations list of least developed countries (LDCs).
  - (iv) WEO’s list of Low Income Developing Countries (LIDCs).
- LIDC grouping updates (2017):
  - Definition in 2014 and update in 2017: per-capita GNI threshold raised to US$2,700 (after adjusting for median growth in GNI per capita among the original LIDC grouping of some 12 percent during 2011-16).
  - Bolivia and Mongolia dropped from LIDC grouping; Timor-Leste added.
  - Current LIDC list includes 59 countries with combined AQS of 4.0 percent.
- Small developing states inclusion:
  - IMF definition of small states: developing country members with populations below 1.5 million.
  - Fund currently has 34 small-state members:
    - Five are PRGT-eligible and meet the IDA per capita GNI threshold.
    - 15 are PRGT-eligible but do not meet the IDA threshold.
    - 14 are not PRGT-eligible.
  - Alternative protected list (PRGT-eligible plus small developing states) comprises 84 members with combined AQS of 3.6 percent.
  - For comparison, a list comprising members that meet updated 14th Review criteria plus small states would comprise 66 members with combined AQS of 2.1 percent.
- Cost of protection estimates:
  - The cost of protection is calculated as the share of the total quota increase allotted for protection under scenarios in the main paper.
  - Cost of protection varies from 0.8 to 1.6 percent (see Table 2 reference).
- Simulations and illustrative allocations:
  - Table 3 shows illustrative allocations for selective increases with protection for the group of PRGT-eligible members plus small developing states (84 members).
  - Key illustrative results (select entries from Table 3; all figures in percent):
    - Advanced economies: ranges in simulations shown include values such as 57.6, 50.2, 49.8, 54.8, 54.0, 53.4, 49.2, 54.6, 53.7, 53.1, 49.9, 54.8, 54.0, 53.4 (depending on scenario).
    - Major advanced economies and specific country examples:
      - United States: values include 17.4, 14.5, 15.2, 16.6, 16.3, 16.2, 15.6, 16.7, 16.5, 16.4, 17.4, 17.3, 17.3, 17.3.
      - Japan: values include 6.5, 5.1, 5.1, 6.0, 5.9, 5.8, 5.3, 6.0, 5.9, 5.8, 5.3, 6.0, 5.9, 5.8.
      - China 3/: values include 6.4, 12.6, 13.3, 8.6, 9.3, 9.8, 13.7, 8.8, 9.5, 10.0, 14.3, 8.9, 9.7, 10.2.
      - India: values include 2.7, 3.1, 3.4, 3.0, 3.0, 3.1, 3.5, 3.0, 3.1, 3.1, 3.8, 3.1, 3.2, 3.2.
    - Regional and group totals in Table 3 (sample values across scenarios):
      - EMDCs: 42.4, 49.8, 50.2, 45.2, 46.0, 46.6, 50.8, 45.4, 46.3, 46.9, 50.1, 45.2, 46.0, 46.6.
      - Total always sums to 100.0 across scenarios.
    - Memorandum items (sample figures):
      - EU-28: values include 30.4, 27.0, 26.0, 28.8, 28.3, 28.0, 24.8, 28.4, 27.8, 27.4, 23.8, 28.1, 27.4, 26.9.
      - LICs 4/: values include 3.3, 2.3, 2.2, 3.4, 3.4, 3.4, 2.3, 3.4, 3.4, 3.4, 2.1, 3.4, 3.4, 3.4.
      - PRGT-eligible plus Small States 6/: values include 3.6, 2.5, 2.4, 3.6, 3.7, 3.7, 2.4, 3.7, 3.7, 3.7, 2.2, 3.6, 3.7, 3.7.

*Source: Finance Department (content from Annex VII and Annex VIII of the cited IMF chapter).*

### Annex IX. Voluntary Financial Contributions

### Annex IX. Voluntary Financial Contributions

### Background
- Purpose: Update staff estimates of members’ voluntary financial contributions to the Fund, covering main forms of voluntary financial contributions and updating three alternative aggregation methods.
- Scope limits:
  - Covers only members’ voluntary financial contributions to the Fund.
  - Excludes members’ participation in the Financial Transactions Plan.
  - Excludes in-kind contributions and bilateral financing provided by members to other members in the context of the Fund’s financial arrangements.

### Definitions of Aggregate Measures (VFCS)
- VFCS I:
  - Simple average of member contribution shares to five voluntary financial contributions: i) NAB, ii) 2016 BBAs as of end-October 2017, iii) PRGT loans, iv) subsidies for concessional financing, and v) capacity development (CD).
- VFCS II:
  - Weighted average with fixed weights: NAB (0.3), 2016 BBAs as of end-October 2017 (0.3), PRGT loans and subsidies for concessional financing combined (0.2), and CD (0.2).
- VFCS III:
  - Uses the greater of the 14th Review quota share or VFCS I share rebased so total shares add up to 100 percent; recognizes members that have provided contributions in excess of quota shares.

### Components of Voluntary Financial Contribution Shares (Box 1)
- All credit arrangements under the New Arrangements to Borrow (NAB) effective as of end-September 2017.
- All effective 2016 Bilateral Borrowing Agreements (BBAs) and pledges as of end-October 2017.
- Cumulative loan commitments to the PRGT (and predecessors) from 1988 to end-September 2017.
- Cumulative subsidy contributions (as of end-September 2017) to concessional financing initiatives, including:
  - (i) PRGF-ESF Trust (1987);
  - (ii) PRG-HIPC Trust (1999);
  - (iii) MDRI and ESF (2005);
  - (iv) PRGT Subsidy Accounts (2009);
  - (v) Catastrophe Containment and Relief Trust (CCRT) (2015);
  - (vi) distribution in 2012/13 of windfall profits from sale of gold in 2009/10 to the PRGT Subsidy Account.
- Net disbursements for capacity development (CD) over FY1999-FY2018Q1.

### Key Statistics (selected indicators and aggregates)
- Total contributions (in millions of SDRs) 9/: 180,233; 317,965; 35,558; 7,494; 1,356
- Selected shares from Table 1 (In percent, unless otherwise indicated):
  - 14th Review Quota Share — Advanced Economies: 57.6; Emerging Market and Developing Countries: 42.4; Transition economies: 7.2; Total: 100.0
  - NAB with Bilateral Borrowing Agreements — Advanced Economies: 75.0; Emerging Market and Developing Countries: 25.0; Transition economies: 3.2; Total: 100.0
  - PRGT Loans — Advanced Economies: 66.3; Emerging Market and Developing Countries: 33.7; Transition economies: 4.9; Total: 100.0
  - Concessional Financing Subsidies — Advanced Economies: 88.6; Emerging Market and Developing Countries: 11.4; Transition economies: 0.0; Total: 100.0
  - Capacity Development (share in financial contributions to CD) — Advanced Economies: 79.8; Emerging Market and Developing Countries: 20.2; Transition economies: 2.9; Total: 100.0
- Selected country-level figures from Table 1 (14th Review Quota / NAB with Bilateral Borrowing / PRGT Loans / Concessional Financing / Capacity Development):
  - United States: 17.4 / 15.6 / 0.0 / 0.0 / 12.3 / 0.7
  - Japan: 6.5 / 18.6 / 13.4 / 24.6 / 13.8 / 35.8
  - Germany: 5.6 / 7.2 / 10.8 / 7.7 / 6.4 / 2.8
  - France: 4.2 / 5.3 / 8.2 / 13.8 / 7.5 / 1.5
  - United Kingdom: 4.2 / 5.3 / 2.9 / 9.4 / 9.6 / 9.9
  - China 7/: 6.4 / 8.8 / 9.6 / 5.1 / 2.0 / 0.4
  - India: 2.7 / 2.5 / 2.2 / 0.0 / 1.3 / 1.1
  - Brazil: 2.3 / 2.5 / 2.2 / 1.4 / 0.2 / 0.2
  - Russia: 2.7 / 2.5 / 2.2 / 0.0 / 1.4 / 0.1

### Aggregate Measures by Country Group (Table 2, In percent)
- Advanced Economies — VFCS I: 78.9; VFCS II: 76.7; VFCS III: 67.8
- Major advanced economies — VFCS I: 57.8; VFCS II: 55.7; VFCS III: 51.0
- Other advanced economies — VFCS I: 21.1; VFCS II: 21.0; VFCS III: 16.8
- Emerging Market and Developing Countries — VFCS I: 21.1; VFCS II: 23.3; VFCS III: 32.2
- Asia — VFCS I: 10.1; VFCS II: 11.7; VFCS III: 12.1
  - China 5/ — VFCS I: 5.2; VFCS II: 6.5; VFCS III: 4.7
  - India — VFCS I: 1.4; VFCS II: 1.7; VFCS III: 2.0
  - Korea — VFCS I: 2.3; VFCS II: 2.4; VFCS III: 1.7
- Middle East, Malta, and Turkey — VFCS I: 3.9; VFCS II: 3.9; VFCS III: 5.3
  - Saudi Arabia — VFCS I: 2.1; VFCS II: 2.3; VFCS III: 1.6
- Western Hemisphere — VFCS I: 3.1; VFCS II: 3.5; VFCS III: 5.8
  - Brazil — VFCS I: 1.3; VFCS II: 1.7; VFCS III: 1.7
  - Mexico — VFCS I: 1.1; VFCS II: 1.3; VFCS III: 1.4
- Transition economies — VFCS I: 2.2; VFCS II: 2.5; VFCS III: 5.3
  - Russia — VFCS I: 1.2; VFCS II: 1.5; VFCS III: 2.0
- Memorandum items:
  - EU28 — 14th Review Quota Share: 30.4; VFCS I: 40.4; VFCS II: 39.4; VFCS III: 32.3
  - LICs 6/ — 14th Review Quota Share: 3.3; VFCS I: 0.7; VFCS II: 0.6; VFCS III: 2.5

### Updates and Data Notes
- Main updates relate to data on the 2016 BBAs, with relatively small updates to other components.
- 2016 BBAs comprise all the 35 creditors under the 2012 BBAs and five new creditors.
- The GAB is not included in the illustrative aggregate measures because it does not add to the Fund’s overall lending envelope, as outstanding drawings and available commitments under the NAB and the GAB may not exceed the total amount of NAB credit arrangements.
- Tables referenced provide summary distributions and selected indicators; prepared by the Finance Department.

*Prepared by the Finance Department. Approved by Andrew Tweedie.*

### 4.  Financial Contributions to the Fund: Selected Indicators and Aggregate

### 4.  Financial Contributions to the Fund: Selected Indicators and Aggregate

### Data description and scope
- Supplement presents by-member data on illustrative simulations of quota increases and updated data on voluntary financial contributions.
- Table 1: detailed results for simulations presented in Table 6 of the main paper — selective increases with a small ad hoc element for protection of the poorest members (37 members).
- Table 2: detailed results for simulations presented in Table 9 of the main paper — selective increases with same protection for the poorest members and an ad hoc element equal to 5 percent of the overall increase, distributed in proportion to a measure of members’ voluntary financial contributions to the Fund (VFCS II).
- Table 3: detailed results for simulations presented in Table 3 of Annex VIII, Supplement 1 — selective increases with a small ad hoc element for protection of the poorest members, defined as PRGT-eligible members plus small developing states (84 members).
- Table 4: detailed information on different types of voluntary financial contributions and aggregate measures (analogous to Tables 1 and 2 of Annex IX, Supplement 1).

### Voluntary Financial Contributions (VFCS) metrics and definitions
- VFCS I: cash contributions to the IMF for technical assistance and training (excluding in kind contributions), FY1999-FY2018Q1.
- VFCS II: weighted average of contribution shares, with weights of 0.3 for NAB, 0.3 for BBAs, 0.2 for PRGT loans and concessional financing subsidies combined, and 0.2 for capacity development.
- VFCS III: measure of "generous" contributions which uses the higher of 14th Review quota share or VFCS I share rebased so total shares add up to 100 percent.
- Specific simulation rule: 5 percent of the overall increase is allocated as ad hoc increases based on voluntary financial contributions (Table 2).

### Illustrative allocation scenarios (methodology highlights)
- All simulations show distributions based on the quota formula (i.e., selective increases) plus ad hoc increases where needed to protect the shares of the poorest members:
  - Protection set A: 37 poorest members (used in Table 1 and Table 2 simulations).
  - Protection set B: PRGT-eligible members plus small developing states (84 members) (used in Table 3).
- Ad hoc element in one scenario: 5 percent of the overall increase allocated in proportion to VFCS II.
- Simulations use multiple formula variants and overall increase assumptions (examples in tables labeled Formula 1.2, Formula 3.2.c, Midpoint Set C, and Current Formula).

### Key aggregate measures presented (Table 4)
- Financial contribution components reported by member: NAB with Rollback; Bilateral Borrowing Agreements (BBAs); PRGT Loans; Concessional Financing Subsidies; Capacity Development; and composite VFCS measures (VFCS I, VFCS II, VFCS III).
- VFCS II is explicitly reported and used to allocate the 5 percent ad hoc element in simulations.
- Table 4 provides by-member shares (in percent) across these various aggregates for the 14th Review baseline and the different contribution categories.

### Chairman’s Concluding Remarks — Committee of the Whole (meeting 18/1)
- Document dates: February 2, 2018 (meeting), February 7, 2018 (Chairman’s Concluding Remarks).
- Directors’ shared high‑level judgments:
  - Reiterated commitment to a strong, quota-based, and adequately resourced IMF at the center of the global financial safety net.
  - Recognized close interlinkage between quota formula and size/distribution of any quota increase under the 15th Review; noted outcome will need to be agreed as a package.
  - Noted work program calls for IMFC guidance on key elements of the 15th Review in the second quarter of 2018.
- Views on resource adequacy and scenarios:
  - Directors underscored importance of ensuring sufficient resources to respond to actual, potential, or prospective financing needs in line with IMF mandate.
  - Many Directors welcomed refinements to quantitative models, noting more conservative assumptions of demand for Fund resources though some felt assumptions remain insufficiently conservative.
  - Most Directors welcomed the longer-term perspective: outcome of the 15th Review will likely determine the Fund’s permanent resources through at least the middle of the next decade, implying growing potential resource needs and larger uncertainties.
  - Many Directors supported, or were open to, a quota increase that would at least maintain existing Fund resources after the bilateral borrowing agreements expire; some could support a larger increase to restore share of quotas in total resources to its long-term average; some considered current resources sufficient over the medium term.
  - Several Directors called for clarification on prospects for a quota increase at an early stage; others viewed it premature to start deliberations on a general quota increase at this stage.
  - Many Directors noted that clarifying the distinction between normal circumstances and severe shocks would better inform resource needs; some noted this involves members’ risk tolerance requiring political judgment.
- Views on resource composition:
  - Directors generally agreed that quotas should provide the bulk of lending resources going forward, with bilateral borrowing remaining a flexible supplementary mechanism when warranted by global conditions.
  - Several Directors emphasized that adequacy discussions should not pre-suppose renewal of bilateral borrowing agreements.
- Views on quota formula and realignment:
  - Majority reiterated that four principles underpinning the 2008 quota formula reform remain valid; many signaled willingness to work toward a new broadly acceptable formula, building on the 2013 quota formula review (QFR) outcome.
  - Many Directors viewed the quota formula as a valuable instrument to realign quota shares; views differed on the midpoint approach—many felt it does not adequately represent the range of views and is not aligned with the 2013 QFR; some considered it constructive.
  - Directors welcomed staff analysis on the relationship between balance of payments difficulties and variability, and the convergence of market GDP and PPP GDP.
- Views on realigning quota shares:
  - Directors reiterated importance that quota shares be in line with members’ relative positions in the world economy; many noted overall out‑of‑lineness increased significantly since the 14th Review.
  - Many called for a meaningful shift in quota shares from advanced economies to emerging market and developing economies; others warned against fixed predefined targets for any group.
- Views on voluntary financial contributions:
  - Views remained divided on whether and how to take account of voluntary financial contributions in quota adjustments. Many supported or were open to taking them into account (some preferring inclusion within the quota formula); many continued to oppose such approaches.
- Protection of poorest members:
  - Directors reiterated commitment to protect quota and voting share of poorest members under the 15th Review.
  - Views varied on the definition of poor countries to be protected: many called for protection of all PRGT-eligible members and small developing states; others preferred a shorter list limited to the poorest based on updated 14th Review criteria or PRGT‑eligibility.
- Procedural outlook:
  - Further progress will require judgment and compromise; Management and staff will reflect on advancing the process. The Chairman expressed encouragement at the shared commitment to complete the 15th Review in line with the agreed timetable.

*Source: Finance Department; Chairman’s Concluding Remarks, Fifteenth General Review of Quotas—Further Considerations, Committee of the Whole meeting 18/1 (February 2, 2018; concluding remarks dated February 7, 2018).*

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_Source: https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021009.pdf_