## 062210 — Distribution of Quotas and Calculated Quotas (excerpt)

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---

### I. Introduction — key observations
- IMFC pledged to complete the 14th General Review of Quotas before January 2011.
- Finalized 2008 data update confirms broad trends from earlier derived 2008 data: a further significant increase in calculated quota share of emerging market and developing countries (EMDCs) as a group relative to the 2007 data set.
- Aggregate result: EMDCs are under-represented by 2.2 percentage points using 2008 data relative to calculated quota shares.
- Within EMDCs: 50 out of 161 countries are under-represented by a total of 8.9 percentage points; many EMDCs remain over-represented.
- Advanced economies as a group are over-represented, but 10 individual advanced economies are under-represented.

### II. Key statistics from Tables (exact figures preserved)
- Table 1 — Distribution of Quotas and Calculated Quotas (In percent)
  - Header columns: Post Second Round Quota Share 1/ | 2005 3/ | 2007 4/ | 2008 5/
  - Advanced economies: 60.5 | 63.8 | 60.4 | 58.2
  - Major advanced economies: 45.3 | 47.6 | 45.0 | 42.9
    - Of which: US: 17.7 | 19.0 | 17.8 | 17.0
  - Other advanced economies: 15.1 | 16.2 | 15.4 | 15.3
  - Emerging Market and Developing Countries: 39.5 | 36.2 | 39.6 | 41.8
  - Developing countries: 32.4 | 30.0 | 32.6 | 34.1
    - Africa: 4.9 | 2.8 | 3.1 | 3.1
    - Asia 6/: 12.6 | 15.8 | 17.2 | 17.7
    - Middle East, Malta & Turkey: 7.2 | 4.8 | 5.4 | 6.2
    - Western Hemisphere: 7.7 | 6.6 | 6.9 | 7.0
  - Transition economies: 7.1 | 6.2 | 7.0 | 7.7
  - Total: 100.0 | 100.0 | 100.0 | 100.0
  - Memorandum items:
    - EU 27: 31.9 | 32.9 | 32.1 | 31.3
    - LICs (PRGT-eligible countries): 4.3 | 2.2 | 2.5 | 2.6

- Table 2 — Under- and Over-represented Countries by Major Groups (In percentage points)
  - Header columns: Post Second Round Quota Share | 2007 3/ | 2008 4/
  - Advanced economies: 60.5 | 0.0 | -2.2
    - Under-represented: 2.3 | 1.8
    - Over-represented: -2.3 | -4.1
  - Emerging Market and Developing Countries: 39.5 | 0.0 | 2.2
    - Under-represented: 7.7 | 8.9
    - Over-represented: -7.6 | -6.7
  - Total Under-represented Countries: 9.9 | 10.7
  - Total Over-represented Countries: -9.9 | -10.7
  - Memorandum items:
    - EU 27: 31.9 | 0.2 | -0.5
      - Under-represented: 2.1 | 2.2
      - Over-represented: -1.9 | -2.8
    - LICs (PRGT-eligible countries): 4.3 | -1.7 | -1.7
      - Under-represented: 0.1 | 0.1
      - Over-represented: -1.8 | -1.8
    - Number of under-represented countries: 64 | 60
      - Of which: EMDCs: 52 | 50

### III. Stocktaking — key positions and constraints
- IMFC parameters from Istanbul: review should achieve a shift in quota share to dynamic EMDCs of at least 5 percent from over-represented to under-represented countries using the current quota formula as basis; these changes come on top of the 2008 reform which when fully implemented will result in a net 2.7 percent shift in voting share to EMDCs as a group. The IMFC also indicated that the voting share of the poorest members should be protected.
- Differences of view among Directors include:
  - Whether the "at least 5 percent" shift should be to dynamic EMDCs, from over- to under-represented countries, or both.
  - Whether to use alternative criteria to identify dynamic EMDCs or to capture dynamism within the formula itself.
  - Whether to reopen or revise the quota formula.
  - Preferences for combinations of selective and ad hoc increases; some considered an equiproportional increase premature to rule out.
  - Protection of poorest members widely supported, but differing views on definition and modalities.
- Practical implications:
  - Significant net shifts to EMDCs are more difficult to achieve using the formula alone because many EMDCs are over-represented; sizable net shifts would require under-represented advanced economies to forego increases or over-represented advanced economies to become modestly under-represented.
  - Reopening the formula could yield different results but is unlikely to be easier to agree than realigning quota shares.
  - Achieving enhanced legitimacy and effectiveness of the Fund requires compromises across membership.

### IV. Illustrative simulations — design and common parameters
- Simulations are illustrative only and do not represent staff proposals; use updated data through 2008.
- Three broad groups of simulations differ by approach to ad hoc increases:
  1. Builds on March paper: focuses on EMDCs and relies primarily on the quota formula as distribution key.
  2. Gives a larger role to a country’s economic weight by incorporating the quota formula’s GDP blend variable in the distribution key for ad hoc increases, along with the quota formula.
  3. Makes the GDP blend variable the primary distribution key for ad hoc increases; the formula continues to distribute selective increases.
- GDP blend variable: linear combination of market GDP (60 percent) and PPP-based GDP (40 percent), compressed using factor 0.95.
  - Number of countries eligible under this approach depends on assumptions; up to 38 countries (including up to 32 EMDCs) are eligible in reported simulations; without compression factor, maximum number would drop to 23 countries (including 17 EMDCs).
- Common simulation features:
  - Data base: updated through 2008 as presented in EB/CQuota/10/3.
  - Size of overall quota increase: simulations for overall increases of 50 percent, 100 percent, and 150 percent.
  - Allocation mechanisms: 0/60/40, 0/75/25, and 20/50/30 (equiproportional/selective/ad hoc).
  - Protecting the poorest: quota shares of individual PRGT-eligible members are protected at their post-2008 reform levels.
  - Protection approaches illustrated:
    - Full protection: over-represented countries fully protected from becoming under-represented.
    - 95 percent protection: protection set at 95 percent of calculated quota share, allowing modest under-representation up to 5 percent.
  - Note: in the 2008 reform some over-represented countries (mainly EMDCs) became under-represented; largest resulting under-representation was 11.5 percent.

### V. Illustrative simulation outcomes and comparisons (summary)
- Initial simulations emphasized the formula and resulted in a net shift to EMDCs in the range of 1-3½ percent, while achieving shifts of at least 5 percent to dynamic EMDCs in tailored scenarios.
- Achieving a substantial net shift to EMDCs as a group requires additional elements beyond strict formula-based allocations (e.g., targeted ad hoc increases, allowance for modest under-representation of some over-represented countries, or use of GDP blend).
- The mix of selective and ad hoc increases matters materially; smaller equiproportional elements were used relative to previous reviews to focus realignment on targeted adjustments.
- Summary Table: Range of shift of quota share to under-represented countries / Dynamic EMDCs / EMDCs as a group (In percentage points)
  - Set 1 Ad hoc to dynamic EMDCs
    - Full protection: 5.2 - 8.1 / 5.1 - 7.3 / 2.9 - 3.4
    - Partial protection: 6.6 - 10.2 / 6.6 - 9.7 / 4.4 - 5.5
  - Set 2 Ad hoc based on formula and GDP blend
    - Full protection: 4.2 - 7.0 / 4.0 - 6.3 / 1.9 - 2.3
    - Partial protection: 4.6 - 8.0 / 4.4 - 7.4 / 2.2 - 3.2
  - Set 3 Ad hoc based on GDP blend
    - Full CQS protection: 4.1 - 6.9 / 4.0 - 6.3 / 1.9 - 2.3
    - Partial CQS protection: 4.5 - 7.9 / 4.4 - 7.3 / 2.2 - 3.2
  - Notes: Results reported for quota increases of 50, 100, and 150 percent.

### VI. Method for allocating ad hoc increases — overview of Sets
- Set 1: Ad hoc increases to dynamic EMDCs (Tables 3A/3B, A1/A2)
  - Ad hoc increases allocated mainly to under-represented EMDCs and other EMDCs meeting dynamic criteria based on PPP GDP share.
  - Under-represented EMDCs receive a uniform reduction in out-of-lineness based on the formula or a fixed percentage increase above their post selective nominal quota, whichever is greater; other dynamic EMDCs receive the fixed percentage increase.
  - Smaller portion allocated to protect against dilution for under-represented advanced economies, prevent over-represented countries becoming (more than modestly) under-represented, and protect post second round quota share of PRGT-eligible countries.
  - Implementation seeks to ensure no over-represented EMDC under the formula receives a larger increase than under-represented EMDCs.
- Set 2: Ad hoc increases allocated based on either the formula or the GDP blend (Tables 4A/4B, A3/A4)
  - Ad hoc increases allocated mainly to countries under-represented under the formula or the compressed GDP blend.
  - Eligible EMDCs receive the higher of the increase indicated by a uniform reduction in out-of-lineness with respect to each variable.
  - Advanced economies only under-represented with respect to the GDP blend are capped at their post second-round quota share.
- Set 3: Ad hoc increases allocated based on the GDP blend variable (Tables 5A/5B, A5/A6)
  - Ad hoc increases allocated mainly to countries under-represented on the basis of the GDP blend.
  - Eligible EMDCs receive a uniform reduction in their out-of-lineness with respect to the GDP blend.
  - Protections apply to over-represented and PRGT-eligible countries; eligible advanced economies over-represented using the formula are capped at their post-2008 reform quota share.
  - Quota shares of EMDCs and advanced economies under-represented under the formula but not eligible for ad hoc increase are protected at their post selective quota share.

### VII. Box 1 — Dynamic EMDCs (criteria and outcomes)
- Three alternative criteria for capturing "dynamic" EMDCs (updated using 2008 data).
- Change from previous calculations:
  - Pakistan no longer meets the threshold (of 25 percent) for over-representation under the PPP GDP and contribution to growth criteria.
  - Uganda no longer meets the average GDP growth threshold with the data update.
- Resulting range: between 19 and 32 countries meet the criteria following the data update, compared with previous range of between 20 and 33.
- Criteria definitions:
  - PPP GDP: PPP GDP share divided by post second round quota share > 1 and not over-represented by more than 25 percent.
  - Contribution: contribution to global GDP growth during 2004-08 above 0.5% and not over-represented by more than 25 percent.
  - Growth: real GDP growth during 2004-08 above EMDC average and not over-represented by more than 25 percent.
- Presentation notes: shading denotes over-represented countries; an asterisk denotes meeting all three approaches.

### VIII. Protecting the poorest — modalities and simulation insights
- Context and options:
  - IMFC called for modalities to protect the voting share of the poorest members; modalities still need to be decided.
  - 2008 reform agreed that the share of basic votes in total votes would be maintained as quotas increase.
  - Low income countries remain over-represented on average and tend to lose quota under formula-based realignment.
  - Option requiring amendment to the Fund’s Articles: further increase the ratio of basic votes to total votes above that agreed in 2008.
  - Alternative (focus here): set aside part of an ad hoc increase to the poorest countries to maintain their quota share.
- Approaches to protection:
  - Individual country protection: eligible over-represented countries that lose quota share after the selective increase receive ad hoc increases to reverse decline; results in relatively little realignment within PRGT group.
  - Group-level protection: poorest members as a group maintain post second round share by scaling allocations; reduces cost of protection and leaves more ad hoc for other eligible members.
- Simulation implications:
  - Group vs individual protection reduces ad hoc set-aside and increases available shifts to IMFC targeted groups by 0.1 – 0.2 percent in these simulations, with no change in aggregate EMDC share.
  - Within PRGT-eligible group, Africa’s share declines by about 0.2 percent, while Asia and Middle East/Malta/Turkey shares rise.
- Coverage options for "poorest members":
  - PRGT-eligible countries (presently 71 members).
  - Low income countries per World Development Indicators (presently 42 members).
  - Focused subgroup: PRGT-eligible countries with annual per capita income below IDA cut-off (48 countries with per capita income of less than $1,135, and up to twice this amount for small states).
  - Using the smaller group (48 countries) frees part of ad hoc increase for other eligible countries, increasing targeted shifts by 0.2 percent in these simulations.

### IX. Directors’ questions and decision points (items for comment)
- Reform goals and quota-share shifts:
  - Should staff pursue approaches that could generate shifts in quota share to both dynamic EMDCs and from over- to under-represented countries of at least 5 percent?
- Alternative distribution approaches:
  - Views on introducing a distribution key based on the compressed GDP blend as complement or alternative to the formula.
  - Whether other approaches are worth exploring.
- Composition and relative size of increase elements:
  - Views on the relative size of selective and ad hoc increases; whether these should be predominant elements.
  - Merit of keeping open a smaller equiproportional element.
- Options to facilitate larger net shifts to EMDCs:
  - Views on foregoing ad hoc increases by under-represented advanced economies (while preserving selective gains).
  - Views on allowing over-represented advanced economies to become modestly under-represented.
- Protection options for the poorest members:
  - Assess options including a further increase in share of basic votes vs ad hoc quota adjustments.
  - If ad hoc protection, should it be individual or group-level?
  - Merit of using proposed PCDR-eligible set as alternative to PRGT-eligible list.
- Illustrative simulation design and numeric parameters to note:
  - Overall increase sizes modeled: 50 percent, 100 percent, 150 percent of post second round quotas.
  - Allocation components: equiproportional/selective/ad hoc (x/y/z).
  - GDP blend: 60 percent market GDP + 40 percent PPP GDP; compression factor 0.95.
  - Protection floor (partial protection): 95 percent of calculated quota share.
  - Dynamic EMDC definition uses ratio of PPP GDP share to post second round quota share > 1 and not over-represented by more than 25 percent.

### X. Illustrative Scenario: Request by Mr. Weber (selected simulation)
- Overview and purpose:
  - Simulations based on Set 2; assumed overall quota increase: 100 percent.
  - Distribution: 0/60/40 (equiproportional/selective/ad hoc).
  - Objective: additional protection to members that contribute more than proportionally to non‑GRA financed activities and the NAB, while preserving protections for over‑represented countries.
- Eligibility criteria for Weber additional protection (exact formulation)
  - (1) Contribute to PRGT, externally financed Fund technical assistance and the NAB;
  - (2) Country's average share in contributions is greater than its post second round quota share;
  - (3) Country is over‑represented and will lose quota share relative to its post second round quota share.
- Adjustment rule for eligible members (exact formula preserved)
  - New quota share = (PSRQS + SET2QS * (1+ AMF/100)) / 2
    - where PSRQS = post second round quota share; SET2QS = quota share resulting from selective and ad hoc increases as in Set 2.
  - AMF (Average Misalignment Factor) defined as country’s average out‑of‑lineness with respect to PRGT loans, PRGT subsidies, technical assistance and the NAB (country’s share in contribution divided by post second round quota share).
- Key assumptions and protections applied:
  - Overall increase: 100 percent.
  - Distribution: 0/60/40.
  - Over‑represented countries: protected at their calculated quota share.
  - PRGT‑eligible countries: receive at least their post second round actual quota share.
- Selected member‑level results (representative exact figures from Table 11)
  - United States: Post Second Round 17.670; Calculated 16.987; GDP Blend share 21.645.
  - China: Post Second Round 3.996; Calculated 7.917; GDP Blend share 8.128.
  - Japan: Post Second Round 6.556; Calculated 6.493; GDP Blend 7.282.
  - Germany: Post Second Round 6.110; Calculated 5.678; GDP Blend 5.201.
  - India: Post Second Round 2.442; Calculated 2.403; GDP Blend 3.027.
  - Brazil: Post Second Round 1.783; Calculated 2.153; GDP Blend 2.654.
  - Korea: Post Second Round 1.412; Calculated 2.108; GDP Blend 1.909.
  - Saudi Arabia: Post Second Round 2.930; Calculated 1.337; GDP Blend 0.842.
- Mechanism intent and tradeoffs:
  - Weber introduces a contributions‑based “booster” to recognize members whose financial contributions exceed their quota share; booster may remove caps and scale SET2QS upward by AMF before averaging with PSRQS.
  - Tradeoffs: recognizes contributors but departs from strictly formula‑based distribution; may affect net shift toward under‑represented EMDCs.

*Source: Excerpt from IMF document _062210 (Fourteenth General Review of Quotas — updated data through 2008, staff paper and illustrative simulations; selected simulation requests including “Illustrative Scenarios: Request by Mr. Weber”).*

### 1. Distribution of Quotas and Calculated Quotas ......................................................................4

### 1. Distribution of Quotas and Calculated Quotas

### I. Introduction — key observations
- IMFC pledged to complete the 14th General Review of Quotas before January 2011; this follows earlier calls to bring forward the deadline by two years.
- The finalized 2008 data update confirms broad trends from earlier derived 2008 data: a further significant increase in calculated quota share of emerging market and developing countries (EMDCs) as a group relative to the 2007 data set.
- Aggregate result: EMDCs are under-represented by 2.2 percentage points using 2008 data relative to calculated quota shares.
- Within EMDCs: 50 out of 161 countries are under-represented by a total of 8.9 percentage points; many EMDCs remain over-represented.
- Advanced economies as a group are over-represented, but 10 individual advanced economies are under-represented.

### II. Key statistics from Tables (exact figures preserved)
- Table 1 — Distribution of Quotas and Calculated Quotas (In percent)
  - Header columns: Post Second Round Quota Share 1/ | 2005 3/ | 2007 4/ | 2008 5/
  - Advanced economies: 60.5 | 63.8 | 60.4 | 58.2
  - Major advanced economies: 45.3 | 47.6 | 45.0 | 42.9
    - Of which: US: 17.7 | 19.0 | 17.8 | 17.0
  - Other advanced economies: 15.1 | 16.2 | 15.4 | 15.3
  - Emerging Market and Developing Countries: 39.5 | 36.2 | 39.6 | 41.8
  - Developing countries: 32.4 | 30.0 | 32.6 | 34.1
    - Africa: 4.9 | 2.8 | 3.1 | 3.1
    - Asia 6/: 12.6 | 15.8 | 17.2 | 17.7
    - Middle East, Malta & Turkey: 7.2 | 4.8 | 5.4 | 6.2
    - Western Hemisphere: 7.7 | 6.6 | 6.9 | 7.0
  - Transition economies: 7.1 | 6.2 | 7.0 | 7.7
  - Total: 100.0 | 100.0 | 100.0 | 100.0
  - Memorandum items:
    - EU 27: 31.9 | 32.9 | 32.1 | 31.3
    - LICs (PRGT-eligible countries): 4.3 | 2.2 | 2.5 | 2.6
  - Source: Finance Department.
  - Notes included in table: formula for CQS, GDP blended using 60 percent market and 40 percent PPP exchange rates, K compression factor 0.95; data bases for 2005/2007/2008 columns specified; 6/ includes Korea and Singapore.

- Table 2 — Under- and Over-represented Countries by Major Groups (In percentage points)
  - Header columns: Post Second Round Quota Share | 2007 3/ | 2008 4/
  - Advanced economies: 60.5 | 0.0 | -2.2
    - Under-represented: 2.3 | 1.8
    - Over-represented: -2.3 | -4.1
  - Emerging Market and Developing Countries: 39.5 | 0.0 | 2.2
    - Under-represented: 7.7 | 8.9
    - Over-represented: -7.6 | -6.7
  - Total Under-represented Countries: 9.9 | 10.7
  - Total Over-represented Countries: -9.9 | -10.7
  - Memorandum items:
    - EU 27: 31.9 | 0.2 | -0.5
      - Under-represented: 2.1 | 2.2
      - Over-represented: -1.9 | -2.8
    - LICs (PRGT-eligible countries): 4.3 | -1.7 | -1.7
      - Under-represented: 0.1 | 0.1
      - Over-represented: -1.8 | -1.8
    - Number of under-represented countries: 64 | 60
      - Of which: EMDCs: 52 | 50
  - Source: Finance Department.
  - Note: Difference = calculated quota shares minus post second round actual quota shares; data bases for 2007/2008 specified.

### III. Stocktaking — key positions and constraints
- IMFC parameters from Istanbul: review should achieve a shift in quota share to dynamic EMDCs of at least 5 percent from over-represented to under-represented countries using the current quota formula as basis; these changes come on top of the 2008 reform which when fully implemented will result in a net 2.7 percent shift in voting share to EMDCs as a group. The IMFC also indicated that the voting share of the poorest members should be protected.
- Differences of view among Directors:
  - Whether the "at least 5 percent" shift should be to dynamic EMDCs, from over- to under-represented countries, or both.
  - Whether to use alternative criteria to identify dynamic EMDCs or to capture dynamism within the formula itself.
  - Whether to reopen or revise the quota formula; many Directors favored not reopening given time constraints, others called for further work.
  - Preferences for combinations of selective and ad hoc increases; some considered an equiproportional increase premature to rule out.
  - Protection of poorest members widely supported, but differing views on definition and modalities.

- Practical implications:
  - Significant net shifts to EMDCs are more difficult to achieve using the formula alone because many EMDCs are over-represented; sizable net shifts would require under-represented advanced economies to forego increases or over-represented advanced economies to become modestly under-represented.
  - Reopening the formula could yield different results but is unlikely to be easier to agree than realigning quota shares; past changes to the formula have required protracted discussions.
  - Achieving enhanced legitimacy and effectiveness of the Fund requires compromises across membership.

### IV. Illustrative simulations — design and common parameters
- Simulations are illustrative only and do not represent staff proposals; they use updated data through 2008 and reflect Directors’ views expressed in March.
- Three broad groups of simulations differ by approach to ad hoc increases:
  1. Builds on March paper: focuses on EMDCs and relies primarily on the quota formula as distribution key.
  2. Gives a larger role to a country’s economic weight by incorporating the quota formula’s GDP blend variable in the distribution key for ad hoc increases, along with the quota formula.
  3. Makes the GDP blend variable the primary distribution key for ad hoc increases; the formula continues to distribute selective increases.
- GDP blend variable: linear combination of market GDP (60 percent) and PPP-based GDP (40 percent), compressed using factor 0.95 for allocating quota increases.
  - The number of countries eligible under this approach depends on assumptions; up to 38 countries (including up to 32 EMDCs) are eligible in reported simulations; without compression factor, maximum number would drop to 23 countries (including 17 EMDCs).

- Common simulation features:
  - Data base: updated data set through 2008 as presented in EB/CQuota/10/3.
  - Size of overall quota increase: simulations presented for overall increases of 50 percent, 100 percent, and 150 percent.
  - Allocation mechanisms (to facilitate comparability): 0/60/40, 0/75/25, and 20/50/30 (equiproportional/selective/ad hoc).
  - Protecting the poorest: quota shares of individual PRGT-eligible members are protected at their post-2008 reform levels in these simulations.
  - Additional elements to facilitate larger shifts to EMDCs:
    - Ad hoc increases concentrated on EMDCs that meet specified criteria; under-represented advanced economies benefit fully from selective increases but only participate in ad hoc increases to the extent required to avoid dilution of their increased quota share following the selective increase.
    - Some simulations allow over-represented countries to become modestly under-represented; two protection approaches illustrated:
      - Full protection: over-represented countries are fully protected from becoming under-represented (Tables 3A, 4A, 5A, and A1, A3, A5).
      - 95 percent protection: protection set at 95 percent of calculated quota share, allowing these countries to become modestly under-represented by up to 5 percent (Tables 3B, 4B, 5B, and A2, A4, A6).
    - Note: in the 2008 reform some over-represented countries (mainly EMDCs) became under-represented; the largest resulting under-representation was 11.5 percent. In the 11th Review a limit was imposed to ensure no over-represented country became under-represented; that limit affected very few countries because ad hoc increases were only 10 percent of total distribution in that review.

### V. Illustrative simulation outcomes and considerations (summary)
- Initial simulations in March had emphasized the formula and resulted in a net shift to EMDCs in the range of 1-3½ percent, while achieving shifts of at least 5 percent to dynamic EMDCs in scenarios tailored to that goal.
- Because many EMDCs are over-represented, achieving a substantial net shift to EMDCs as a group requires additional elements beyond strict formula-based allocations (e.g., targeted ad hoc increases, allowance for modest under-representation of some over-represented countries, or use of GDP blend).
- The mix of selective and ad hoc increases matters materially for distributional outcomes; smaller equiproportional elements were used relative to previous reviews to focus the realignment on targeted adjustments.

*Source: IMF Finance Department — Fourteenth General Review of Quotas (updated data through 2008) — staff paper and illustrative simulations.*

### 17.      Taking account of the above elements, the method used for allocating ad hoc

### _062210 - 17.      Taking account of the above elements, the method used for allocating ad hoc

### Method for allocating ad hoc increases — overview of Sets
- Set 1: Ad hoc increases to dynamic EMDCs (Tables 3A and 3B, and Tables A1 and A2)
  - Ad hoc increases allocated mainly to under-represented EMDCs and other EMDCs that meet the dynamic criterion based on their share in PPP GDP (i.e., the third option in Section III.C of Fourteenth General Review of Quotas Realigning Quota Shares Initial Considerations (3/5/2010)—see Box 1).
  - Under-represented EMDCs receive a uniform reduction in out-of-lineness based on the formula or a fixed percentage increase above their post selective nominal quota, whichever is greater; other dynamic EMDCs receive the fixed percentage increase.
  - A smaller portion allocated to protect against:
    - (i) dilution of the share of under-represented advanced economies as a result of the ad hoc increases;
    - (ii) over-represented countries becoming (more than modestly) under-represented; and
    - (iii) a decline in the post second round quota share of individual PRGT-eligible countries.
  - Implementation note: This approach seeks to ensure that no over-represented EMDC under the formula receives a larger increase than under-represented EMDCs. The size of the fixed percentage increase is determined to allow a substantial decrease in out-of-lineness for under-represented EMDCs and an adequate increase in share for eligible dynamic but over-represented EMDCs.

- Set 2: Ad hoc increases allocated based on either the formula or the GDP blend (Tables 4A and 4B, and Tables A3 and A4)
  - Ad hoc increases allocated mainly to countries under-represented either under the formula or the compressed GDP blend variable (i.e., a country’s share in the compressed GDP blend variable is greater than its quota share after the selective increase).
  - Eligible EMDCs receive the higher of the increase indicated by a uniform reduction in their out-of-lineness with respect to each of these two variables.
  - Same protections as in Set 1 apply.
  - Advanced economies only under-represented with respect to the GDP blend (i.e., over-represented using the formula) are capped at their post second-round quota share so they do not gain quota share under this approach.

- Set 3: Ad hoc increases allocated based on the GDP blend variable (Tables 5A and 5B, and A5 and A6)
  - Ad hoc increases allocated mainly to countries under-represented on the basis of the GDP blend.
  - Eligible EMDCs receive a uniform reduction in their out-of-lineness with respect to the GDP blend variable.
  - Protections as in Sets 1 and 2 apply to over-represented and PRGT-eligible countries; eligible advanced economies over-represented using the formula are capped at their post-2008 reform quota share.
  - Quota shares of EMDCs and advanced economies that are under-represented under the formula but not eligible for an ad hoc increase are protected at their quota share after the selective quota increase, so their quota share does not decline as a result of the ad hoc increase.

### Box 1 — Dynamic EMDCs (criteria and outcomes)
- Three alternative criteria discussed for capturing "dynamic" EMDCs (updated using the 2008 data base).
- Change from previous calculations:
  - Pakistan no longer meets the threshold (of 25 percent) for over-representation under the PPP GDP and contribution to growth criteria.
  - Uganda no longer meets the average GDP growth threshold with the data update.
- Resulting range: between 19 and 32 countries meet the criteria following the data update, compared with the previous range of between 20 and 33.
- Criteria definitions (as used in the Box):
  - PPP GDP: Includes EMDCs whose PPP GDP share divided by post second round quota share is greater than 1 and not over-represented by more than 25 percent.
  - Contribution: Includes EMDCs whose contribution to global GDP growth during 2004-08 is above 0.5% and not over-represented by more than 25 percent.
  - Growth: Includes EMDCs whose real GDP growth during 2004-08 is above EMDC average and not over-represented by more than 25 percent.
- Notes on presentation in Box 1:
  - Shading denotes over-represented countries. An asterisk in front indicates that the country meets the criteria under all three approaches.

### Main results (simulation outcomes and comparisons)
- All three approaches can result in sizable shifts in quota shares and significant realignment in rankings among the largest quota countries.
- Country ranking impacts are generally more stable (with a few exceptions) than shifts in shares, especially when comparing Set 1 with Sets 2 and 3.
- Set 1 achieves the largest overall shifts in shares, resulting in increases significantly above the IMFC targets; this mainly reflects a decline in the U.S. quota share (and to a smaller extent Japan) and a correspondingly larger increase in the share of China.
- Sets 2 and 3 generally achieve the IMFC targets provided the overall quota increase is large enough (a doubling rather than 50 percent).
- Summary Table: Range of shift of quota share to under-represented countries / Dynamic EMDCs / EMDCs as a group (In percentage points)
  - Set 1 Ad hoc to dynamic EMDCs (Ad hoc increase to all under-represented countries and other dynamic EMDCs)
    - Full protection: 5.2 - 8.1 / 5.1 - 7.3 / 2.9 - 3.4
    - Partial protection: 6.6 - 10.2 / 6.6 - 9.7 / 4.4 - 5.5
  - Set 2 Ad hoc based on formula and GDP blend (Ad hoc increase to countries under-represented with respect to the formula or the GDP blend)
    - Full protection: 4.2 - 7.0 / 4.0 - 6.3 / 1.9 - 2.3
    - Partial protection: 4.6 - 8.0 / 4.4 - 7.4 / 2.2 - 3.2
  - Set 3 Ad hoc based on GDP blend (Ad hoc to countries under-represented with respect to the GDP blend)
    - Full CQS protection: 4.1 - 6.9 / 4.0 - 6.3 / 1.9 - 2.3
    - Partial CQS protection: 4.5 - 7.9 / 4.4 - 7.3 / 2.2 - 3.2
- Notes on table:
  - Results reported for quota increases of 50, 100, and 150 percent; see Tables 3–5 for details.
  - Definition of dynamic EMDCs: includes all under-represented EMDCs plus other dynamic EMDCs defined as those whose PPP GDP share divided by post second round quota share is greater than 1 and who are not over-represented by more than 25 percent.
  - Full protection: the quota share of initially over-represented countries cannot fall below the calculated quota share as a result of the quota increase.
  - Partial protection: the quota share of initially over-represented countries cannot fall below 95 percent of the calculated quota share.

### Protecting the poorest — modalities and simulation insights
- Context and options
  - IMFC called for modalities to protect the voting share of the poorest members; modalities still need to be decided.
  - 2008 reform agreed that the share of basic votes in total votes would be maintained as quotas increase, implying a member’s voting share would remain unchanged as long as its quota share does not change.
  - Low income countries remain over-represented on average and tend to lose quota (and therefore voting share) under formula-based realignment.
  - Option requiring amendment to the Fund’s Articles: further increase the ratio of basic votes to total votes above that agreed in 2008.
  - Alternative (focus of remainder of section): set aside part of an ad hoc increase to the poorest countries to maintain their quota share.

- Approaches to protection
  - Individual country protection (used in earlier simulations)
    - Partially reverses adjustments in quota share resulting from the selective increases.
    - Eligible countries that are over-represented and lose quota share after the selective increase receive ad hoc increases to reverse that decline.
    - Outcome: relatively little realignment in shares within the group of PRGT-eligible countries.
  - Group-level protection (protect poorest members as a group)
    - Realignment within the group still takes place.
    - Overall cost of protection is somewhat reduced.

- Simulation implications (illustrated in Tables 6 and A7)
  - Applying protection at the group rather than individual country level:
    - Reduces the amount of ad hoc increases set aside for protection.
    - Leaves more available for distribution to other eligible members.
    - Results in slightly higher shifts to IMFC targeted groups (by 0.1 – 0.2 percent in these simulations) with no change in aggregate share of EMDCs.
    - Within the PRGT-eligible group, Africa’s share declines by about 0.2 percent, while shares of Asia and the Middle East, Malta, and Turkey increase.

- Who counts as "poorest members"? (coverage options)
  - Options include:
    - PRGT-eligible countries (presently 71 members).
    - Low income countries based on the IBRD’s World Development Indicators (WDI) definition (presently 42 members; see Table 7).
    - Focus limited to PRGT-eligible countries with annual per capita income below the prevailing IDA cut-off, or below twice the cut-off for countries meeting the "small country" definition:
      - This group includes 48 countries with a per capita income of less than $1,135 (and up to twice this amount for small states).
      - PRGT-eligible group includes a number of countries with significantly higher per capita incomes.
  - Simulation effect of using the smaller group (48 countries): frees up part of the ad hoc increase for other eligible countries, resulting in larger shifts to IMFC targeted groups (by 0.2 percent for the simulations shown), without changing the overall distribution between advanced economies and EMDCs.
  - Using the smaller group may reduce anomalies in treatment of over-represented countries based on whether they fall within or outside the PRGT-eligible list.

*Source: Excerpt from IMF document _062210 (chapter/section on allocation of ad hoc increases and protection of poorest members).*

### 23.      Directors may wish to comment on the following issues:

### _062210 - 23.      Directors may wish to comment on the following issues:

### Reform goals and quota-share shifts
- Directors are asked to comment on the broad goals of the reform, taking into account the objectives set out by the IMFC.
- Specific question: should staff continue to pursue approaches that could generate shifts in quota share to both dynamic EMDCs and from over- to under-represented countries of at least 5 percent?

### Alternative distribution approaches for the quota increase
- Directors are asked to assess the relative merits of alternative approaches set out in the paper for distributing the quota increase, including:
  - Introducing a distribution key based on the compressed GDP blend as a complement or alternative to the formula for distributing ad hoc increases.
  - Whether there are other approaches worth exploring.

### Composition and relative size of increase elements
- Directors are asked for views on the relative size of the selective and ad hoc increases.
- Specific framing: do Directors agree these should be the predominant elements of the increase, given the focus on realigning shares in the 14th Review?
- Directors are asked whether there is merit in keeping open the option of including a smaller equiproportional element as part of the overall increase.

### Options to facilitate larger net shifts to EMDCs
- The simulations in the paper consider two options:
  - Foregoing ad hoc increases by under-represented advanced economies (while preserving their gains from the selective increase).
  - Allowing over-represented advanced economies to become modestly under-represented.
- Directors are asked how they view these approaches.

### Protection options for the poorest members
- Directors are asked to assess options for protecting the voting share of the poorest members, including the role of a further increase in the share of basic votes.
- If protection were achieved through ad hoc quota adjustments, should protection be provided for individual countries or for the group as a whole?
- Directors are asked whether there is merit in exploring the option of using the set of members that would be eligible for post-catastrophe debt relief (as recently discussed by the Board) as an alternative to the PRGT-eligible list, and whether there are other alternative approaches to explore.

### Illustrative simulation design and key numeric parameters
- Simulations assume overall quota increases of 50, 100, and 150 percent of post second round quotas.
- The overall increase is the sum of equiproportional, selective, and ad hoc increases.
  - Equiproportional increase: distributed to all members in proportion to their post second round quota share.
  - Selective increase: distributed to all members in proportion to their calculated quota share.
  - Ad hoc increase: distributed to eligible members according to the set and implementation rules below.

- Three ad hoc eligibility sets in illustrative simulations:
  - Set 1: ad hoc to dynamic EMDCs (includes all EMDCs under-represented with respect to the quota formula—ratio of calculated to post second round quota share > 1—plus other EMDCs whose PPP GDP share > post second round quota share and who are not over-represented by more than 25 percent).
  - Set 2: ad hoc to countries under-represented either with respect to the quota formula or with respect to the GDP blend variable.
  - Set 3: ad hoc to countries under-represented with respect to the GDP blend variable.

- GDP blend and compression:
  - GDP blend = 60 percent market GDP + 40 percent PPP GDP, compressed by a factor of 0.95 (i.e., compressed GDP blend uses factor 0.95).

- Ad hoc allocation mechanism:
  - Allocation primarily based on a uniform reduction in out-of-lineness (URF): reduces the gap between a country’s calculated quota share and its post selective quota share, or between its GDP-blend share and post selective quota share, proportionately by a uniform reduction factor.
  - Set 1 also uses a fixed percentage “minimum ad hoc increase to dynamic EMDCs” for eligible over-represented EMDCs; eligible under-represented EMDCs receive the URF allocation or the minimum ad hoc increase, whichever is greater.

- Rules by set (implementation detail):
  - Set 1:
    - Eligible over-represented EMDCs receive a fixed percentage increase over their post selective nominal quota (the “minimum ad hoc increase to dynamic EMDCs” shown in Tables 3A and 3B).
    - Eligible under-represented EMDCs receive either the uniform reduction in out-of-lineness or the minimum ad hoc increase, whichever is greater.
    - Advanced countries under-represented under the quota formula are protected at their post selective quota share.
  - Set 2:
    - EMDCs under-represented under the formula only: receive URF with respect to the formula.
    - EMDCs under-represented under the GDP blend only: receive URF with respect to the GDP blend.
    - EMDCs under-represented under both: receive the greater of the two URFs.
    - Advanced countries under-represented only under the GDP blend: capped at post second round quota share.
    - Advanced countries under-represented under the formula only or both: capped at post selective quota share.
  - Set 3:
    - Eligible EMDCs receive URF with respect to the GDP blend.
    - Eligible advanced countries over-represented with respect to the quota formula are capped at their post second round quota share.
    - Eligible advanced countries under-represented with respect to the quota formula are capped at their post selective quota share.

- Protection of over-represented countries from becoming under-represented:
  - Full protection scenarios: simulated quota share of an over-represented country cannot fall below its calculated quota share.
  - Partial protection scenarios: simulated quota share of an over-represented country cannot fall below 95 percent of its calculated quota share (i.e., 95 percent protection).

- Protection of poorest members implemented in scenarios:
  - Baseline (Tables 3A–5B): each PRGT-eligible country receives at least its post second round actual quota share.
  - Alternative mechanisms (Tables 6 and A7):
    - Individual PRGT protection: PRGT-eligible countries receive at least their post second round actual quota share.
    - Group PRGT protection: PRGT-eligible countries as a group maintain their post second round actual quota share by scaling up the allocations for PRGT-eligible countries by a common factor.
    - Individual PCDR protection: countries meeting the proposed PCDR eligibility receive at least their post second round actual quota share.

### Simulation dataset and ancillary assumptions
- Data cover the period through 2008 as presented in Fourteenth General Review of Quotas—Updated Data Set and Quota Calculations (6/3/10), primarily based on IFS data.
- Simulation results include ad hoc increases for 54 eligible members not yet effective; include Kosovo (member as of June 29, 2009) and Tuvalu in anticipation of forthcoming membership.
- For two countries not yet consenting to their quota increases, 11th Review proposed quotas are used.
- The overall increase is distributed across equiproportional, selective, and ad hoc components in proportions denoted generically as x/y/z in the tables.

### Key scenario magnitudes and parameters to note (as used across tables)
- Overall increase sizes modeled: 50 percent, 100 percent, 150 percent of post second round quotas.
- GDP blend weights: 60 percent market GDP, 40 percent PPP GDP.
- Compression factor for GDP blend: 0.95.
- Protection floor (partial protection) for over-represented countries: 95 percent of calculated quota share.
- Definition thresholds:
  - Dynamic EMDCs include EMDCs with ratio of PPP GDP share to post second round quota share > 1 and not over-represented by more than 25 percent (i.e., calculated/post second round quota share > 0.8 is used in defining over-representation cutoff).
  - Minimum net shifts contemplated in the paper include targeted adjustments of at least 5 percent in quota-share shifts for dynamic EMDCs and from over- to under-represented countries.

### Selective lists and eligibility groupings cited
- PRGT-eligible list referenced for protection (see eligibility to use Fund’s concessional facilities).
- Proposed PCDR eligibility list referenced as an alternative group for protection (post-catastrophe debt relief proposal).
- World Bank Low Income and IDA-related cutoffs are used for selective lists; Tables identify PRGT-eligible, proposed PCDR-eligible, and World Bank Low Income groupings.

*Source: Finance Department, Fourteenth General Review of Quotas—Realigning Quota Shares: Further Considerations (statistical appendix and simulation requests).*

### 1.         Illustrative         Scenarios: Request by Mr. Alazzaz ......................................................

### 1.         Illustrative         Scenarios: Request by Mr. Alazzaz .............................................................9

### Listed Illustrative Scenarios (by item and page)
- 1.         Illustrative         Scenarios: Request by Mr. Alazzaz .............................................................9
- 2.   Illustrative Scenarios: Request by Mr. Callesen ..........................................................10
- 3.   Illustrative Scenarios: Request by Mr. Fayolle and Mr. Gibbs. ...................................11
- 4.   Illustrative Scenarios: Request by Mr. Guzmán and Mr. Stein ...................................12
- 5.   Illustrative Scenarios: Request by Mr. Hockin ............................................................13
- 6.   Illustrative Scenarios: Request by Mr. Kiekens ...........................................................14
- 7.   Illustrative Scenarios: Request by Mr. Kotegawa ........................................................15 
- 8a.   Illustrative Scenarios: Request by Ms. Lundsager .......................................................16 
- 8b.   Illustrative Scenarios: Request by Ms. Lundsager .......................................................17
- 9.   Illustrative Scenarios: Request by Mr. Mozhin and Mr. Virmani ...............................18
- 10.   Illustrative Scenarios: Request by Mr. Virmani ..........................................................19

*Source: _062210 - 1.         Illustrative         Scenarios: Request by Mr. Alazzaz .............................................................9 (PDF content listing provided).*

### 11.  Illustrative Scenarios: Request by Mr. Weber .............................................................20

### 11. Illustrative Scenarios: Request by Mr. Weber

### Overview and purpose
- Simulations based on Set 2 in Fourteenth General Review of Quotas—Realigning Quota Shares: Further Considerations.
- Assumed overall quota increase: 100 percent.
- Distribution across mechanisms: 0/60/40 (equiproportional/selective/ad hoc).
- Objective: provide additional protection to members that contribute more than proportionally (relative to their quota share) to non‑GRA financed activities and the NAB, while preserving protections for over‑represented countries.

### Eligibility criteria for Weber additional protection (exact formulation)
A country qualifies for additional protection based on contributions if it meets all three criteria:
- (1) Contribute to all of the following activities: PRGT, externally financed Fund technical assistance and the NAB;
- (2) The country's average share in contributions is greater than its post second round quota share;
- (3) The country is over‑represented and will lose quota share relative to its post second round quota share.

### Adjustment rule for eligible members (exact formula preserved)
- The maximum loss in quota share for an eligible over‑represented country (AQS‑CQS) is reduced in proportion to the country’s average out‑of‑lineness (AMF) with respect to the four categories of financial contributions (PRGT loans, PRGT subsidies, technical assistance and the NAB).
- The out‑of‑lineness (AMF) is defined as the country’s share in the financial contribution divided by its post second round quota share.
- For eligible countries, the new quota share is set to:
  - (PSRQS + SET2QS * (1+ AMF/100)) / 2
  - where PSRQS = post second round quota share; SET2QS = quota share that results from the selective and ad hoc increases as in Set 2.

### Key assumptions and protections applied in the simulation
- Overall increase: 100 percent of post second round quotas.
- Distribution: 0/60/40 (equiproportional/selective/ad hoc).
- Over‑represented countries: protected at their calculated quota share (i.e., cannot fall below calculated quota share in standard Set 2 assumptions).
- PRGT‑eligible countries: receive at least their post second round actual quota share (protection of the poorest).

### Mechanism and intent (policy design)
- The Weber scenario introduces a contributions‑based “booster” to recognize members whose financial contributions to PRGT, externally financed technical assistance, and the NAB exceed their post second round quota share.
- The booster:
  - May apply even if the eligible member is over‑represented or under‑represented under the formula;
  - Removes any cap that applied to an eligible country in Set 2;
  - Scales the selective+ad hoc outcome (SET2QS) upward by AMF (in percentage points) before averaging with PSRQS.

### Relation to other scenarios documented in the chapter (context)
- The Weber request (Tables 11 and A11) is one of multiple Executive Director simulation requests, which include alternative overall increases and allocation mixes (examples elsewhere in the chapter: 30 percent overall with 0/60/40 in Mr. Alazzaz; 50/100/150 percent increases in Mr. Callesen; formula‑based, GDP blend, PPP GDP, compressed/uncompressed variants in other requests).
- The Weber scenario is explicitly linked to the Average Misalignment Factor (AMF) concept used in other contribution‑based proposals in this chapter.

### Selected member‑level results (representative highlights from Table 11; exact figures preserved)
- United States: Post Second Round 17.670; Calculated 16.987; GDP Blend share 21.645; simulated 0/60/40 cases show values such as 16.987 and 17.670 in the table for variants.
- China: Post Second Round 3.996; Calculated 7.917; GDP Blend share 8.128; simulated 0/60/40 cases include 5.970, 5.415, 5.639 in Table 11 variants.
- Examples of other members in Table 11 (selected entries preserved exactly):
  - Japan: Post Second Round 6.556; Calculated 6.493; GDP Blend 7.282.
  - Germany: Post Second Round 6.110; Calculated 5.678; GDP Blend 5.201.
  - India: Post Second Round 2.442; Calculated 2.403; GDP Blend 3.027.
  - Brazil: Post Second Round 1.783; Calculated 2.153; GDP Blend 2.654.
  - Korea: Post Second Round 1.412; Calculated 2.108; GDP Blend 1.909.
  - Saudi Arabia: Post Second Round 2.930; Calculated 1.337; GDP Blend 0.842.
- (Table 11 and the A11 by‑member listing include comprehensive member‑level simulated quota shares under the Weber assumptions; the entries above are representative exact figures taken from the table.)

### Implementation implications and policy considerations (as reflected in the chapter)
- The Weber approach aims to recognize and partially offset quota losses for contributors to non‑GRA activities and the NAB by linking additional protection to contribution misalignment (AMF).
- Design choices embedded in the scenario:
  - Ties additional quota protection to verifiable contribution patterns across four categories;
  - Uses an averaging formula to moderate adjustments (PSRQS averaged with an AMF‑adjusted SET2QS);
  - Removes prior caps for eligible members, potentially increasing their post‑reform shares relative to standard Set 2 outcomes.
- Tradeoffs:
  - Increases recognition for contributors but departs from strictly formula‑based distribution; may affect the net shift toward under‑represented EMDCs.
  - Requires policy decisions about which contributions and time averaging to use in computing AMF (the chapter defines AMF as the average share in contributions relative to post second round quota share).

### Cross‑references to assumptions for ad hoc increases (exact framework points)
- Attachment 1 (June paper) Sets:
  - Set 2: ad hoc increases to countries under‑represented with respect to the quota formula or the GDP blend; EMDCs under‑represented under the formula only receive uniform reduction in out‑of‑lineness; advanced under‑represented under GDP blend only are capped at post second round quota share; caps differ by criterion.
- Protection levels:
  - Full protection: simulated quota share of an over‑represented country cannot fall below its calculated quota share.
  - Partial protection: lower limit set at 95 percent of calculated quota share (CQS/(1+0.05) = 95.24 percent of calculated quota share) in simulations that apply partial protection.

*Source: Fourteenth General Review of Quotas—Simulation Requests from Executive Directors (July 13, 2010), “Illustrative Scenarios: Request by Mr. Weber” and associated tables and attachments.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2010/_062210.pdf_