## Executive Board Report to the IMFC on Quota and Governance Reforms ## Source details **Canonical URL:** [Executive Board Report to the IMFC on Quota and Governance Reforms](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2010/_100110a.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2010/_100110a.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2010/_100110a.pdf.json) --- ### Overview - Since the IMFC last met in April, the Executive Board has taken up the full range of quota and other governance reforms; discussions have been inconclusive and no proposal has been able to command broad support. - The debate is continuing with informal consultations aimed at narrowing remaining differences and producing a staff proposal acceptable to the membership. - A call for members to finalize domestic processes so that the 2008 quota and voice reform can become effective by the time of the Annual Meetings. ### Size of the Quota Increase - Most Directors supported a substantial overall increase to ensure the Fund has sufficient resources to meet members’ needs. - Developments in the euro area and recent progress on reforming the Fund’s lending facilities strengthened the case for a substantial increase. - Most Directors indicated they could support a doubling of quotas; some viewed this as an upper bound, others as a minimum. - A few Directors, noting the expanded New Arrangements to Borrow (NAB), were not convinced of the need to increase quota resources substantially beyond that needed to achieve the targeted realignment of quota shares. - Many Directors noted that with an increase in quotas, the size of the NAB should be reconsidered to maintain the appropriate balance between quota and borrowed resources. ### Quota Realignment - Directors reiterated commitment to a shift in quota share to dynamic emerging market and developing countries (EMDCs) of at least 5 percent from over- to under-represented countries. - Significant differences remain on the details and mechanisms for implementing realignment: - A number of Directors viewed approaches along the lines laid out in the staff paper as a good basis: a combination of a selective increase for all members and a sizable ad hoc component aimed primarily at EMDCs, using the compressed GDP blend variable in distributing ad hoc increases. - Many other Directors considered a larger net shift to EMDCs is needed—"of the order of 5–6 percentage points"—with adequate protection for other EMDCs not benefiting from the shift; they generally stressed that PPP GDP should play a larger role in allocating ad hoc increases, and did not support protection for over-represented advanced countries. These Directors, together with a few others, maintained the view that the quota formula remains severely flawed and called for its reform within two years of the conclusion of the 14th Review, as well as for more frequent adjustments based on timely data. - A number of other Directors, emphasizing that the formula should remain the primary mechanism, favored only a limited ad hoc increase as needed to achieve the targeted shift. These Directors and several others noted that all over-represented countries should contribute to the adjustment while being fully protected from becoming underrepresented; some noted all under-represented countries should be eligible for ad hoc increases. - Some Directors reiterated their call to take account of members’ voluntary financial contributions to the Fund. ### Protecting the Poorest - Directors reiterated support for protecting the voting share of the poorest members. - Many supported protecting the quota shares of these countries individually. - Preferences among Directors varied: - A number preferred protecting PRGT-eligible countries. - A few favored a narrower list of countries eligible for Post-Catastrophe Debt Relief. - A number remained open on the definition of the poorest members. - A few Directors were open to the possibility of a further increase in the share of basic votes. ### Enhancing Ministerial Engagement and Oversight - Directors agreed ministerial and governors’ engagement is essential for promoting multilateral cooperation and policy coherence. - Views diverged on whether to reform the advisory IMFC or to establish a ministerial decision-making entity (illustratively titled the "International Monetary and Financial Board (IMFB)"): - (a) Many Directors remained unconvinced of the need for a ministerial-level decision-making body, noting little difference between the IMFB and the Council and cautioning against weakening the Board of Governors and the Executive Board or upsetting the accountability framework. - (b) A number welcomed the IMFB proposal as balancing deeper ministerial engagement with preservation of Executive Board operational roles; most of these preferred broader ministerial involvement (e.g., accountability of the Managing Director, setting guidelines for the Fund’s lending framework), while others favored a more limited set of strategic decisions. - (c) A few Directors saw the IMFB as addressing prior concerns about the "Council" in the Articles of Agreement but were not ready to express firm views pending consensus on scope and noting the challenge of amending the Articles. - (d) Many Directors called for further reforms of the IMFC procedures—shorter term limits for the IMFC chair, more interactive plenary discussions, and earlier circulation of communiqué drafts—while others saw procedural reforms as insufficient without a more fundamental shift to a decision-making body. ### Board Size, Composition, and Decision Making - Directors agreed a strong Board is vital but views varied on changes to size, composition, and decision-making majorities: - (a) Size: Most Directors reiterated the current Board size strikes an appropriate balance; some called for amending the Articles to set the size of the Executive Board at 24. A few maintained reducing Board size could enhance efficiency; a few remained open to considering the option. - (b) Composition: Representation must respect voluntary constituency formation; some reiterated importance of increasing the relative presence of EMDCs. A few called for a third chair for sub-Saharan Africa. - (c) All-elected Board: Many viewed a move to an all-elected Board, together with steps to avoid further concentration in voting power, as useful to level the playing field. Others argued against changing established rules; a few called for raising the upper limit on voting power of elected chairs to facilitate consolidation, while a few favored lowering it to ensure a more even distribution. - (d) Second Alternate Executive Director: Most Directors noted greater leeway to appoint a second Alternate Executive Director for multi-country constituencies could facilitate Board re-composition; a few regarded it as premature and a few pointed to budgetary implications. - (e) Decision making: A few Directors favored lowering the threshold for special majorities to remove veto power of the largest shareholders; some called for greater, albeit selective, use of double majorities. ### Management Selection and Staff Diversity - Directors reiterated commitment to an open and transparent process for selecting management and many agreed a political commitment is necessary to end unwritten understandings governing selection. - Some Directors stressed such commitment should apply to the heads of all international financial institutions. - Support was reaffirmed for opening up the nomination process, though the extent of eligible nominators remains unresolved. - Directors noted progress in ensuring staff reflects Fund membership diversity and urged continued focus on efforts to promote diversity—nationality, gender, and background—particularly at senior levels; a number called for more ambitious targets and initiatives. - Directors looked forward to keeping abreast of efforts to strengthen results. ### Next Steps - The next formal opportunity to take up these issues will be in the context of the Executive Board’s Report to the IMFC on the Reform of Fund Governance, scheduled for late September. *Source: Executive Board Report to the IMFC on Quota and Governance Reforms (content unit _100110a).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2010/_100110a.pdf_