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### Background and purpose
- Sets out and seeks to operationalize a core package for consideration by the Executive Board and subsequently the Board of Governors.
- Key next steps:
  - Executive Board discussion of the package; if broadly supported, transmission to the Board of Governors of an Executive Board Report on the Fourteenth General Review of Quotas and Reform of the Executive Board including:
    - a proposed resolution for adoption,
    - a draft amendment of the Articles (for an all-elected Executive Board),
    - associated legal commentary.
- Draft report attached as Annex II; detailed redline of the proposed amendment attached as Annex III.
- Section IV discusses phasing and inter-linkages; Section V presents a proposed Executive Board decision to transmit the report.

### Quotas — key elements, mechanics, and proposal
- Overarching objectives and constraints:
  - IMFC guidance: 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 a basis; protect voting share of poorest members.
  - Broad support for a doubling of quotas; corresponding roll-back of the New Arrangements to Borrow (NAB) preserving relative shares when quota increase becomes effective.
  - NAB reduction to be finalized in the NAB review scheduled to be completed by November 2011; roll-back occurs only when conditions for effectiveness of quota increases under the 14th Review are met and related payments made.
- Size and distribution of increase:
  - Overall quota increase relative to post second round quotas: 100 percent—distributed as a 60 percent selective increase followed by a 40 percent ad hoc increase.
  - Selective increase: distributed to all members in proportion to their calculated quota share using the current quota formula (data through 2008).
  - Ad hoc increase: principally to members under-represented with respect to the compressed GDP blend variable (GDP blend = 60 percent market GDP + 40 percent PPP GDP, compressed by factor 0.95).
- Ad hoc allocation mechanics:
  - Use of a uniform reduction in out-of-lineness (URF) to reduce the difference between a country’s GDP blend share and its post selective quota share; a unique URF is determined given the ad hoc size and other elements.
  - Eligible EMDCs receive the full URF proportionate reduction.
  - Eligible advanced countries that are under-represented with respect to the GDP blend receive 50 percent of the URF that EMDCs receive.
  - Advanced countries under-represented by GDP blend but not by the formula are capped at their post second round quota share.
- Protection and limits:
  - Protection of poorest members: PRGT-eligible members that met the IDA income cut-off of US$1,135 in 2008 (or twice that amount for small countries) plus Zimbabwe maintain at least their post second round quota share.
  - Floor on declines: a country’s quota share cannot fall below 70 percent of its post second round quota share or decline by more than 0.85 percentage points; a 30 percent maximum decline cap also specified elsewhere.
  - Maximum nominal increase for an individual country: 220 percent.
  - Voluntary foregoing by advanced countries: 1.37 percent for G-20 advanced countries; 1.35 percent for other advanced countries.
  - Voluntary redistribution: 5 basis points from France, Germany, Italy, and the UK to Spain; additional adjustments include 0.09 basis points Singapore→Tonga; 1.56 basis points US→Saudi Arabia; 1.20 basis point shift from advanced G-20 countries to partially cover cost of protecting poorest members.
- Proposal summary (to seek broad consensus):
  - 60 percent selective / 40 percent ad hoc split.
  - Under-represented members (by GDP blend) eligible for ad hoc increases via a uniform proportional reduction in the gap between GDP blend share and post-selective quota share; advanced eligible members receive half the reduction EMDCs receive.
  - Over-represented members protected from falling below higher of calculated quota or GDP blend.
  - Protect poorest (49* members plus Zimbabwe).
  - Maximum individual quota increases capped at 220 percent; voluntary foregoing and specified redistributions applied.

### Quota outcomes and distributional effects (selected numerical findings)
- Combined elements exceed IMFC minimum targets.
- Shifts and shares:
  - Shifts to dynamic EMDCs and from over- to under-represented members are above 6 percent.
  - Reform results in a further net shift of quota shares to EMDCs as a group of 2.8 percent.
  - Further shift in voting shares of 2.6 percent; when combined with 2008 quota and voice reform aggregate voting share of EMDCs would rise by 5.3 percent.
- Country-level outcomes:
  - Major realignment in ranking of quota shares; 10 largest shareholders listed: the US, Japan, China, Germany, France, the UK, Italy, India, Russia, and Brazil.
  - 61 members would receive an increase in quota share, of which 53 are EMDCs.
  - 13 EMDCs would receive nominal quota increases greater than 150 percent.
  - 8 of the 10 countries with the largest quota increases would be EMDCs.
  - After protection for poorest, 99*** EMDCs would either maintain or receive an increase in their quota shares; Supplement reflects correction to 102 EMDCs maintain or increase after adjustments.
- Table excerpt highlights (preserve values as presented):
  - Total shares shown as 100.0 across Pre-Singapore, Post Second Round, Proposed columns.
  - Advanced economies voting share examples: Pre-Singapore 58.2; Post Second Round 60.0; Proposed 61.6; alternative columns include 60.5, 57.7, 60.6, 57.9, 55.3.
  - United States quota/voting share entries across columns include: 17.0, 21.6, 17.4, 17.7, 17.4, 17.0, 16.7, 16.5.
  - Emerging Market and Developing Countries entries include: 41.8, 40.0, 38.4, 39.5, 42.3, 39.4, 42.1, 44.7.
- Largest increases and decreases (Difference between Proposed and Post Second Round Quota Shares, percentage points):
  - Largest Increases: China 3/2.40; Brazil 0.53; Korea, Republic of 0.39; Turkey 0.37; Mexico 0.35; Spain 0.31; India 0.31; Singapore 0.23; Russian Federation 0.21; Ireland 0.20.
  - Largest Decreases: Saudi Arabia -0.85 (also listed as -0.83 in another table excerpt); Belgium -0.59; Germany -0.52; Canada -0.36; Venezuela, R. B. de -0.33; Netherlands -0.33; United Kingdom -0.28; France -0.28; United States -0.24 (also -0.26 in another table excerpt); Switzerland -0.24.
- Summary shifts and counts (Table 4 excerpts):
  - Shift of voting shares (ppts): to under-represented countries 8.2 5.8; to dynamic EMDCs 8.8 5.7; to EMDCs 5.3 2.6; to non-oil EMDCs 1/ 7.6 3.9.
  - Shift of quota shares (ppts): to under-represented countries 8.5 6.2; to dynamic EMDCs 9.0 6.0; to EMDCs 3.9 2.8; to non-oil EMDCs 1/ 6.4 4.2.
  - Number of countries that increase quota share: 54 61 (Advanced Countries 10 8; EMDCs 44 53).
  - Number of countries that increase or maintain quota share: 54 107 (Advanced Countries 10 8; EMDCs 44 99) — Supplement later reports 54 110 and EMDCs 44 102 in updated tables.
  - Number of countries with nominal quota increases >150%: 40 16 (Advanced Countries 6 3; EMDCs 34 13).
  - Adjustment coefficient 2/: 65.8 55.7.

### Governance — Executive Board size, composition, and related measures
- Executive Board size:
  - Commitment (Board of Governors resolution note) to maintain Executive Board size at 24 and to review Board composition every 8 years after conditions for effectiveness of quota increases under the 14th Review are met.
  - As a legal matter, Board of Governors must still adopt a resolution at each regular election to increase size from 20 to 24.
- Composition and representation:
  - Move to an all-elected Executive Board via proposed amendment eliminating appointed Executive Directors and Schedule E election rules.
  - Commitment to reduce number of Advanced European chairs by 2 (measured by pro-rated occupancy of Executive Director position) to favor EMDCs; to be implemented no later than the first regular election after quota increase conditions are met.
  - Representation continues to be based on voluntary constituency formation.
- Second Alternate Executive Director (AED):
  - 2008 reform allowed second AED for constituencies with at least 19 members; proposed reduction of threshold to constituencies with 7 or more members.
  - Provision effective at the first regular election after entry into force of the 2008 Proposed Amendment on Voice and Participation.
  - Implementation broadly budget neutral by re-designating an existing “Senior Advisor” as an AED, except for large sub-Saharan African constituencies granted an additional resource.
- Electoral and regulatory framework:
  - Proposed amendment specifies Board of Governors adopt regulations to govern elections to the all-elected Board, including a limit on total number of votes that more than one member may cast for same candidate and potential minimum vote threshold; regulations designed to avoid excessive concentration of voting power while allowing constituency flexibility.
  - Transitional provisions: incumbents appointed under former rules to be deemed elected for transitional period; consequential amendments to By-Laws and Rules and Regulations.

### Phasing, inter-linkages, timeline, and decision process
- Unitary resolution and voting threshold:
  - Quota and governance reforms placed in a single Board of Governors resolution as a unitary package; subject to an 85 percent majority (highest applicable majority for quotas).
- Interlinked implementation conditions:
  - 2008 quota and voice reform: To date 94 countries representing 82.55 percent of total voting power have completed domestic procedures to ratify the reform; 113 countries representing 85 percent of voting power are required.
  - 14th General Review proposed effectiveness: increases will not become effective until members having at least 70 percent of the total quotas on November 5, 2010 have consented.
  - Effectiveness also requires that the proposed amendments on Voice and Participation (2008 reform) and on reform of the Executive Board have entered into force.
  - Corresponding NAB adjustment to become effective when these conditions are met and related quotas paid.
  - All-elected Board amendment enters into force when three-fifths of the members having 85 percent of the total voting power have accepted it.
- Timeline indicators:
  - Key markers: 2012 Annual Meetings; January 2013; January 2014.
  - Milestones: Review of quota formula completed; 14th General Review effective with 70% consents; Second Alternate ED; Two fewer advanced European chairs; Amendment on Voice and Participation (2008) in force; Amendment on all-elected Board in force; Board composition reviewed every 8 years; 15th General Review completed.
- Proposed Executive Board decision and voting mechanics (may be adopted by majority of votes cast):
  1. Executive Board:
     - (a) adopts the Report set forth in Annex II; and
     - (b) recommends adoption by the Board of Governors of the Resolution set forth in Appendix to the Report.
  2. Authorizes Secretary to send the proposal and request a vote by each Governor on the Resolution.
  3. Requests Board of Governors, pursuant to Section 13 of the By-Laws, to vote without meeting on the Resolution. Votes must be received at the seat of the Fund before 6:00 p.m., Washington time, on December 15, 2010.
  4. All votes held in custody of the Secretary until counted; proceedings confidential until result determined.
  5. Effective date of the Resolution shall be the last day allowed for voting.
  6. Secretary authorized to take actions necessary to carry out purposes of decision.
- Quota consent and payment rules:
  - Three general conditions for any quota increase to become effective:
    - (i) Executive Board determines members having not less than 70 percent of total quotas on November 5, 2010 have consented in writing;
    - (ii) proposed amendment on reform of the Executive Board (Attachment II) has entered into force;
    - (iii) 2008 Proposed Voice and Participation Amendment has entered into force.
  - Each member must consent by December 31, 2011 (Executive Board may extend).
  - Payment: member must pay quota within 30 days after later of (a) member’s consent notification or (b) date all conditions met; Executive Board may extend.
  - Payments cannot be made unless member current in obligations to the General Resources Account.
  - Payment composition: 25 percent of increase in SDRs or specified currencies; balance in member’s own currency.

### Annex I — Technical aspects and illustrative tables
- Data set: simulation results based on quota data through 2008.
- Methodological notes preserved:
  - GDP blend: 60 percent market GDP, 40 percent PPP GDP, compressed by factor 0.95.
  - URF mechanism used to allocate ad hoc increases; URF also used in 2008 reform.
  - Post-selective quota share defined as simulated share after selective increases only.
- Illustrative table excerpts (Table A1 selected entries, in percent):
  - United States: Pre-Singapore 16.987; Post Second Round 21.645; Proposed 17.380; additional columns 17.670; 17.428; 17.023; 16.727; 16.498.
  - China 5/: 7.917 8.128 2.980 3.996 6.394 2.928 3.806 6.071.
  - India: 2.403 3.027 1.945 2.442 2.751 1.916 2.337 2.629.
  - Korea, Republic of: 2.108 1.909 0.764 1.412 1.800 0.760 1.364 1.731.
  - Zimbabwe (among poorest members): Pre-Singapore 0.016; Post Second Round 0.011; Proposed 0.165; other columns 0.148; 0.148; 0.173; 0.170; 0.170.
- Attachment I (proposed quotas, in millions of SDRs) examples:
  - Afghanistan, Islamic Republic of: 323.8
  - Albania: 139.3
  - Algeria: 1,959.9
  - Angola: 740.1
  - Argentina: 3,187.3
  - Australia: 6,572.4
  - Austria: 3,932.0
  - Bangladesh: 1,066.6
  - Brazil: 11,042.0
  - Canada: 11,023.9
  - China: 30,482.9
  - France: 20,155.1
  - Germany: 26,634.4
  - India: 13,114.4
  - Japan: 30,820.5
  - Russian Federation: 12,903.7
  - United Kingdom: 20,155.1
  - United States: 82,994.2
- Annex I final realignments reiterate transfers (values preserved): 5 basis points transfer from four large EU members to Spain; equalization of France and United Kingdom quotas; transfers: 0.09 basis points Singapore→Tonga; 1.56 basis points United States→Saudi Arabia; 1.20 basis point shift from advanced G-20 countries to protect poorest.

### Implementation, formula review, and follow-up timelines
- Formula review: comprehensive review to be completed by January 2013.
- Quota review: proposed to bring forward timetable for completion of the Fifteenth General Review of Quotas to January 2014.
- Best efforts proposed to make the 14th Review effective by 2012 Annual Meetings, subject to consent and amendment entry conditions.
- Executive Board and NAB participants requested to review NAB credit arrangements by November 2011 with corresponding roll-back effective when conditions met and quota payments associated with 70 percent threshold have been made.

*Source: IMF Executive Board paper on the Fourteenth General Review of Quotas and Reform of the Executive Board (text as provided).*

### 1. Background. After a long and intense debate, the membership is converging on quota

### 1. Background. After a long and intense debate, the membership is converging on quota

### Background and purpose
- The paper sets out and seeks to operationalize a core package for consideration by the Executive Board and subsequently the Board of Governors.
- Key next steps: Executive Board discussion of the package; if broadly supported, transmission to the Board of Governors of an Executive Board Report on the Fourteenth General Review of Quotas and Reform of the Executive Board including:
  - a proposed resolution for adoption,
  - a draft amendment of the Articles (for an all-elected Executive Board),
  - associated legal commentary.
- A draft report is attached as Annex II; a detailed redline of the proposed amendment of the Articles is attached as Annex III.
- Section IV discusses proposed phasing and inter-linkages; Section V presents a proposed Executive Board decision needed to transmit the report to the Board of Governors.

### Box 1 — Quota and Governance Reform: A Summary
- Quotas
  - Increase: A doubling of quotas, with a corresponding roll-back of the New Arrangements to Borrow (NAB) preserving relative shares, when the quota increase becomes effective.
  - Shift in shares: Minimum targets in the October 2009 IMFC Communiqué to be exceeded:
    - Over 6 percent shift from over-represented to under-represented members.
    - Over 6 percent shift to dynamic emerging market and developing countries (EMDCs).
  - Protecting the voting power of poorest: To be done for PRGT-eligible members that fall below the IDA-income threshold through ad hoc increases on an individual country basis.
  - Quota formula: Review to be completed by January 2013.
  - Next review: 15th General Quota Review to be brought forward, completed by January 2014.
- Governance — Executive Board size and composition
  - Commitment of the membership — noted in a Board of Governors resolution — to maintain Executive Board size at 24 and, after the conditions for effectiveness of the quota increases under the 14th General Quota Review are met, to review Board composition every 8 years.
  - Two fewer advanced European chairs, based on an agreed metric (occupancy of the Executive Director position pro-rated to the time spent in it) — to be implemented no later than the first regular election after the conditions for effectiveness of the quota increases under the 14th Review are met.
  - Move to an all-elected Executive Board.
  - Further scope for a second Alternate Executive Director for multi-country constituencies.

### Parallel reforms and institutional issues
- Open, transparent, and merit-based selection of Fund management and other IFIs — noted as important, with the view that it may be credibly dealt with at the next turnover in leadership.
- Ministerial engagement and strategic oversight — efforts to strengthen IMFC processes (e.g., more informal and restricted meetings); proposal to transfer decision-making powers to ministers has not commanded consensus.
- Need to make further progress in diversifying Fund staff.

### Timeline and approach
- Executive Board to discuss detailed package in Section II (quotas) and Section III (governance).
- If broadly supported, prepare Executive Board Report and legal amendments for the Board of Governors.
- Proposal includes phasing and inter-linkages; an Executive Board decision (majority of votes cast) is presented to transmit the report.

### II. QUOTAS — key elements and rationale
- IMFC call: Complete the 14th General Review of Quotas by January 2011; emphasized quota reform to increase legitimacy and effectiveness and that the IMF should remain quota-based.
- IMFC guidance: 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 a basis; protect voting share of the poorest members.

#### Size of quota increase
- Broad support for a doubling of quotas, provided a corresponding roll-back of the NAB preserves relative shares.
- NAB reduction to be finalized in the forthcoming review of the NAB scheduled to be completed by November 2011.
- Roll-back of the NAB should occur only when the conditions for effectiveness of the quota increases under the 14th Review are met and related payments made.

#### Realignment of quota shares — principles from Committee of the Whole
- Allocation should use a combination of selective and ad hoc increases, with no equi-proportional element given focus on realigning shares.
- The current quota formula should continue to be used for the 14th Review, pending a review to be completed before the next general quota review.
- Part of the increase should be distributed using an alternative measure of economic weight.
- Voting share of the poorest should be preserved through ad hoc quota increases on an individual country basis.

#### Narrowing options and simulations
- Approach: distribute more than half the increase selectively using the formula; remainder as ad hoc increases primarily to members under-represented using the compressed GDP blend variable.
- Ad hoc increases used to:
  - (i) avoid dilution of gains for under-represented countries after selective increase;
  - (ii) protect over-represented countries from becoming under-represented (based on formula or higher of formula and GDP blend);
  - (iii) allow advanced countries under-represented under the GDP blend to participate but capped at their post-second round quota share;
  - (iv) allow advanced countries under-represented on both formula and GDP blend to participate partially or fully;
  - (v) set a floor on maximum decline in any individual member’s quota share.
- Voluntary foregoing (modest) could facilitate protection of the poorest and desired shifts to dynamic EMDCs by setting a maximum for individual quota increases and modest voluntary foregoing by all advanced countries.

#### Proposal (to seek broad consensus)
- A 60 percent selective increase and a 40 percent ad hoc increase.
- Under-represented members based on the GDP blend variable:
  - eligible for ad hoc increases and receive a uniform proportional reduction in the gap between their GDP blend share and post-selective quota share;
  - eligible advanced countries receive half the proportional reduction applying to eligible EMDCs;
  - eligible advanced countries that are over-represented under the formula are capped at their post-second round quota share.
- Under-represented countries under the formula receive an ad hoc allocation that ensures gains from the selective increase are not diluted.
- Over-represented countries under the formula are protected from falling below the higher of their calculated quota or their GDP blend share.
- A floor to limit the maximum decline in quota share for any individual country to 30 percent.
- An additional limit on the maximum decline in share of 0.85 percentage points has been added to mitigate adjustment burden on any individual country.
- Protection of the individual post-second round quota (and thus voting) shares of the poorest members, defined as those countries that are PRGT-eligible and met the IDA income cut-off of US$1,135 in 2008 (or twice that amount for small countries). The countries covered include 49* members plus Zimbabwe, which is not currently PRGT-eligible.
- A maximum of 220 percent on individual quota increases.
- Voluntary foregoing by all advanced countries of 1.35 percent (1.37 percent by G-20 advanced countries) from the shares resulting from the above elements.
- A voluntary redistribution of 5 basis points in quota share from the 4 largest European Union members (France, Germany, Italy and the UK) to Spain, without affecting the quota share or ranking of any other member.
- Executive Board agreed additional adjustments:
  - 0.09 basis points in quota share from Singapore to Tonga to preserve its post-second round quota share;
  - 1.56 basis points in quota share from the United States to Saudi Arabia to ameliorate its very large decline in share;
  - a 1.20 basis point shift from advanced G-20 countries to cover a portion of the cost of protecting the poorest members.

#### Outcomes (summary of results)
- The combined elements exceed IMFC minimum targets.
- Shifts to dynamic EMDCs and from over- to under-represented countries are above 6 percent.
- Voting share of the poorest members is protected.
- Major realignment in ranking of quota shares, with the 10 largest shareholders: the US, Japan, China, Germany, France, the UK, Italy, India, Russia, and Brazil.
- In total, 61 members would receive an increase in quota share, of which 53 are EMDCs.
- 13 EMDCs would receive nominal quota increases greater than 150 percent.
- 8 of the 10 countries with the largest quota increases would be EMDCs.
- After taking account of protection for the poorest members, 99*** EMDCs would either maintain or receive an increase in their quota shares.
- Reform would result in a further net shift of quota shares to EMDCs as a group of 2.8 percent.
- There would be a further shift in voting shares of 2.6 percent; when combined with the 2008 quota and voice reform, the aggregate voting share of EMDCs would rise by 5.3 percent.
- Notes and corrections:
  - Three countries were inadvertently omitted from an earlier count; the correct number is 52 and is reflected in final tables in the Supplement.
  - Zimbabwe: removed from PRGT-eligibility list due to arrears to the Trust, but had estimated per capita income below US$1,135 in 2008 and lacked market access; likely to become PRGT-eligible once arrears cleared. Zimbabwe has no arrears to the General Resources Account (GRA) and would be eligible to consent and pay for its quota increase. Members with protracted arrears to the GRA would not be able to consent to or pay for quota increases until overdue obligations are cleared.
  - Results by member for quota and voting shares are presented in Table A1. At members’ request, quotas of France and the United Kingdom have been equalized; without such equalization their quota shares would be 3.97 and 4.49 percent, respectively.
  - Reflecting corrected protection for the poorest members and Executive Board additional adjustments, the outcome is that 102 EMDCs would either maintain or receive an increase in their quota shares (see the Supplement).
- Timing and follow-up:
  - Comprehensive review of the quota formula proposed to be completed by January 2013 to better reflect economic weights.
  - Proposed to bring forward the timetable for completion of the 15th General Review of Quotas to January 2014.

### III. GOVERNANCE — Executive Board size, composition, and related measures

#### Role of the Executive Board
- The Executive Board is a crucial mechanism to bring oversight, voice and interests of members to the work of management and staff.
- Differences on Board composition (more than size) led to failure of a proposed Board of Governors resolution on the 2010 regular election of Executive Directors.

#### Size
- Proposed Board of Governors resolution notes a commitment to maintain Executive Board size at 24 and to review composition every 8 years (after conditions for effectiveness of quota increases under the 14th Review are met).
- As a legal matter, the Board of Governors would still need to adopt a resolution at each regular election to increase the size of the Executive Board from 20 to 24.

#### Composition
- Representation continues to be based on voluntary constituency formation.
- Proposed resolution notes a commitment to reduce the number of Executive Directors representing advanced European countries by 2 in favor of EMDCs.
- Measurement: time pro-rated in the Executive Director chair (rotation of an EMDC into an advanced European Executive Director chair for one period out of two counts as ½).

#### Second Alternate Executive Director (AED)
- 2008 reform allows a second AED for constituencies with at least 19 members; threshold may be adjusted by a majority of votes cast by the Board of Governors.
- Proposal: lower threshold to multi-country constituencies with 7 or more members (close to the notional “average-sized constituency”).
- A second AED would be provided in a broadly budget neutral manner by re-designating an existing “Senior Advisor” as an AED, except for large sub-Saharan African constituencies which would be granted an additional resource.
- Proposal effective at the first regular election after entry into force of the 2008 Proposed Amendment on Voice and Representation.

#### Move to an all-elected Executive Board
- Proposed amendment to eliminate the category of appointed Executive Directors and the associated election rules in Schedule E of the Articles.
- Proposed amendment specifies that the Board of Governors adopt regulations to govern conduct of elections to the all-elected Executive Board.
- Regulations to be designed to avoid excessive concentration of voting power in multi-country constituencies while allowing flexibility for voluntary constituency formation.
- A proposed amendment and detailed commentary are set out in the draft Executive Board Report on the Fourteenth General Review of Quotas and Reform of the Executive Board (Annex II).

### IV. Phasing and structure of the resolution
- The paper discusses proposed phasing and inter-linkages between quota increase effectiveness conditions, roll-back of the NAB, changes to Board composition, and entry into force of amendments (details and specific decision text provided in Annex II and Annex III).

*Source: IMF Executive Board paper on the Fourteenth General Review of Quotas and Reform of the Executive Board (text as provided).*

### 16. Phasing and inter-linkages. The quota and governance reforms would be placed in a

### 16. Phasing and inter-linkages. The quota and governance reforms would be placed in a

### Unitary resolution and majority threshold
- The quota and governance reforms would be placed in a single Board of Governors resolution as a unitary package.
- As a unitary resolution, it would be subject to an 85 percent majority, this being the highest applicable majority (for quotas).

### Interlinked implementation conditions (Figure 1)
- Adoption of the resolution would formally interlink important features of the package:
  - 2008 quota and voice reform:
    - The 2008 reform, including its increase in basic votes, is an important foundation for the current package.
    - It provides the basis for the current quota discussion and for a second AED for multi-country constituencies.
    - It is imperative that members complete domestic procedures to ratify the reform—To date, 94 countries representing 82.55 percent of the total voting power have done so (113 countries representing 85 percent of the voting power are required).
  - 14th General Review of Quotas:
    - Best efforts proposed for the quota increase and shift in shares to enter into force by the 2012 Annual Meetings.
    - It is proposed that increases in quotas provided for under the 14th Review will not become effective until members having at least 70 percent of the total quotas on November 5, 2010 have consented.
    - It would also require that the proposed amendments of the Fund’s Articles on Voice and Participation (that formed part of the 2008 reform) and on the reform of the Executive Board have entered into force.
    - A corresponding adjustment to the NAB is expected to be agreed, to become effective when these conditions are met and related quotas paid.
  - Executive Board size and composition:
    - The proposed Board of Governors resolution would note the commitment to maintain the Executive Board size at 24 and to review its composition every 8 years after the conditions for effectiveness of the quota increases under the 14th General Review of Quotas are met.
    - The reduction by two of the number of Executive Directors representing advanced European countries (on the metric noted in ¶13 above) would be implemented no later than the first regular election after the conditions for effectiveness of the quota increases under the 14th General Review are met.
  - Second AED:
    - A second AED may be appointed in constituencies with 7 or more members after the proposed amendment of the Fund’s Articles on Voice and Participation (the 2008 reform) has entered into force, and the proposed resolution has been adopted.
    - Actual appointments would be made at the time of the first regular election thereafter.
  - All-elected Board:
    - The amendment of the Articles for an all-elected Board would enter into force when the Fund certifies in a formal communication to all members that three-fifths of the members having 85 percent of the total voting power have accepted it.

### Timeline indicators (as presented in Figure 1)
- Key timeline markers shown include:
  - 2012 Annual Meetings
  - January 2013
  - January 2014
- Milestones indicated on the timeline include:
  - Review of quota formula completed
  - 14th General Review of Quotas effective, with consents from members having 70% of quotas
  - Second Alternate ED
  - Two fewer advanced European chairs
  - Amendment on Voice and Participation (2008) in force
  - Amendment on all-elected Board in force
  - Board composition reviewed every 8 years
  - 15th General Review of Quotas completed (Board of Governors resolution adopted)

### Proposed Executive Board decision process and voting mechanics (V. PROPOSED DECISION)
- Proposed decision for adoption by the Executive Board (may be adopted by a majority of the votes cast):
  1. The Executive Board:
     - (a) adopts the report entitled: “Fourteenth General Review of Quotas and Reform of the Executive Board—Report of the Executive Board to the Board of Governors” set forth in Annex II (the “Report”); and
     - (b) recommends the adoption by the Board of Governors of the resolution set forth in the Appendix to the Report (the “Resolution”).
  2. The Executive Board authorizes and directs the Secretary to send to each member of the Fund the proposal of the Executive Board set forth in the Report, with a request for a vote by each Governor on the Resolution.
  3. The Board of Governors is requested, pursuant to Section 13 of the By-Laws, to vote without meeting on the Resolution. To be valid, votes must be received at the seat of the Fund before 6:00 p.m., Washington time, on December 15, 2010. Votes received after that time will not be counted.
  4. All votes cast pursuant to this decision shall be held in the custody of the Secretary until counted, and all proceedings with respect thereto shall be confidential until the Executive Board determines the result of the vote.
  5. The effective date of the Resolution shall be the last day allowed for voting.
  6. The Secretary is authorized to take such action as he shall deem necessary or appropriate in order to carry out the purposes of this decision.

### Key numerical and tabular highlights (as presented in the source tables and memorandum items)
- Voting/consent and ratification thresholds and counts:
  - 85 percent majority required for unitary Board of Governors resolution (for quotas).
  - To date, 94 countries representing 82.55 percent of total voting power have completed domestic procedures to ratify the 2008 reform; 113 countries representing 85 percent of voting power are required.
  - Proposed effectiveness condition for 14th Review: consent by members having at least 70 percent of the total quotas on November 5, 2010.
  - All-elected Board amendment entry: when three-fifths of the members having 85 percent of the total voting power have accepted it.
- Representative quota and voting-share numbers (selected excerpts from tables):
  - Total shares shown as 100.0 across Pre-Singapore, Post Second Round, Proposed columns.
  - Advanced economies voting share examples: Pre-Singapore 58.2; Post Second Round 60.0; Proposed 61.6; alternative columns include 60.5, 57.7, 60.6, 57.9, 55.3 (as presented in the table).
  - Major advanced economies (G7) voting shares shown in multiple columns including: 42.9, 48.0, 46.0, 45.3, 43.4, 45.1, 43.0, 41.2.
  - United States quota/voting share entries across columns include: 17.0, 21.6, 17.4, 17.7, 17.4, 17.0, 16.7, 16.5 (as presented in the table).
  - Emerging Market and Developing Countries entries include: 41.8, 40.0, 38.4, 39.5, 42.3, 39.4, 42.1, 44.7.
  - Memorandum items and shifts (as presented):
    - EU 27: 31.3, 27.8, 32.9, 31.9, 30.2, 32.5, 30.9, 29.4.
    - LICs (IDA thresholds): 1.8, 1.7, 3.5, 3.2, 3.2, 4.0, 4.5, 4.5.
- Largest increases and decreases in quota shares (Table 3 excerpts):
  - Largest increases (Difference between Proposed and Post Second Round Quota Shares): China 3/2.40; Brazil0.53; Korea, Republic of0.39; Turkey0.37; Mexico0.35; Spain0.31; India0.31; Singapore0.23; Russian Federation0.21; Ireland0.20 (as listed).
  - Largest decreases: Saudi Arabia-0.85; Belgium-0.59; Germany-0.52; Canada-0.36; Venezuela, R. B. de-0.33; Netherlands-0.33; United Kingdom-0.28; France-0.28; United States-0.24; Switzerland-0.24 (as listed).
- Summary shifts and counts (Table 4 excerpts):
  - From Pre-Singapore / From Post Second Round:
    - Shift of voting shares (ppts) to under-represented countries8.25.8
    - to dynamic EMDCs8.85.7
    - to EMDCs5.32.6
    - to non-oil EMDCs 1/7.63.9
    - Shift of quota shares (ppts) to under-represented countries8.56.2
    - to dynamic EMDCs9.06.0
    - to EMDCs3.92.8
    - to non-oil EMDCs 1/66.44.2
    - Number of countries that increase quota share5461
      - Advanced Countries108
      - EMDCs4453
    - Number of countries that increase or maintain quota share54107
      - Advanced Countries108
      - EMDCs4499
    - Number of countries with nominal quota increases greater than 150%4016
      - Advanced Countries63
      - EMDCs3413
    - Adjustment coefficient 2/65.855.8

*Source: _103110 - 16. Phasing and inter-linkages. The quota and governance reforms would be placed in a — IMF PDF content unit.*

### Annex I. Illustration of Proposed Quota and Voting Shares—Technical Aspects

### Annex I. Illustration of Proposed Quota and Voting Shares—Technical Aspects

### Data set
- Simulation results are based on the quota data set which covers the period through 2008.

### Size of the overall quota increase
- The overall quota increase relative to post second round quotas is 100 percent—distributed as a 60 percent selective followed by a 40 percent ad hoc increase.
- The selective increase is distributed to all members in proportion to their calculated quota share.
- The ad hoc increase is distributed to eligible members as described below.

### Ad hoc increase
- The ad hoc increase is mainly distributed to countries that are under-represented with respect to the GDP blend variable, i.e., those members whose post selective quota share1 is smaller than their share in the GDP blend variable.2
- The allocation of the ad hoc increase is primarily based on a uniform reduction in out-of-lineness, i.e., the difference between a country’s GDP blend variable share and its post selective quota share is reduced proportionately by a uniform reduction factor (URF).3
- Taking the size of the ad hoc increase and all other elements of the allocation mechanism as described below as given, a unique URF is determined.
- Eligible EMDCs receive a uniform reduction in out-of-lineness with respect to the GDP blend variable.
- Eligible advanced countries that are under-represented with respect to the GDP blend variable receive 50 percent of the uniform reduction in out-of-lineness with respect to the GDP blend variable that EMDCs receive.
- Advanced countries that are under-represented with respect to the GDP blend variable but not the quota formula are capped at their post second round quota share.

Notes (from annex):
- 1 A country’s post selective quota share is the simulated quota share that would result if only the selective increases were implemented.
- 2 Consistent with the quota formula, the GDP blend variable is a weighted average of GDP at market prices (60 percent) and PPP GDP (40 percent), compressed by a factor of 0.95.
- 3 The uniform reduction in out-of-lineness was also used in the 2008 reform for allocating ad hoc increases.

### Protection of the poorest members and other protection mechanisms
- The poorest members individually maintain at least their post second round quota share. They are defined as those PRGT-eligible countries with annual per capita income below the prevailing operational IDA cut-off in 2008 (US$1,135) or below twice IDA’s cut-off for countries meeting the definition of a “small country” under the PRGT eligibility criteria. Zimbabwe is also included in the list of the poorest members.
- Advanced countries that are under-represented with respect to the quota formula but not the GDP blend variable maintain their gains from the selective allocation, i.e., they receive their post selective quota share.
- Countries that are over-represented under the formula are protected from falling below their calculated quota or GDP blend share, whichever is greater.
- A country’s quota share cannot fall below 70 percent of its post second round quota share or decline by more than 0.85 percentage points.

### Maximum increase and voluntary reduction in quota share
- The maximum nominal percentage increase for an individual country is set at 220 percent.
- All advanced countries receive a percentage reduction in their final quota share—the reduction is 1.37 percent for advanced G20 countries and 1.35 percent for other advanced countries.4

Note:
- 4 Advanced countries do not benefit from the resulting increase in available resources via a higher URF since their uniform reduction in out-of-lineness is maintained at the level that obtains without the voluntary foregoing.

### Final Realignments
- The final realignments do not change the quota shares of any country except the ones involved.
- A transfer of 5 basis points in quota share to Spain is made in equal parts by France, Germany, Italy, and the United Kingdom.*
- The quota shares of France and the United Kingdom are equalized.

Footnote (final realignments):
- *A transfer of 0.09 basis points in quota share from Singapore to Tonga; a transfer of 1.56 basis points in quota share from the United States to Saudi Arabia; and a 1.20 basis point shift from advanced G-20 countries to cover a portion of the cost of protecting the poorest members were agreed at the time of the Board discussion.

### Illustrative table and panel notes (Table A1)
- The table titled "Table A1. Illustration of Proposed Quota and Voting Shares--By Member" presents calculated quota share, GDP Blend share, quota shares, and voting shares (in percent) for members under columns labeled Pre-Singapore, Post Second Round 3/, and Proposed 3/ 4/ (as shown in the source table).
- Select illustrative numeric entries from the table (all values in percent) include:
  - United States: Pre-Singapore 16.987; Post Second Round 21.645; Proposed 17.380; (additional columns show 17.670; 17.428; 17.023; 16.727; 16.498).
  - China 5/7.9178.1282.9803.9966.3942.9283.8066.071 (as presented in the source table).
  - India: Pre-Singapore 2.403; Post Second Round 3.027; Proposed 1.945; other columns 2.442; 2.751; 1.916; 2.337; 2.629.
  - Korea, Republic of: Pre-Singapore 2.108; Post Second Round 1.909; Proposed 0.764; other columns 1.412; 1.800; 0.760; 1.364; 1.731.
  - Zimbabwe (listed among poorest members): Pre-Singapore 0.016; Post Second Round 0.011; Proposed 0.165; other columns 0.148; 0.148; 0.173; 0.170; 0.170.
- Table notes:
  - Source: Finance Department.
  - 5/ Includes China, P.R., Hong Kong SAR, and Macao SAR.
  - 1/ See Annex I for a description of the allocation mechanism.
  - 2/ GDP blended using 60 percent market and 40 percent PPP exchange rates, compressed using a factor of 0.95.
  - 3/ Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo and Tuvalu which became members on June 29, 2009 and June 24, 2010, respectively. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.
  - 4/ Basic votes are calculated using the agreed percentage of total votes, 5.502 percent of total votes (provided there are no fractional votes) as in the Proposed Amendment to Enhance Voice and Participation, which has not yet entered into effect.

*Source: Finance Department.  

*International Monetary Fund—Annex I to the Fourteenth General Review of Quotas and Reform of the Executive Board (Excerpt).*

### 4. This report is organized as follows: Section II sets out the proposal for the completion of the

### 4. This report is organized as follows: Section II sets out the proposal for the completion of the

### Organization of the report
- Section II: proposal for the completion of the Fourteenth General Review of Quotas.
- Section III: commentary on the proposed amendment of the Articles of Agreement (Attachment II of the Resolution) to establish an Executive Board consisting solely of elected Executive Directors.
- Section IV: proposals related to the appointment of additional Alternate Executive Directors and the size and composition of the Executive Board.
- Section V: procedural issues related to the quota increases, the proposed amendment and the adoption of the Resolution.
- Appendix: the Resolution.

### Proposal for the Fourteenth General Review of Quotas — overview and guiding principles
- The conduct of the Fourteenth General Review has been guided by views expressed by the IMFC (October 2009 and April 2010).
- IMFC objectives: quota reform to increase legitimacy and effectiveness; IMF to remain a quota-based institution; distribution of quota shares should reflect relative weights of members in the world economy given strong growth in dynamic emerging market and developing countries (EMDCs); shift in quota shares to dynamic EMDCs of at least five percent from over-represented to under-represented countries using the current formula as basis; commitment to protecting voting share of poorest members.
- Five-year Article III, Section 2(a) period for the Fourteenth Review ends on January 28, 2013; IMFC called for completion by January 2011 (two years ahead), requiring the Executive Board to appoint a Committee of the Whole in line with Rule D-3.

### Assessment of resource needs and overall quota increase proposed
- The Executive Board emphasizes the Fund should remain quota-based despite large borrowed resources.
- Noted decline in relative size of the Fund since the last general quota increase twelve years ago and broadened potential demand following facility reforms.
- Proposal: increase total Fund quotas agreed in the context of the 2008 quota and voice reform by 100 percent from approximately SDR 238.4 billion to approximately SDR 476.8 billion.
- In light of proposed Fourteenth Review increases, Executive Board and NAB participants to review NAB credit arrangements by November 2011, with corresponding roll-back of the NAB (preserving relative shares) to become effective when general conditions for effectiveness of quota increases under the Fourteenth Review are met and related quota payments have been made (i.e., payments associated with the 70 percent effectiveness threshold).
- Note: quotas agreed under the 2008 reform are not yet effective because the Proposed Voice and Participation Amendment has not entered into force; members urged to complete domestic processes and notify the Fund of acceptances.

### Proposed distribution of the quota increase (detailed mechanics)
- Overall approach: compromise reflecting differences among Directors.
- Distribution of the total increase:
  - 60 percent of the overall increase: distributed as selective increases in proportion to members’ shares in calculated quotas using the current quota formula (based on data through 2008).
  - 40 percent of the overall increase: distributed as ad hoc increases to a subset of members based on the following elements:
    - PRGT-eligible members that met the IDA income cut-off of US$ 1,135 in 2008 (or twice that amount for small countries) plus Zimbabwe maintain at least their quota share after the 2008 reform (i.e., their post second-round quota share).
    - Members under-represented under the formula but not under the compressed GDP blend variable receive their quota share after the selective increase (i.e., their post selective quota share).
    - Members under-represented using the compressed GDP blend variable receive a uniform proportionate reduction in the difference between their share in the compressed GDP blend variable and their post-selective quota share, or one-half of the reduction for advanced country members that are also under-represented under the formula.
    - Advanced country members that are over-represented under the formula but under-represented using the compressed GDP blend variable are capped at their share after the 2008 reform.
    - Members that are over-represented are protected from falling below the higher of their share based on the formula or the compressed GDP blend.
    - No member’s nominal quota is increased by more than 220 percent.
    - No member’s quota share declines by more than 30 percent from its share after the 2008 reform or by more than 0.85 percentage points.
    - Quota shares for G-20 advanced country members are reduced by 1.37 percent from the results of combining the above elements, and by 1.35 percent for other advanced country members.
- Technical and definitional notes:
  - Starting point for adjustments: members’ quotas after full implementation of the 2008 ad hoc quota increase; effectiveness contingent on entry into force of the Proposed Voice and Participation Amendment.
  - The compressed GDP variable: weighted average of market-based GDP (60 percent weight) and PPP-based GDP (40 percent), compressed by a factor of 0.95.
  - Proposed quotas for Australia, Canada, France, Germany, Italy, Japan, Saudi Arabia, Singapore, Spain, Tonga, the United Kingdom, and the United States reflect additional adjustments; increases for all other members leave unchanged as determined under the principles above.
  - France and the United Kingdom agreed to maintain the equal distribution of quotas between themselves under the Fourteenth Review as first agreed under the Ninth General Review and maintained under the Eleventh General Review.
  - Proposed quotas have been rounded to the nearest multiple of SDR 0.1 million.
  - For members that have not consented and/or paid for proposed Eleventh Review increases, Fourteenth Review quotas were calculated on basis of their proposed Eleventh Review quotas.

### Implementation procedures and timing
- Procedures to implement the quota increase summarized in Section V (procedural details not reproduced here).
- List of proposed quotas is included as Attachment I to the proposed Resolution (Attachment excluded from this summary).
- Proposed target: best efforts to make the quota increase and shift in shares enter into force by the 2012 Annual Meetings.
- The Executive Board calls upon members to complete acceptances of the Proposed Voice and Participation Amendment expeditiously.

### Formula and Quota review timelines
- Formula Review: complete a comprehensive review of the formula by January 2013.
- Quota Review: bring forward timetable for completion of the Fifteenth General Review of Quotas to January 2014.
  - Any realignment in the Fifteenth Review expected to result in increases in quota shares of dynamic economies in line with relative positions in the world economy, likely increasing the share of emerging market and developing countries as a whole.
  - Steps proposed to protect the voice and representation of the poorest members.

### Commentary on proposed amendment on reform of the Executive Board
- Proposed amendment (Attachment II of the Resolution): eliminate the category of appointed Executive Directors and require that all Executive Directors be elected.
- Election, tenure and status of elected Executive Directors remain unchanged except as noted.

### Size, composition, and election procedures for the Executive Board under the amendment
- Current Articles: Executive Board of 20 Executive Directors (5 appointed and 15 elected), with Board of Governors authorized to increase or decrease number of elected Executive Directors for each regular election.
- Under proposed amendment:
  - General rule retained: Executive Board to consist of 20 Executive Directors, all elected.
  - Board of Governors continues to be authorized, by an eighty-five percent majority of the total voting power, to increase or decrease the number of Executive Directors for each regular election.
- Regulations governing regular elections:
  - Current “default” election rules in Schedule E (based on 15 elective Executive Directors and excluding votes of appointing members) would be inapplicable.
  - Proposed amendment would eliminate Schedule E “default” rules and require the Board of Governors to adopt regulations (by a majority of votes cast) to govern each regular election.
  - Regulations must establish a limit on total number of votes that more than one member may cast for the same candidate (limit modifiable over time) to balance avoiding excessive concentration of voting power in multi-country constituencies and allowing members flexibility to form constituencies voluntarily.
  - Regulations could establish a minimum threshold of votes required to elect an Executive Director.
  - Membership has expressed commitment to increase number of Executive Directors to 24 at the time of each regular election; regulations would need to take that into account when adopted for each election.

### Consequential amendments and transitional arrangements
- Consequential amendments required in Articles referencing appointed Executive Directors: Article XII, Sections 3(f), 3(i)(i)-(v), 3(j) and 8; Article XXI(a)(ii); Article XXIX(a); Schedule D, paragraphs 1(a), 5(e) and 5(f); Schedule E; and Schedule L, paragraphs 1(b) and 3(c).
- Transitional provisions on entry into force:
  - Upon entry into force, no category of appointed Executive Directors exists in Articles.
  - Executive Directors in office who had been appointed under existing Article XII, Section 3(b)(i) or Section 3(c) would be deemed to have been elected by the member that appointed him (and in the case of those appointed under Section 3(c), by any other members that agreed to have the Executive Director cast their votes).
  - Status of deemed-elected Executive Directors identical to other elected Executive Directors.
  - All Executive Directors in office at entry into force continue until successors are elected (as provided under Article XII, Section 3(f)).
- By-Laws and Rules and Regulations: consequential amendments necessary to address elimination of appointed Executive Directors; these can be proposed prior to, and become effective on, date of entry into force.

### Other governance reforms — Second Alternate Executive Director and Executive Board review
- Proposed Resolution addresses rules governing appointment of a second Alternate Executive Director.
- Resolution 63-2 (April 28, 2008) provided that, following the first regular election after entry into force of the Proposed Voice and Participation Amendment, an Executive Director elected by at least 19 members would be entitled to appoint two Alternate Executive Directors.
- Proposed change: lower the threshold of 19 members so that, following the first regular election after entry into force of the Proposed Voice and Participation Amendment, any Executive Director elected by 7 or more members would be entitled to appoint two Alternate Executive Directors.
  - Provision establishing new threshold set out in the proposed Resolution (paragraphs 15-16); it would supersede the 19 member threshold in Resolution 63-2 and become effective only after the first regular election of Executive Directors following entry into force of the Proposed Voice and Participation Amendment.
  - Threshold could be further modified by the Board of Governors by a majority of the votes cast.
- Review of Executive Board size and composition is addressed in Section IV (details summarized above).

*Source: Excerpt from the IMF report on the Fourteenth General Review of Quotas and related governance reforms.*

### 25. A second related issue concerns the review by the Board of Governors of the size of the

### _103110 - 25. A second related issue concerns the review by the Board of Governors of the size of the

### Review of Executive Board size and composition
- The proposed amendment maintains both the general rule regarding the total size of the Executive Board and the mechanism by which this size may be adjusted.
- The Fund’s membership has expressed its commitment to:
  - maintain the Executive Board at its current size of 24 Executive Directors; and
  - review the composition of the Board every 8 years following the date the general conditions for the effectiveness of quota increases under the Fourteenth General Review are met.
- As a legal matter, this commitment would not obviate the need for the Board of Governors to take a decision to increase the number of Executive Directors to 24 at the time of each regular election—nor would it require the Board of Governors to approve such an increase.
- The proposed Resolution notes a commitment to reduce the number of Executive Directors representing advanced European countries by 2 in favor of EMDCs, to be measured by time pro-rated in the Executive Director’s chair (e.g., rotation of an EMDC into an advanced European Executive Director chair for one period out of two counts as ½). The reduction would be implemented no later than the first election after the general conditions for the effectiveness of quota increases under the Fourteenth General Review are met.

### Quota increases — conditions, timing, and payment rules
- Three general conditions for any quota increase under the Fourteenth General Review to become effective:
  - (i) the Executive Board determines that members having not less than 70 percent of the total of quotas on November 5, 2010 have consented in writing to the increases in their quotas;
  - (ii) the proposed amendment of the Articles of Agreement on the reform of the Executive Board (Attachment II) has entered into force; and
  - (iii) the 2008 Proposed Voice and Participation Amendment has entered into force.
- Each member must consent to its increase by December 31, 2011, provided the Executive Board has authority to extend this period.
- A member’s quota cannot be increased until it has paid for the increase.
- Payment timing and composition:
  - A member must pay its quota within 30 days after the later of (a) the date on which the member notifies the Fund of its consent, or (b) the date on which all of the conditions specified in paragraph 27 above have been met. The Executive Board may extend the period for payment.
  - A member may not make such a payment unless it is current in its obligations to the General Resources Account.
  - Each member is to pay 25 percent of its increase in special drawing rights or in the currencies of other members specified, with their concurrence, by the Fund, or in any combination of special drawing rights and such currencies; the balance of the increase is to be paid in the member’s own currency.
- Notices of consent must be received before 6:00 p.m., Washington time, December 31, 2011, unless extended by the Executive Board.
- The Executive Board is requested to complete a comprehensive review of the formula by January 2013.
- The Executive Board is requested to bring forward the timetable for completion of the Fifteenth General Review of Quotas to January 2014.
- The Executive Board and participants in the New Arrangements to Borrow (NAB) are requested to undertake a review of NAB credit arrangements by November 2011, with a corresponding roll-back of the NAB to become effective when the conditions in paragraph 3 of the Resolution are met and the quota payments associated with the participation threshold in paragraph 3(i) have been made.

### Amendment of the Articles of Agreement — procedure and timing
- Article XXVIII governs amendment procedure:
  - A proposed amendment is to be communicated to the Chairman of the Board of Governors for consideration by the Board of Governors.
  - When three-fifths of the members having eighty-five percent of the total voting power have accepted the proposed amendment, the Fund is to certify that fact by formal communication to all members.
- Under Article XXVIII(c), an amendment enters into force for each member three months after the date of the Fund’s formal communication, unless a shorter period is specified.
- For the amendment now proposed, the Executive Board recommends that the amendment should enter into force for all members as of the date of the Fund’s formal communication.
- The Resolution directs the Secretary to ask all members, by circular letter or telegram, whether they accept the Proposed Amendment on the Reform of the Executive Board. The communication shall specify that the Proposed Amendment shall enter into force for all members on the date on which the Fund certifies that three-fifths of the members, having eighty-five percent of the total voting power, have accepted the Proposed Amendment.

### Adoption of the Board of Governors Resolution — voting and timetable
- The Chairman requested the Secretary to bring the Resolution and proposed amendment before the Board of Governors for approval.
- The Executive Board requests Governors to vote without meeting, pursuant to Section 13 of the By-Laws.
- To be valid, votes must be received at the seat of the Fund before 6:00 p.m., Washington, D.C. time, December 15, 2010.
- Considering that the Resolution proposes adjustments in the quotas of members as set out in Attachment I, adoption of the Resolution requires positive responses from Governors having an eighty-five percent majority of the total voting power. The Resolution must be voted on as a whole.

### Resolution provisions of substantive consequence
- Increases in quotas:
  - Proposed increases to quotas are set out in Attachment I to the Resolution.
  - A member’s increase shall not become effective unless the member has consented in writing by the date prescribed and has paid the increase in full within the prescribed period; members with overdue repurchases, charges or assessments to the General Resources Account may not consent to or pay for the increase until current.
  - Each member shall pay 25 percent of its increase in special drawing rights or specified currencies; the balance shall be paid in the member’s own currency.
- Participation thresholds and monitoring:
  - No increase shall become effective until (i) the 70 percent participation threshold is met, (ii) the Proposed Amendment on the Reform of the Executive Board has entered into force, and (iii) the Proposed Amendment approved under Board of Governors Resolution No. 63-2 has entered into force.
  - Each member commits to use its best efforts to complete these steps no later than the Annual Meetings in 2012. The Executive Board is requested to monitor, on a quarterly basis, the progress made in implementation.
- Additional Alternate Executive Directors:
  - Following the first regular election of Executive Directors after entry into force of the amendment approved under Board of Governors Resolution No. 63-2, an Executive Director elected by seven or more members shall be entitled to appoint two Alternate Executive Directors.
  - Conditions for appointing two Alternates include designation by notification to the Secretary of the Fund of (i) the Alternate who shall act when the Executive Director is not present and both Alternates are present; and (ii) the Alternate who shall exercise the powers of the Executive Director pursuant to Article XII, Section 3(f). Designations may be changed by notification to the Secretary.

### Size and composition commitments reiterated in the Resolution
- The Board of Governors takes note of:
  - (i) the commitment to reduce, as a means of achieving greater representation of emerging market and developing countries, the number of Executive Directors representing advanced European countries by two no later than the first regular election of Executive Directors after the conditions set forth in paragraph 3 of this Resolution are met; and
  - (ii) the commitment of the Fund’s membership to maintain an Executive Board consisting of 24 Executive Directors, and to review the composition of the Executive Board every eight years following the date the conditions set forth in paragraph 3 of this Resolution are met.

### Attachment I — Proposed quotas (as presented)
- Attachment I to the Resolution lists the proposed quotas (in millions of SDRs) for all members. Examples from Attachment I (as shown):
  - Afghanistan, Islamic Republic of: 323.8
  - Albania: 139.3
  - Algeria: 1,959.9
  - Angola: 740.1
  - Argentina: 3,187.3
  - Australia: 6,572.4
  - Austria: 3,932.0
  - Bangladesh: 1,066.6
  - Brazil: 11,042.0
  - Canada: 11,023.9
  - China: 30,482.9
  - France: 20,155.1
  - Germany: 26,634.4
  - India: 13,114.4
  - Japan: 30,820.5
  - Russia (Russian Federation): 12,903.7
  - United Kingdom: 20,155.1
  - United States: 82,994.2
- The full list of proposed quotas for all members is contained in Attachment I of the Resolution.

### Attachment II — Proposed Amendment (executive summary)
- The Proposed Amendment on the Reform of the Executive Board amends Article XII, Section 3(b) to read:
  - “(b) Subject to (c) below, the Executive Board shall consist of twenty Executive Directors elected by the members, with the Managing Director as chairman.”

*Source: Fourteenth General Review of Quotas and Reform of the Executive Board — Report excerpt and Resolution text*

### 2. The text of Article XII, Section 3(c) shall be amended to read as follows:

### _103110 - 2. The text of Article XII, Section 3(c) shall be amended to read as follows:

### Summary of proposed amendments to governance and voting provisions
- Amendment to Article XII, Section 3(c):
  - “(c) For the purpose of each regular election of Executive Directors, the Board of Governors, by an eighty-five percent majority of the total voting power, may increase or decrease the number of Executive Directors specified in (b) above.”
- Amendment to Article XII, Section 3(d):
  - “(d) Elections of Executive Directors shall be conducted at intervals of two years in accordance with regulations which shall be adopted by the Board of Governors. Such regulations shall include a limit on the total number of votes that more than one member may cast for the same candidate.”
- Amendment to Article XII, Section 3(f):
  - “(f) Executive Directors shall continue in office until their successors are elected. If the office of an Executive Director becomes vacant more than ninety days before the end of his term, another Executive Director shall be elected for the remainder of the term by the members that elected the former Executive Director. A majority of the votes cast shall be required for election. While the office remains vacant, the Alternate of the former Executive Director shall exercise his powers, except that of appointing an Alternate.”
- Amendment to Article XII, Section 3(i):
  - “(i) (i) Each Executive Director shall be entitled to cast the number of votes which counted towards his election.
    (ii) When the provisions of Section 5(b) of this Article are applicable, the votes which an Executive Director would otherwise be entitled to cast shall be increased or decreased correspondingly. All the votes which an Executive Director is entitled to cast shall be cast as a unit.
    (iii) When the suspension of the voting rights of a member is terminated under Article XXVI, Section 2(b), the member may agree with all the members that have elected an Executive Director that the number of votes allotted to that member shall be cast by such Executive Director, provided that, if no regular election of Executive Directors has been conducted during the period of the suspension, the Executive Director in whose election the member had participated prior to the suspension, or his successor elected in accordance with paragraph 3(c)(i) of Schedule L or with (f) above, shall be entitled to cast the number of votes allotted to the member. The member shall be deemed to have participated in the election of the Executive Director entitled to cast the number of votes allotted to the member.”

- Amendment to Article XII, Section 3(j):
  - “(j) The Board of Governors shall adopt regulations under which a member may send a representative to attend any meeting of the Executive Board when a request made by, or a matter particularly affecting, that member is under consideration.”

- Amendment to Article XII, Section 8:
  - “The Fund shall at all times have the right to communicate its views informally to any member on any matter arising under this Agreement. The Fund may, by a seventy percent majority of the total voting power, decide to publish a report made to a member regarding its monetary or economic conditions and developments which directly tend to produce a serious disequilibrium in the international balance of payments of members. The relevant member shall be entitled to representation in accordance with Section 3(j) of this Article. The Fund shall not publish a report involving changes in the fundamental structure of the economic organization of members.”

- Amendment to Article XXI(a)(ii):
  - “(a) (ii) For decisions by the Executive Board on matters pertaining exclusively to the Special Drawing Rights Department only Executive Directors elected by at least one member that is a participant shall be entitled to vote. Each of these Executive Directors shall be entitled to cast the number of votes allotted to the members that are participants whose votes counted towards his election. Only the presence of Executive Directors elected by members that are participants and the votes allotted to members that are participants shall be counted for the purpose of determining whether a quorum exists or whether a decision is made by the required majority.”

- Amendment to Article XXIX(a):
  - “(a) Any question of interpretation of the provisions of this Agreement arising between any member and the Fund or between any members of the Fund shall be submitted to the Executive Board for its decision. If the question particularly affects any member, it shall be entitled to representation in accordance with Article XII, Section 3(j).”

- Amendment to Schedule D, paragraph 1(a):
  - “(a) Each member or group of members that has the number of votes allotted to it or them cast by an Executive Director shall appoint to the Council one Councillor, who shall be a Governor, Minister in the government of a member, or person of comparable rank, and may appoint not more than seven Associates. The Board of Governors may change, by an eighty-five percent majority of the total voting power, the number of Associates who may be appointed. A Councillor or Associate shall serve until a new appointment is made or until the next regular election of Executive Directors, whichever shall occur sooner.”

- Deletion and renumbering in Schedule D:
  - Paragraph 5(e) of Schedule D shall be deleted.
  - Paragraph 5(f) shall be renumbered 5(e) and amended:
    - “(e) When an Executive Director is entitled to cast the number of votes allotted to a member pursuant to Article XII, Section 3(i)(iii), the Councillor appointed by the group whose members elected such Executive Director shall be entitled to vote and cast the number of votes allotted to such member. The member shall be deemed to have participated in the appointment of the Councillor entitled to vote and cast the number of votes allotted to the member.”

- Amendment to Schedule E (Transitional Provisions with Respect to Executive Directors):
  - 1(a) and 1(b) transitional deeming provisions:
    - “(a) Each Executive Director who was appointed pursuant to former Article XII, Sections 3(b)(i) or 3(c), and was in office immediately prior to the entry into force of this Schedule, shall be deemed to have been elected by the member who appointed him; and
       (b) Each Executive Director who cast the number of votes of a member pursuant to former Article XII, Section 3(i)(ii) immediately prior to the entry into force of this Schedule, shall be deemed to have been elected by such a member.”

- Amendment to Schedule L, paragraph 1(b):
  - “(b) appoint a Governor or Alternate Governor, appoint or participate in the appointment of a Councillor or Alternate Councillor, or elect or participate in the election of an Executive Director.”

- Amendment to Schedule L, paragraph 3(c) chapeau:
  - “(c) The Executive Director elected by the member, or in whose election the member has participated, shall cease to hold office, unless such Executive Director was entitled to cast the number of votes allotted to other members whose voting rights have not been suspended. In the latter case:”

### Redline version highlights (Annex III)
- Executive Board composition and appointment/election rules:
  - Text restores a twenty Executive Directors baseline and specifies that five shall be appointed by the five members having the largest quotas and fifteen shall be elected by the other members.
  - For regular elections, the Board of Governors, by an eighty-five percent majority of the total voting power, may increase or decrease the number of Executive Directors in (ii) above.
  - Provision for reduction of the number of elective Executive Directors by one or two if Executive Directors are appointed under (c) unless the Board of Governors decides, by an eighty-five percent majority of the total voting power, that this reduction would hinder effective discharge or upset balance.
  - Detailed transitional and procedural rules for appointed vs. elected Executive Directors, including voting entitlements tied to votes “which counted towards his election” and limits on participation when votes are reallocated due to suspension terminations.
- Election mechanics in Schedule E (Election of Executive Directors):
  - Governors eligible to vote shall cast all of their votes for one person in electing elective Executive Directors.
  - The fifteen persons receiving the greatest number of votes shall be Executive Directors, provided that no person who received less than four percent of the total number of votes that can be cast (eligible votes) shall be considered elected.
  - Second-ballot rules when fifteen persons are not elected, with specific procedures referencing nine percent and four percent thresholds:
    - Rules for deeming votes to have raised totals above nine percent and treatment of Governors part of whose votes must be counted to raise totals above four percent.

### Key procedural thresholds and exact numeric values preserved
- eighty-five percent majority of the total voting power (multiple provisions)
- two years (election interval)
- ninety days (vacancy timing)
- seventy percent majority of the total voting power (publication of report)
- twenty Executive Directors; five appointed; fifteen elected
- reduction by one or two Executive Directors (conditional)
- four percent threshold (eligibility in Schedule E)
- nine percent threshold (second-ballot procedures)
- majority of the votes cast (required for special vacancy elections)

*Source: Text of proposed amendments and redline version as provided in the content unit.*

### 6. If, after the second ballot, fifteen persons have not been elected, further ballots shall be held

### 6. If, after the second ballot, fifteen persons have not been elected, further ballots shall be held

### Election procedure
- If, after the second ballot, fifteen persons have not been elected, further ballots shall be held on the same principles until fifteen persons have been elected.
- Provided that after fourteen persons are elected, the fifteenth may be elected by a simple majority of the remaining votes and shall be deemed to have been elected by all such votes.

### Schedule L — Suspension of Voting Rights (selected provisions)
- A member whose voting rights are suspended shall not:
  - (b) appoint a Governor or Alternate Governor, appoint or participate in the appointment of a Councillor or Alternate Councillor, or appoint, elect, or participate in the election of an Executive Director.
- (c) The Executive Director appointed or elected by the member, or in whose election the member has participated, shall cease to hold office, unless such Executive Director was entitled to cast the number of votes allotted to other members whose voting rights have not been suspended. In the latter case, other provisions apply as outlined in Schedule L.

### SUPPLEMENT — IMF Quota and Governance Reform — Elements of an Agreement (updated tables summary)
- The supplement provides the final version of Tables 1–4 and Table A1 and reflects the additional adjustments agreed by the Executive Board described in paragraph 8, page 4, of the final version of the staff paper.

Key statistical highlights (values preserved exactly as in source):
- Advanced economies: 58.2 60.0 61.6 60.5 57.7 60.6 57.9 55.3
- Major advanced economies (G7): 42.9 48.0 46.0 45.3 43.4 45.1 43.0 41.2
- United States: 17.0 21.6 17.4 17.7 17.4 17.0 16.7 16.5
- Emerging Market and Developing Countries: 41.8 40.0 38.4 39.5 42.3 39.4 42.1 44.7
- Total: 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Memorandum items (selected):
- EU 27: 31.3 27.8 32.9 31.9 30.2 32.5 30.9 29.4
- LICs (IDA thresholds) 6/ : 1.8 1.7 3.5 3.2 3.2 4.0 4.5 4.5
- Shifts from Post Second Round:
  - Underrepresented countries (shift in p.p.): 6.2 5.8
  - Underrepresented EMDCs (shift in p.p.): 5.7 5.4
  - Dynamic EMDCs (shift in p.p.) 7/: 6.0 5.7
  - EMDCs (shift in p.p.): 2.8 2.6
  - Uniform reduction factor 8/: 53.9

Table 2 (Quota Shares of 20 Largest Members) — top ranks (In percent):
- Rank 1: United States 17.38; United States 17.67; United States 17.41
- Rank 2: Japan 6.23; Japan 6.56; Japan 6.46
- Rank 3: Germany 6.09; Germany 6.11; China 3/6.39
- Rank 4: France 5.02; France 4.50; Germany 5.59
- Rank 5: United Kingdom 5.02; United Kingdom 4.50; France 4.23
- Rank 6: Italy 3.30; China 3/4.00; United Kingdom 4.23
- Rank 7: Saudi Arabia 3.27; Italy 3.31; Italy 3.16
- Rank 8: Canada 2.98; Saudi Arabia 2.93; India 2.75
- Rank 9: China 3/2.98; Canada 2.67; Russian Federation 2.71
- Rank 10: Russian Federation 2.78; Russian Federation 2.49; Brazil 2.32

Table 3 (Largest Increases and Decreases in Quota Shares — Difference between Proposed and Post Second Round Quota Shares, in percentage points):
- Largest Increases (top 10):
  - 1 China 3/2.40
  - 2 Brazil 0.53
  - 3 Korea, Republic of 0.39
  - 4 Turkey 0.37
  - 5 Mexico 0.35
  - 6 Spain 0.31
  - 7 India 0.31
  - 8 Singapore 0.23
  - 9 Russian Federation 0.21
  - 10 Ireland 0.20
- Largest Decreases (top 10):
  - 1 Saudi Arabia -0.83
  - 2 Belgium -0.59
  - 3 Germany -0.52
  - 4 Canada -0.36
  - 5 Venezuela, R.B. de -0.33
  - 6 Netherlands -0.33
  - 7 United Kingdom -0.28
  - 8 France -0.28
  - 9 United States -0.26
  - 10 Switzerland -0.24

Table 4 (Summary of Voting and Quota Share Shifts):
- Shift of voting shares (ppts):
  - to under-represented countries 8.2 5.8
  - to dynamic EMDCs 8.8 5.7
  - to EMDCs 5.3 2.6
  - to non-oil EMDCs 1/ 7.7 3.9
- Shift of quota shares (ppts):
  - to under-represented countries 8.5 6.2
  - to dynamic EMDCs 9.0 6.0
  - to EMDCs 3.9 2.8
  - to non-oil EMDCs 1/ 6.4 4.2
- Number of countries that increase quota share: 54 61
  - Advanced Countries 10 8
  - EMDCs 44 53
- Number of countries that increase or maintain quota share: 54 110
  - Advanced Countries 10 8
  - EMDCs 44 102
- Number of countries with nominal quota increases greater than 150%: 40 16
  - Advanced Countries 6 3
  - EMDCs 34 13
- Adjustment coefficient 2/: 65.8 55.7

Table A1 (Illustration of Proposed Quota and Voting Shares — By Member, selected entries, In percent):
- United States: Pre-Singapore 16.987 21.645 17.380 17.670 17.407 17.023 16.727 16.479
- China 5/: 7.917 8.128 2.980 3.996 6.394 2.928 3.806 6.071
- India: 2.403 3.027 1.945 2.442 2.751 1.916 2.337 2.629
- Brazil: 2.153 2.654 1.420 1.783 2.316 1.402 1.714 2.218
- Korea, Republic of: 2.108 1.909 0.764 1.412 1.800 0.760 1.364 1.731
- Selected smaller members (examples): Tuvalu 0.0004 0.0001 -- 0.0008 0.0005 -- 0.0301 0.0299; Palau 0.0010 0.0007 0.0015 0.0015 0.0010 0.0129 0.0308 0.0304

Footnotes and methodological notes (preserved phrasing and numeric details):
- 1/ See Annex I for a description of the allocation mechanism.
- 2/ GDP blended using 60 percent market and 40 percent PPP exchange rates, compressed using a factor of 0.95.
- 3/ Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo and Tuvalu which became members on June 29, 2009 and June 24, 2010, respectively. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.
- 4/ Basic votes are calculated using the agreed percentage of total votes, 5.502 percent of total votes (provided there are no fractional votes) as in the Proposed Amendment to Enhance Voice and Participation, which has not yet entered into effect.
- 5/ Includes China, P.R., Hong Kong SAR, and Macao SAR.
- 6/ Eligibility is limited to PRGT-eligible countries with annual per capital income below the prevailing operational IDA cut-off in 2008 (US$1,135) or below twice IDA's cut-off for countries meeting the definition of a "small country" under the PRGT eligibility criteria. Zimbabwe is included.
- 7/ 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.
- 8/ Uniform proportional reduction in the gap between GDP blend (see footnote 2) and post-selective quota share.

*Source: Finance Department; SUPPLEMENT — INTERNATIONAL MONETARY FUND, IMF Quota and Governance Reform—Elements of an Agreement—Updated Tables.*

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