Press Release: IMF Executive Board Approves Major Overhaul of Quotas and Governance
IMF News, November 5, 2010
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- Published: November 5, 2010
Executive summary and decision
- The Executive Board approved proposals leading to a major overhaul of the Fund’s quotas and governance, described as the most fundamental governance overhaul in the Fund’s 65-year history.
- The package includes completion of the 14th General Review of Quotas with a doubling of quotas to approximately SDR 476.8 billion (about US$755.7 billion at current exchange rates) and a major realignment of quota shares among members.
- The reform package is recommended to the Board of Governors (187 members), which must approve the proposed quota increases and a proposed amendment of the Articles of Agreement to eliminate the category of appointed Executive Directors.
- Members will make best efforts to complete necessary acceptances and parliamentary approvals by the Annual Meetings 2012; timeline endorsed calls for quota increase and realignments to take effect by the Annual Meetings of October 2012, and Executive Board reforms to be implemented no later than the subsequent Executive Board election scheduled in late 2012.
Quotas and voting shares (Key elements)
- Quota increase:
- Members’ quotas will double under the 14th General Review of Quotas to SDR 476.8 billion from SDR 238.4 billion agreed under the 2008 quota and voice reform.
- Once effective, there will be a corresponding rollback in the New Arrangements to Borrow (NAB), preserving relative shares.
- Shifts in shares:
- More than 6 percent quota shift from over-represented to under-represented members.
- More than 6 percent quota shift to dynamic emerging market and developing countries.
- Total shift in voting share to emerging market and developing countries as a whole will be 5.3 percent, when combined with the 2008 quota and voice reform.
- Protection of poorest members:
- Voting shares will be preserved for the poorest countries, defined as members eligible for borrowing from the low-income Poverty Reduction and Growth Trust and whose per capita income is below the International Development Association threshold (US$1,135 in 2008, the year on which the quota reform calculations are based, or twice that amount for small countries).
- Quota formula and review timetable:
- A comprehensive review of the current quota formula will be completed by January 2013.
- Completion of the 15th General Review of Quotas will be brought forward to January 2014.
- Any realignment is expected to increase quota shares of dynamic economies in line with their relative positions in the global economy; steps will also be taken to protect voice and representation of the poorest members.
Governance — Executive Board size and composition (Key elements)
- Executive Board size and review:
- Membership commits to maintain the Executive Board size at 24 members.
- Board composition will be reviewed every eight years, starting when the quota reform takes effect.
- Representation changes:
- Advanced European countries will reduce their combined Board representation by two chairs at the latest by the time of the first election after the quota reform takes effect.
- The Executive Board will consist only of elected Executive Directors following entry into force of the proposed amendment of the Fund’s Articles of Agreement, ending the category of appointed Executive Directors.
- There will be further scope for appointing second Alternate Executive Directors to enhance representation of multi-country constituencies.
Illustrative quota and voting shares (selected figures from the proposed allocation)
- Calculated Quota Share / Quota Shares / Voting Shares (selected groups; percentages as presented):
- Advanced economies: Calculated Quota Share 58.2; Pre-Singapore 60.0; Post Second Round 61.6; Proposed 60.5 (Quota Shares column); Pre-Singapore 57.7; Post Second Round 60.6; Proposed 57.9; 55.3 (Voting Shares column).
- Major advanced economies (G7): Calculated 42.9; Pre-Singapore 48.0; Post Second Round 46.0; Proposed 45.3 (Quota Shares column); Pre-Singapore 43.4; Post Second Round 45.1; Proposed 43.0; 41.2 (Voting Shares column).
- United States: Calculated 17.0; Pre-Singapore 21.6; Post Second Round 17.4; Proposed 17.7 (Quota Shares column); Pre-Singapore 16.7; Post Second Round 16.5 (Voting Shares column).
- Emerging Market and Developing Countries: Calculated 41.8; Pre-Singapore 40.0; Post Second Round 38.4; Proposed 39.5 (Quota Shares column); Pre-Singapore 42.3; Post Second Round 39.4; Proposed 42.1; 44.7 (Voting Shares column).
- Developing countries: Calculated 34.1; Pre-Singapore 33.2; Post Second Round 30.9; Proposed 32.4 (Quota Shares column); Pre-Singapore 35.1; Post Second Round 31.7; Proposed 34.5; 37.0 (Voting Shares column).
- Africa: Calculated 3.1; Pre-Singapore 2.9; Post Second Round 5.5; Proposed 4.9 (Quota Shares column); Pre-Singapore 4.4; Post Second Round 6.0; Proposed 6.2; 5.6 (Voting Shares column).
- Asia (including Korea and Singapore): Calculated 17.3; Pre-Singapore 10.3; Post Second Round 12.6; Proposed 16.1 (Quota Shares column); Pre-Singapore 10.4; Post Second Round 12.8 (Voting Shares column).
- Western Hemisphere: Calculated 7.0; Pre-Singapore 8.0; Post Second Round 7.5; Proposed 7.7 (Quota Shares column); Pre-Singapore 7.9; Post Second Round 8.2; Proposed 8.4 (Voting Shares column).
- Total: 100.0 (Calculated Quota Share column).
- Memorandum items:
- EU 27: Calculated 31.3; Pre-Singapore 27.8; Post Second Round 32.9; Proposed 31.9 (Quota Shares column); Pre-Singapore 30.2; Post Second Round 32.5; Proposed 29.4 (Voting Shares column).
- LICs (IDA thresholds): Calculated 1.8; Pre-Singapore 1.7; Post Second Round 3.5; Proposed 3.2 (Quota Shares column); Pre-Singapore 4.0; Post Second Round 4.5 (Voting Shares column).
- Notes and technical definitions (as presented):
- GDP Blend Share: GDP blended using 60 percent market and 40 percent PPP exchange rates, compressed using a factor of 0.95.
- Post Second Round figures include ad hoc increases for 54 eligible members that are not yet effective; also include Kosovo and Tuvalu which became members on June 29, 2009 and June 24, 2010, respectively.
- 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.
- LIC eligibility limited to 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 included.
- Dynamic EMDCs definition: 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.
- Uniform reduction factor: Uniform proportional reduction in the gap between GDP blend and post-selective quota share.
Summary of voting and quota share shifts (key statistics)
- Shift of voting shares (percentage points):
- to under-represented countries: 8.8
- to dynamic EMDCs: 5.3
- to EMDCs: 5.3
- to non-oil EMDCs 1/: 3.9
- Shift of quota shares (percentage points):
- From Pre-2008 Reform: 8.5
- From Post Second Round: 9.0; 6.4; 4.2 (as presented in separate lines)
- Number of countries increasing quota share:
- From Pre-2008 Reform: 54
- From Post Second Round: 61
- Distribution of countries with quota increases:
- Advanced Countries: 10 (Pre-2008 Reform); 8 (Post Second Round)
- EMDCs: 44 (Pre-2008 Reform); 53 (Post Second Round)
- Number of countries that increase or maintain quota share:
- 110 (Pre-2008 Reform)
- 102 (Post Second Round)
- Number of countries with nominal quota increases greater than 150%:
- 40; 16; 6; 3; 34; 13 (figures listed in sequence as in source)
- Adjustment coefficient:
- 65.8 (Pre-Singapore)
- 55.7 (Post Second Round)
Annex — Institutional roles and decision process (summary)
- Board of Governors:
- Highest decision-making body; consists of one governor appointed by each member country (usually the minister of finance or the governor of the central bank).
- Most powers of the IMF are vested in the Board of Governors; normally meets once a year.
- Delegated to the Executive Board all except certain reserved powers.
- Executive Board:
- Functions in continuous session and is responsible for conducting the business of the IMF.
- Composed of 24 Directors, who are appointed (5) or elected (19), and the Managing Director, who serves as its Chairman.
- Usually meets several times each week and carries out its work largely on the basis of papers prepared by IMF management and staff.
- Quotas:
- Each member country is assigned a quota based on its relative position in the world economy and various other variables.
- Quota subscriptions generate most of the IMF's financial resources.
- A member’s quota determines its maximum financial commitment to the IMF and its voting power, and influences its access to IMF financing.
International Monetary Fund — Press Release No. 10/418 (November 5, 2010).