Further Thoughts on a New Quota Formula, and Statistical Appendices I and II

Policy Papers, November 22, 2006

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The Board of Governors in a Resolution adopted on September 18 requested that the Executive Board reach agreement on a new quota formula, starting discussions soon after the Annual Meetings in Singapore.
The Resolution sets completion targets: by the Annual Meetings in 2007, and no later than the IMFC Meeting in the Spring of 2008.
The Resolution states the new formula should provide a simpler and more transparent means of capturing members’ relative positions in the world economy.
The new formula would provide the basis for a second round of ad hoc quota increases, as part of the program of quota and voice reform to be completed by the Annual Meetings in 2007, and no later than by the Annual Meetings of 2008.

The paper explores key issues related to a new quota formula as background for an informal Board seminar.
The seminar is the first opportunity for the Board to discuss the new formula since the adoption of the Resolution.
The paper reviews broad considerations and principles that should guide the design of a new quota formula, taking as a starting point the roles of quotas in the Fund.
The paper considers more specific issues in that light, such as:
- the selection of variables, and
- possible functional forms for the new formula.
In examining these issues, the paper draws on the extensive discussion of the quota formulas in recent years, taking up questions raised both within the Board and in other fora.

Roles of quotas in the Fund—used as the starting point to set design principles for the formula.
Simplicity and transparency—explicit objective from the Resolution to capture members’ relative positions in the world economy.
Variable selection—paper examines which indicators best reflect members’ relative positions.
Functional form—paper assesses possible mathematical specifications to combine variables into a quota formula.
Institutional context—paper situates the formula discussion within prior extensive discussions of quota formulas raised within the Board and other fora.

Further Thoughts on a New Quota Formula, and Statistical Appendices I and II, November 22, 2006

Possible Quota Formula Variables—Shares in Global Totals
- Possible Quota Formula Variables—Shares in Global Totals (Markdown version)
- Possible Quota Formula Variables—Shares in Global Totals (PDF)