IMF-PART-II

IMF-II(International Monetary Fund-II)

QUOTA

Thursday, April 13, 2023

PROF. AJIR KUMAR RAY 1

International Monetary FundQUOTA

Quota subscriptions generate most of the IMF's financial resources.

Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy.

A member country's quota determines its • maximum financial commitment to the IMF, • its voting power, • and has a bearing on its access to IMF financing.



On December 15, 2010, the Board of Governors, the Fund’s highest decision-making body, approved a package of far-reaching reforms of the Fund’s quotas and governance, completing the 14th General Review of Quotas.

Once the reform package is approved by member countries and implemented, it will result in an unprecedented 100 percent increase in total quotas and a major realignment of quota shares to better reflect the changing relative weights of the IMF’s member countries in the global economy.




The 14th General Review of Quotas will:• Double quotas from approximately SDR 238.4 billion to

approximately SDR 476.8 billion.

• Shift more than 6 percent of quota shares from over-represented to under-represented member countries.

• Shift more than 6 percent of quota shares to dynamic emerging market and developing countries. (EMDCs )

• China will become the 3rd largest member country in the IMF, and there will be four EMDCs (Brazil, China, India, Russia) among the 10 largest shareholders in the fund

• Preserve the quota and voting share of the poorest member countries. those eligible for the low-income poverty reduction and growth trust (PRGT) and whose per capita income fell below US$1,135 in 2008 (the threshold set by the IDA)




• The IMFC noted that quota reform is crucial for increasing the legitimacy and effectiveness of the Fund, and stressed that the IMF is and should remain a quota-based institution.

• 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 by about two years to January 2014.




Quotas play several key roles in the IMF


Subscriptions (quota share). A member's quota subscription determines the maximum amount of financial resources the member is obliged to provide to the IMF.

A member must pay its subscription in full upon joining the Fund: up to 25 percent must be paid in SDRs or widely accepted currencies(such as the U.S. dollar, the euro, the yen, or the pound sterling), while the rest is paid in the member's own currency.

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Voting power (voting share). The quota largely determines a member's voting power in IMF decisions. Each IMF member’s votes are comprised of basic votes plus one additional vote for each SDR 100,000 of quota. The 2008 reform fixed the number of basic votes at 5.502 percent of total votes, which initially increased the number of basic votes from 250 to 677 votes per member. The number of basic votes will keep increasing as members that are eligible for ad hoc quota increases under the 2008 reform pay for their quota increases and will have almost tripled once all the quota increases under the 2008 reform become effective.

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Access to financing. The amount of financing a member can obtain from the IMF (its access limit) is based on its quota. For example, under Stand-By and Extended Arrangements, a member can borrow up to 200 percent of its quota annually and 600 percent cumulatively. However, access may be higher in exceptional circumstances.

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How quota reviews work •The IMF's Board of Governors conducts general quota reviews at regular intervals (usually every five years).

•Any changes in quotas must be approved by an 85 percent majority of the total voting power, and a member’s quota cannot be changed without its consent.

•There are two main issues addressed in a general quota review: the size of an overall increase and the distribution of the increase among the members.

•First, a general quota review allows the IMF to assess the adequacy of quotas both in terms of members’ balance of payments financing needs and in terms of its own ability to help meet those needs.

•Second, a general review allows for increases in members’ quotas to reflect changes in their relative positions in the world economy.



General Quota Reviews

Quota ReviewDate Resolution Adopted

Overall Quota Increase (percent)

First Quinquennial No increase proposed ---

Second Quinquennial No increase proposed ---

1958/59 1 February and April 1959 60.7

Third Quinquennial No increase proposed ---

Fourth Quinquennial March 1965 30.7

Fifth General February 1970 35.4

Sixth General March 1976 33.6

Seventh General December 1978 50.9

Eighth General March 1983 47.5

Ninth General June 1990 50.0

Tenth General No increase proposed ---

Eleventh General January 1998 45.0

Twelfth General No increase proposed ---

Thirteenth General No increase proposed ---

Fourteenth General __ 100.0



http://www.imf.org/external/np/exr/facts/quotas.htm

• When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members that are broadly comparable in economic size and characteristics.

• The IMF uses a quota formula to guide the assessment of a member’s relative position.




• The current quota formula is a weighted average of

GDP (weight 50 percent) Openness (weight 30 percent) Economic variability (weight 15 percent) International reserves (weight 05 percent)

For this purpose, GDP is measured as a blend of

GDP based on market exchange rates (weight of 60 percent) +PPP exchange rates (40 percent).

The formula also includes a “compression factor” that reduces the dispersion in calculated quota shares across members.




Where CQS = calculated quota share = (0.5*Y + 0.3*O + 0.15*V + 0.05*R ) k


Y = a blend of GDP converted at market rates and PPP exchange rates averaged over a three year period. The weights of market-based and PPP GDP are 0.60 and 0.40, respectively;

O = the annual average of the sum of current payments and current receipts (goods, services, income, and transfers) for a five year period;

V = variability of current receipts and net capital flows (measured as a standard deviation from the centered three-year trend over a thirteen year period);



k = a compression factor of 0.95. The compression factor is applied to the uncompressed calculated quota shares which are then rescaled to sum to 100


R = twelve month average over a year of official reserves (foreign exchange,SDR holdings, reserve position in the Fund, and monetary gold);

Where CQS = calculated quota share = (0.5*Y + 0.3*O + 0.15*V + 0.05*R ) k



• Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.

• The largest member of the IMF is the United States, with a current quota of SDR 37.1 billion (about $58 billion),

• the smallest member is Tuvalu, with a current quota of SDR 1.8 million (about $2.7 million).




http://www.imf.org/external/np/exr/facts/sdr.htm


GDP (billion $, Current Prices) Shaded cells indicate IMF staff estimates

CountryUnits

(billion)2008 2009 2010 2011

United States U.S. $ 14,369.08 14,119.05 14,624.18 15,157.29

Japan U.S. $ 4,886.95 5,068.89 5,390.90 5,683.29

Germany U.S. $ 3,651.62 3,338.68 3,305.90 3,358.24

France U.S. $ 2,865.23 2,656.38 2,555.44 2,590.79

U K U.S. $ 2,679.01 2,178.86 2,258.57 2,395.48

Relative Economic Strength of Developed Countries



Asian Countries GDP billion US $ (Current Prices)

GDP US $ (billion) Asian Countries. Shaded cells indicate IMF staff estimates

Country 2008 2009 2010 2011

China 4,519.95 4,984.73 5,745.13 6,422.28

India 1260.619 1,236.94 1,430.02 1,598.39

Indonesia 511.489 539.377 695.059 776.976

Thailand 272.429 263.979 312.605 334.026

Malaysia 222.272 192.955 218.95 236.555

Philippines 167.167 161.196 189.061 212.657

Pakistan 163.892 161.994 174.792 190.204

Bangladesh 84.462 94.602 105.402 115.222

Vietnam 90.274 93.164 101.987 113.627

Sri Lanka 39.597 42.203 48.241 52.552

Relative Economic Strength of Asian Countries



Developed Countries Per Capita GDP (US $ Current Prices)

Shaded cells indicate IMF staff estimates

Country 2008 2009 2010 2011

United States 47,155.32 45,934.47 47,131.95 48,387.29

Japan 38,271.30 39,740.27 42,325.23 44,682.34

Germany 44,524.95 40,831.66 40,511.83 41,235.74

France 45,991.04 42,412.63 40,591.43 40,965.40

United Kingdom 43,651.55 35,257.45 36,298.39 38,239.51

Relative Economic Strength (per capita) of Developed Countries



Asian Countries Per Capita GDP (US $ Current Prices)

Shaded cells indicate IMF staff estimates

Country 2008 2009 2010 2011

Malaysia 8,142.62 6,950.47 7,754.99 8,238.51

Thailand 4,107.79 3,940.97 4,620.71 4,888.46

China 3,403.53 3,734.61 4,282.89 4,763.87

Indonesia 2,237.72 2,329.45 2,963.28 3,270.01

Sri Lanka 1,971.49 2,084.87 2,364.62 2,558.45

India 1,066.46 1,031.59 1,176.06 1,296.68

Vietnam 1,047.54 1,068.26 1,155.57 1,272.18

Pakistan 1,018.15 989.13 1,049.31 1,122.94

Bangladesh 527.887 583.164 640.847 690.718

Relative Economic Strength (per capita) of Asian Countries





United States 17.670

Japan 6.556

Germany 6.110

France 4.505

United Kingdom 4.505

China 3.996

Italy 3.306

Saudi Arabia 2.930

Canada 2.672

Russia 2.494

India 2.442

Netherlands 2.166

Belgium 1.932

Brazil 1.783

Spain 1.688

Distribution of Quotas by Member (percent)



Mexico 1.521

Switzerland 1.451

Korea 1.412

Australia 1.358

Venezuela 1.115

Sweden 1.005

Argentina 0.888

Austria 0.887

Indonesia 0.872

Denmark 0.793

Norway 0.790

South Africa 0.784

Malaysia 0.744

Nigeria 0.735

Poland 0.708

Distribution of Quotas by Member (percent)



Casting Votes of

Votes by Country

Total Votes1

Percentof FundTotal2

United States 421,960 421,960 16.88

Japan 157,021 157,021 6.28

Germany 146,391 146,391 5.86

France 108,121 108,121 4.32

United Kingdom 108,121 108,121 4.32

China 95,995 95,995 3.84

India 58,951 70,689 2.83

Russian Fed 60,190 60,190 2.41



http://www.imf.org/external/np/sec/memdir/eds.aspx

http://www.imf.org/external/np/sec/memdir/eds.aspx

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