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IMF Executive Board Approves Major Overhaul of Quotas and Governance

Press Release No. 10/418
November 5, 2010

The Executive Board of the International Monetary Fund (IMF) today approved proposals that will lead to a major overhaul of the Fund’s quotas and governance, strengthening the Fund’s legitimacy and effectiveness.

“This historic agreement is the most fundamental governance overhaul in the Fund’s 65-year history and the biggest ever shift of influence in favor of emerging market and developing countries to recognize their growing role in the global economy,” IMF Managing Director Dominique Strauss-Kahn said after the Executive Board’s decision.

As part of the far-reaching reforms, the Executive Board proposes 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. It will result in a shift of more than 6 percent of quota shares to dynamic emerging market and developing countries and more than 6 percent from over-represented to under-represented countries, while protecting the quota shares and voting power of the poorest members. The Board also endorsed proposals that would lead to a more representative, all-elected Executive Board.

The Executive Board, which oversees the Fund’s day-to-day operations, recommended the reform package to the Board of Governors, which represents all 187 members and must approve the proposed quota increases and a proposed amendment of the Articles of Agreement that would eliminate the category of appointed Executive Directors. Following the Board of Governors’ approval, the proposed quota increases and the amendment will have to be accepted by the membership, which in many cases involves parliamentary approval, and which members will make best efforts to complete by the Annual Meetings 2012.

“The doubling of quotas maintains the quota-based nature of the Fund, and ensures its ability to serve its membership in times of crisis. A fairer allocation of quota shares reflecting better our members’ economic importance, together with a more representative Executive Board, will enhance the credibility and effectiveness of the Fund’s ongoing efforts towards greater global financial stability,” Mr. Strauss-Kahn said.

“The reforms build on those initiated in 2008 and, combined with the earlier steps, the voting shares of emerging market and developing countries as a group will rise by well over 5 percentage points,” he added. “The package we have arrived at is a balanced one. The negotiations have not been easy, but our members have shown a willingness to compromise and to demonstrate the flexibility needed to reach an agreement for the greater common good. For that I thank each and every member country—all the various national authorities that have made great efforts in advancing these discussions, including Korea which played an important role in bringing together the G-20 two weeks ago. I look forward to the Board of Governors’ approval of these reforms.”

The quota shift would exceed the target set out in October 2009 by ministers and governors in the International Monetary and Financial Committee (IMFC)—the Fund’s policy-advisory body—of a shift in quota share to dynamic emerging market and developing countries of at least 5 percent from over-represented countries to under-represented countries, while the voting share of the poorest members is protected. The 10 largest members of the Fund will consist of the United States, Japan, the “BRICs” (Brazil, China, India, the Russian Federation), and the four largest European countries (France, Germany, Italy, the United Kingdom). The Executive Board endorsed a timeline that calls for the 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, which is scheduled in late 2012.

Summary of the Key Elements of the Reforms:

1) Quotas and Voting shares

Quota increase – Members’ quotas, the Fund’s principal source of financial resources, 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 the increase in quotas becomes effective, there will be a corresponding rollback in the New Arrangements to Borrow (NAB), a back-stop arrangement between the IMF and a group of IMF members to provide additional lending resources to the Fund, preserving relative shares.

Shift in shares – The minimum targets set out in the October 2009 IMFC Communiqué will be exceeded with a more than 6 percent quota shift from over-represented to under-represented members, and a more than 6 percent quota shift to dynamic emerging market and developing countries. Moreover, the 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.

Protecting the voting power of the poorest – Voting shares will be preserved for the poorest countries, defined as those 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 next review –A comprehensive review of the current quota formula, which formed the basis to work from during the 14th General Review, 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. The goal is to continue the dynamic process of adjusting quota shares to reflect shifts in the global economy. Any realignment is expected to result in increases in the quota shares of dynamic economies in line with their relative positions in the global economy, and hence likely in the share of emerging market and developing countries as a whole. Steps will also be taken to protect the voice and representation of the poorest members.

2) Governance—Executive Board size and composition

• The membership commits to maintain the Executive Board size at 24 members, and to review Board composition every eight years, starting when the quota reform takes effect.

• 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 (currently the members with the five largest quotas appoint an Executive Director).

• There will be further scope for appointing second Alternate Executive Directors to enhance representation of multi-country constituencies.


The Board of Governors is the highest decision-making body of the IMF and consists of one governor appointed by each member country. The governor is usually the minister of finance or the governor of the central bank. Most powers of the IMF are vested in the Board of Governors. The Board of Governors has delegated to the Executive Board all except certain reserved powers. The Board of Governors normally meets once a year.

The Executive Board functions in continuous session and is responsible for conducting the business of the IMF. It is composed of 24 Directors, who are appointed (5) or elected by member countries or by groups of countries (19), and the Managing Director, who serves as its Chairman. The Board usually meets several times each week. It carries out its work largely on the basis of papers prepared by IMF management and staff.

Each member country of the IMF 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 has a bearing on its access to IMF financing.

Illustration of Proposed Quota and Voting Shares 1/
(In percent)
    Calculated Quota Share GDP Blend Share2/   Quota Shares
  Voting Shares
      Pre-Singapore Post Second Round 3/ Proposed   Pre- Singapore Post Second Round 3/ 4/ Proposed 3/ 4/    
  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    
  Other 25.9 26.4   28.6 27.7 26.0   28.1 26.3 24.7    
  Other advanced economies 15.3 11.9   15.6 15.1 14.3   15.4 14.9 14.1    
  Emerging Market and Developing Countries 41.8 40.0   38.4 39.5 42.3   39.4 42.1 44.7    
  Developing countries 34.1 33.2   30.9 32.4 35.1   31.7 34.5 37.0    
  Africa 3.1 2.9   5.5 4.9 4.4   6.0 6.2 5.6    
  Asia 5/ 17.7 17.3   10.3 12.6 16.1   10.4 12.8 16.1    
  Middle East, Malta & Turkey 6.2 5.2   7.6 7.2 6.7   7.6 7.3 6.8    
  Western Hemisphere 7.0 8.0   7.5 7.7 7.9   7.7 8.2 8.4    
  Transition economies 7.7 6.8   7.6 7.1 7.2   7.7 7.6 7.7    
  Total 100.0 100.0   100.0 100.0 100.0   100.0 100.0 100.0    
  Memorandum items:                        
  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            
  Source: Finance Department.

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/ Including Korea and Singapore.
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.
Summary of Voting and Quota Share Shifts
            From Pre-2008 Reform   From Post Second Round  
  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  
1/ Oil-exporting EMDCs are those that WEO classifies in the functional group “fuel exporters”, consisting of 27 countries.
2/ The adjustment coefficient measures the extent to which deviations between actual and calculated quota shares are reduced by the quota adjustment. The pre-Singapore calculations exclude Kosovo and Tuvalu.