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Quotas and Voice - Further Considerations

Author(s):
International Monetary Fund
Published Date:
February 2005
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I. Introduction

1. In its 2005 Spring Meeting, the International Monetary and Financial Committee (IMFC) encouraged the Board to consider further issues of quotas and voice, while noting that progress will require broad consensus among the shareholders. The Committee also noted that the IMF’s effectiveness and credibility as a cooperative institution must be safeguarded and further enhanced. In this regard, adequate voice by all members should be assured and the distribution of quotas should reflect developments in the world economy. The Committee emphasized that the period of the Thirteenth General Review of Quotas provides an opportunity for the membership to make progress toward a consensus on these issues.1

2. During their discussion of the Fund’s medium-term strategy on March 28, 2005, Directors reconfirmed the importance of adequate voice by all members, and a distribution of quotas that reflects developments in the world economy, to enhance the IMF’s perceived legitimacy and effectiveness. Directors agreed that voice issues should remain a key element of the strategy going forward. Given the different positions and perceptions of members in this area, Directors agreed with the view that the Fund’s membership must consider closely and in a cooperative manner how best to take these issues forward. Many Directors suggested that this also include exploring prospects for pursuing various suggestions that would facilitate progress even in the absence of a general increase in Fund quotas.

3. This paper represents a follow up to these requests. It takes stock of the progress made in quota discussions to date, and examines options for adjustments in quotas or voting power outside of a general quota increase. The paper is organized as follows: Section II reviews the status of recent quota discussions, while Section III presents the results of updating the data through 2003. Section IV discusses the options for addressing the distribution of quotas and voting power outside of a general increase in quotas. These options include ad hoc increases for a selected group of individual members without offsetting adjustments in quotas elsewhere; upward adjustments for some members offset by voluntary declines in quotas for other members; and an increase in basic votes. Section V concludes and poses some issues for discussion.

II. General Quota Reviews and the Status of Quota Discussions

4. The Twelfth General Review of Quotas was concluded on January 30, 2003 by a resolution of the Board of Governors without an increase in quotas.2 The Board of Governors also noted the Executive Board’s intention during the period of the Thirteenth General Review “to monitor closely and assess the adequacy of Fund resources, to consider measures to achieve a distribution of quotas that reflects developments in the world economy, and to consider measures to strengthen the governance of the Fund.” In accordance with the Fund’s Articles, the Thirteenth Review will need to be concluded by January 2008.3

5. In the most recent review of the Fund’s liquidity position in April of this year, staff concluded that the Fund’s current and prospective position is satisfactory.4 At that time, the Fund’s one-year forward commitment capacity (FCC) amounted to SDR 94 billion as compared to SDR 55 billion at end-2002 when the Executive Board concluded its discussions on the Twelfth General Review of Quotas without recommending an increase in quotas. The staff paper concluded that the Fund would likely be able to meet the projected near-term needs of its members, particularly in the context of the global economic recovery, but that continued monitoring would be important given the challenges to a sustained recovery and the need for the Fund to have adequate resources to fulfill its responsibilities. The adequacy of Fund resources will continue to be monitored and assessed in the context of the semi-annual liquidity reviews.

6. During the period of the Thirteenth General Review of Quotas, there has been heightened emphasis on voice and governance issues. Specifically, the Executive Board has been pursuing avenues to enhance the voice of developing and transition countries in the Fund’s governing bodies on two different, but complementary, tracks: issues related to the distribution of quotas and voting power, which are being considered as part of the work program on quotas; and measures to enhance the administrative capacity of the offices of Executive Directors elected by developing and transition member countries (Box 1). Status reports on quotas and voice have been issued to the IMFC and Development Committee in 2003, 2004, and 2005.5

Box 1.Evolution of the Size and Structure of the Executive Board and Measures to Enhance Administrative Capacity of Executive Director’s Offices

The size and structure of the Executive Board have evolved since the Board’s inception in 1946 (Appendix I). The changes to the Board reflected changes in the international financial system and in Fund membership. In the period through the 1970s, the large increase in Fund membership due to the membership of newly independent countries in Africa and Asia, coupled with the growth of new sources of economic dynamism, resulted in an increase in the number of chairs from 12 to 20. Of those 20, two were created to accommodate the new African members (one each added in 1963 and 1964). In 1972, African representation was strengthened by an understanding reached in the Executive Board that there should be two Executive Directors elected by the African members for the efficient conduct of the Board’s business. The Board of Governors took note of—and implicitly concurred with—this understanding, which was confirmed in 1978 at the time of the Second Amendment of the Articles. It has been endorsed, in the context of the Board of Governors’ approval of the rules for the regular elections of Executive Directors, for every regular election since then. Further increases in the size of the Executive Board to the current 24 chairs reflected the addition of chairs for China and Saudi Arabia, as well as the increase in membership by the CIS and Eastern European countries, and Switzerland.

While voting power is the most readily identified dimension of voice, it remains crucial to ensure that the offices of Executive Directors from developing and transition countries, in particular those with large constituencies, have the administrative and technical capacity to participate fully and effectively in the Fund’s decision-making process. This is essential for effective and collaborative consensus-building in which policies and their implementation reflect the views of the membership as a whole. In March 2003, the staffs of the Fund and the World Bank jointly prepared a technical note on voice for the Development Committee, which identified a number of possible avenues for enhancing the administrative and technical capacity of the large multi-country constituencies.1/ These included: extra technological support to facilitate communications with capitals; the facilitation of intra-constituency interaction; providing developing country chairs with technical and research support; adding advisors to Executive Directors’ offices; and adding a second Alternate Executive Director.2/

The Fund’s Executive Board subsequently took action in several areas. As a first step, it was agreed in April 2003 that Executive Directors with twenty or more member countries—including the Executive Directors from sub-Saharan Africa—may add three persons to the staff in their offices. Other recent initiatives include the use of new technology to facilitate close and effective communication between Executive Directors’ offices and their authorities in capitals, and additional training for new members of Executive Directors’ staff to be provided on a regular basis. While no new measures are presently being planned by the Executive Board, it will be important to sustain the efforts in this area going forward. This will include ensuring that incoming Board members and their staff are provided with timely and comprehensive information on Board procedures and Fund policies, and periodically reviewing the effectiveness of the capacity-enhancing measures that have already been taken.

1/ See Voice and Participation of Developing and Transition Countries in Decision-Making at the World Bank and IMF—A Technical Note by Bank/Fund Staff for the Development Committee, EB/CW/DC/03/1 Revision 1, March 26, 2003.2/ The last-mentioned step would require an amendment of the Articles of Agreement.

7. Progress has been made towards agreement on a new metric to measure members’ relative economic positions. The Board had previously endorsed the objective of a simpler and more transparent approach in specifying the variables in a new quota formula that would replace the existing quota formulas (See Appendices II and III for background on the determination of quotas and on the quota formulas, respectively), and agreed that the variables included in the quota formulas should be indicators of members’ relative positions in the world economy.6 These understandings were reaffirmed in July 2003 7 It was also agreed to limit consideration to three or four variables used in the existing quota formulas, but updated and modernized. These variables include GDP and measures of openness, variability, and possibly official international reserves (Box 2). No consensus emerged on the weights to be used in aggregating the variables in a new quota formula, but many Directors considered that GDP, as the most important indicator of economic size, should have the highest weight.

Box 2.Quota Formulas Discussed by the Executive Board: specification of variables

GDP: Directors have generally agreed that the three-year average of GDP at market exchange rates is the most important variable to be included in any new formula as an indicator of countries' economic size and of their potential to either provide resources to the Fund or use Fund resources. The possibility of using purchasing power parity rather than market exchange rates to derive GDP was discussed in October 2001 when a “majority of the Board considered that market exchange rates should be used to convert GDP to a common currency, so as to obtain the best measure of the total amount of resources generated by a country.” See IMF Executive Board Informally Discusses Quota Formulas, PIN No. 01/118, November 7, 2001.

Openness: Most Directors have supported the inclusion of an openness variable, specified as the absolute sum of current receipts and current payments, averaged over a five-year period, to reflect countries' integration in the world economy. Directors have taken note of the data difficulties involved at the current stage in broadening the openness measure by including a variable for financial openness. Some Directors have been concerned about the correlation of openness with other variables and also about the treatment of trade within currency unions.

Variability: To capture countries’ vulnerability to balance of payments shocks in the quota formula (and the attendant potential demand for Fund resources), many Directors have supported the inclusion of a measure of variability of current receipts and net capital flows. Directors have also generally agreed that variability be specified as deviations from a three-year average, which would serve to smooth trends while adequately capturing the fluctuations in capital flows.

Reserves: Many Directors saw reserves as a useful indicator of members’ financial strength, which should be retained as a variable consistent with recent emphasis on reserve adequacy. A number of other Directors considered that, for many members with access to capital markets, reserves are of declining importance and should be excluded.

On the choice of weights for the variables in quota formulas, many Directors supported the view that the weights should be selected mainly on the basis of judgments about the relative importance of individual variables on economic grounds. It was recognized that this would ultimately require the Executive Board to exercise judgment regarding an outcome that can command wide support.

1 See IMF Executive Board Discusses Quota Distribution Issues, PIN No. 03/106, August 29, 2003.

8. The July 2003 discussion also revealed considerable consensus among Executive Directors on a number of other issues relating to quota formulas and the distribution of quota shares. Most Directors saw correlation among the variables in a quota formula as unavoidable, though a few Directors saw merit in further work to try to reduce this correlation. It was acknowledged that the correlation among variables meant that the coefficients attached to each variable cannot be taken to represent each variable’s relative importance in a new quota formula. Accordingly, the precise choice of weights will ultimately require the Executive Board to exercise judgment regarding an outcome that could command wide support.

9. A range of views was expressed on the implications for the distribution of quotas of any modernized and simple quota formula based on economic variables broadly endorsed. Many Directors observed that, for a number of countries, actual quota shares are considerably lower than calculated quota shares, almost regardless of specific formulas, whereas the opposite appears to be true for many other countries. A number of Directors considered that these outcomes underscore the need for a political decision by the membership to secure quota shares that would strengthen the representation of developing countries in the Fund. A number of other Directors cautioned that changes in quota distribution should not target an a priori distribution between groups of countries. A few Directors expressed interest in the suggestion that a subgroup of members could voluntarily accept a reduction in their quota shares to allow for the increase of other members. A few other Directors called for a better representation of transition countries in the Fund.

10. In discussing how best to move forward, most Directors saw considerable merit in a package of measures.8 Such a package would involve:

  • a general quota increase with the selective element allocated by means of a new quota formula;
  • ad hoc quota increases aimed at increasing the quotas for those individual members with actual quota shares considerably smaller than calculated quota shares; and
  • an increase in basic votes aimed at correcting the erosion of the voting power of the smallest members.

However, it was recognized that the required majority for all elements of such a package does not exist at present. Specifically, most Directors recognized that there was no need for a quota increase in view of the Fund’s satisfactory liquidity position. Moreover, an increase in basic votes would require an amendment of the Articles of Agreement.

11. Staff circulated a paper in August 2004 updating the data set used for illustrative quota calculations.9 The paper concluded that quota formulas using GDP and the other economic and financial variables and weights that have been considered broadly appropriate by the Board are not likely to yield results that significantly impact the overall distribution of calculated quota shares. In addition, the results underpinned the conclusions from earlier Board discussions. Specifically, for the industrial countries as a group, calculated quotas based on economic and financial variables deliver calculated quota shares that exceed actual quota shares while the converse is observed for developing and transition economies as a group.

III. Updated Quota Calculations

12. Staff has updated the data set used for illustrative quota calculations for 184 members through 2003. The updated data set for individual members is presented in Table A2 (Statistical Appendix) both for the traditional variables used in the existing five formulas and for the variables that have been discussed by the Executive Board.10

  • The data are drawn mainly from International Financial Statistics (IFS) and the World Economic Outlook (WEO). Missing data series are computed based on the Country Desk Data database, staff reports, and in a few instances, data from the Eleventh Quota Review.11
  • As in the earlier papers, some data adjustments such as exclusion of goods for processing, international banking interest, and official transfers from current account data have not been made.12
Table A2.Data Used for Quantification of Quota Formulas(In SDR millions)
GDPReservesCurrent PaymentsCurrent ReceiptsCurrent Receipts plus Current PaymentsVariability of Current ReceiptsVariability of Current Receipts plus Net Capital Flows
Actual Quota 1/Average12-month AverageAverage
2003 2/2001-20032003 2/1999-2003 2/1999-2003 2/1999-20031991-2003 2/1991-2003
United States37,1497,866,6107,973,79459,4561,309,522992,0622,301,58444,83365,530
Japan13,3133,069,7253,136,117390,893363,150443,357806,50723,51317,535
Germany13,0081,717,9131,569,82240,524606,570617,1711,223,74016,44023,392
France10,7391,258,4201,135,53624,008353,809369,768723,57711,75711,070
United Kingdom10,7391,283,8081,205,58528,004494,636471,171965,80717,31411,271
Italy7,0561,049,632940,76226,217288,195285,420573,6159,3376,891
Saudi Arabia6,986152,173147,31215,92251,81461,291113,1057,1143,444
Canada6,369619,747583,27325,744243,673256,680500,35311,1277,255
China6,3691,161,4961,118,474256,612374,342382,998757,3409,03113,441
Russia5,945307,481271,61241,88573,64997,264170,9138,1806,357
Netherlands5,162366,526330,6268,455230,712237,863468,5757,4376,095
Belgium4,605217,550195,3408,091168,525177,033345,5576,8324,329
India4,158412,181388,85658,44564,87765,848130,7252,4392,460
Switzerland3,459230,057213,43433,010123,909145,751269,6603,5593,997
Australia3,236363,828317,77918,55784,71271,329156,0414,1503,465
Spain3,049599,515521,58420,220179,357171,068350,4255,0696,105
Brazil3,036361,539372,27632,91267,26955,874123,1432,4745,793
Venezuela2,65959,70975,9989,21317,89523,12441,0183,1782,004
Mexico2,586456,628482,01738,983149,641139,040288,6816,4196,453
Sweden2,396215,575191,58813,36492,906100,885193,7914,8773,885
Argentina2,11792,646127,5428,62128,63827,55356,1911,6943,467
Indonesia2,079148,917131,15323,34646,08751,47497,5613,6873,292
Austria1,872180,836162,9686,74795,90193,264189,1652,5722,458
South Africa1,869118,26698,8964,61730,65930,27860,9371,1101,780
Nigeria1,75339,78236,6735,21014,73017,26131,9912,9112,513
Norway1,672157,705145,99624,15548,49465,619114,1134,0513,590
Denmark1,643151,745136,65323,51967,62770,750138,3774,9163,666
Korea1,634434,753411,89695,411148,617157,286305,9038,5107,644
Iran1,49792,678159,93115,38018,31823,25241,5702,354912
Malaysia1,48774,16072,26027,17175,76083,060158,8204,8923,401
Kuwait1,38129,84527,9235,93812,01519,64631,6612,5251,696
Ukraine1,37235,31232,4004,08516,18217,77133,9531,1581,841
Poland1,369149,756147,85022,24449,97544,37694,3502,3902,984
Finland1,264115,718104,1856,97640,04246,50986,5512,0081,901
Algeria1,25547,32944,55320,55710,35515,14625,5012,0431,470
Iraq1,1888,44911,73081110,08110,83420,9141,763836
Libya1,12418,04718,38212,3276,8469,40816,2551,4461,079
Thailand1,082102,19596,95227,37757,79664,220122,0163,0983,252
Hungary1,03859,17950,0099,20734,89131,59366,4841,0751,590
Pakistan1,03463,62259,1907,15311,32612,74924,075612786
Romania1,03040,98435,9795,07013,66412,28225,946523511
Turkey964171,358142,37721,56447,82345,30493,1272,8975,185
Egypt94451,01264,0919,56916,52116,70533,2268571,001
Israel92878,79982,83917,36739,43738,83278,2692,1532,004
New Zealand89555,95947,3102,96017,86416,15634,020731916
Philippines88056,71157,3049,77131,57634,94766,5232,3301,841
Portugal867105,25095,2375,87143,35737,45180,8081,2971,157
Singapore86365,29967,00862,333125,164138,763263,9279,2177,527
Chile85652,45152,75411,26919,55719,02838,5849521,151
Ireland838108,75094,3062,767104,385104,209208,5948,6809,478
Greece823123,849106,3783,56635,57829,75165,3301,3082,907
Czech Republic81964,64256,47317,91436,97234,36371,3351,0121,601
Colombia77457,16061,5487,52814,10113,79027,891606873
Bulgaria64014,25312,3203,7227,1926,47113,663265421
Peru63843,31243,0416,9548,9537,93816,891394815
United Arab Emirates61256,80652,19310,42835,77040,29976,0703,1282,079
Morocco58831,26028,5888,36110,88311,50522,388341427
Bangladesh53336,95337,4331,5377,5657,75315,318240214
Congo, Dem. Republic of5336,5226,266691,3291,5322,861222282
Zambia4893,1472,8513171,2681,1732,442160196
Serbia / Montenegro46814,74311,9782,5444,6421,3876,029308162
Sri Lanka41313,03812,7281,3905,9675,67111,638226197
Belarus38612,74311,2404287,0176,81313,829643324
Ghana3695,5394,6215812,8822,7615,642167192
Kazakhstan36621,45419,0172,7379,0818,56617,6478031,189
Croatia36520,58917,9324,87810,0259,15019,175380438
Slovak Republic35823,35219,4927,25214,12713,30227,429934923
Zimbabwe3535,43511,35302,0331,6303,66314382
Trinidad and Tobago3367,6877,3241,5443,3073,6646,971280205
Vietnam32930,54227,7714,13715,18615,24130,427592340
Cote d’Ivoire32510,0409,1681,4894,0814,1938,273290152
Sudan31512,39310,8634262,6232,0464,669124121
Uruguay3078,00010,6879263,1282,9486,076201539
Ecuador30217,40115,4666325,8795,76511,6442791,081
Syrian Arab Republic29470,81868,782295,2435,98111,224388258
Tunisia28717,87116,6111,8718,5378,03416,571237314
Angola2869,8548,1884666,4085,99912,4062,0291,402
Luxembourg27918,78616,84015560,26161,739122,0003,0941,383
Uzbekistan2766,6387,6101,1862,7162,8035,518555995
Jamaica2745,8246,2398964,0913,6027,693107200
Kenya27110,2779,5019133,0072,9585,966109150
Qatar26414,60214,5861,7276,4359,01715,452655548
Myanmar2586,7726,5063792,1932,1014,293152128
Yemen, Republic of2448,1127,8563,4103,4253,9617,3871,141925
Slovenia23219,83717,4435,48510,0409,84319,883338254
Dominican Republic21911,82515,1572718,6359,11917,754544394
Brunei Darussalam2153,2553,237642,2664,1376,403399514
Guatemala21017,70817,3951,8504,9954,2249,219125228
Panama2079,1959,3168787,2506,87514,125472396
Lebanon20312,89813,1138,3687,5671,6789,246143507
Tanzania1997,3617,4201,2361,8262,0053,83117755
Oman19415,51115,6212,3677,2118,43615,646976450
Cameroon18610,6858,9214512,3272,1484,475128172
Uganda1814,6014,5966621,4921,0852,577151122
Bolivia1725,7836,0994641,8061,5753,3816966
El Salvador17110,68110,8611,2674,6744,4869,160246200
Jordan1717,1157,1453,3955,0735,38510,458146253
Bosnia-Herzegovina1695,0204,4309863,5753,3426,917388313
Costa Rica16412,50012,7971,1766,6956,10712,802342267
Afghanistan, Islamic Republic1623,1542,5445842,6592,4495,108328328
Senegal1624,5824,0025071,7061,5443,2517371
Azerbaijan1614,7924,5934962,4371,9004,337142191
Gabon1544,6113,9871221,9802,5234,503380143
Georgia1502,8542,6631341,1269382,0647281
Lithuania14413,12111,1561,9785,8515,20811,058416280
Cyprus1409,4028,3041,9874,8834,6039,486158270
Namibia1373,2322,6452141,4391,6153,0546874
Bahrain1356,8676,5401,3077,7587,88615,644895709
Ethiopia1345,2294,9626541,6141,6213,235981884
Papua New Guinea1323,3242,9002661,5771,7253,302166124
Bahamas, The1303,7433,8313522,3611,9704,331161137
Nicaragua1303,1273,0643391,8311,4333,2654994
Honduras1304,9655,0251,0132,7762,5465,32211976
Liberia12931139012001423421412
Latvia1277,9097,1619153,7403,2937,033150217
Moldova1231,5361,3341949879141,90112798
Madagascar1223,9133,6222871,1331,0002,13398123
Iceland1187,4326,6203862,9432,6185,56162175
Mozambique1143,5383,1955971,5491,1872,7366776
Guinea1072,5972,48618007361,5365351
Sierra Leone104767753522351844192435
Malta1023,4043,1541,3103,5633,4196,982178150
Mauritius1024,0403,7589952,2542,3294,5829987
Paraguay1004,3184,6735472,3822,3124,694230217
Mali933,0682,6675381,0048991,9024728
Suriname92706626764243727965965
Armenia922,0051,8353148657301,5955935
Guyana915375201906776181,29511390
Kyrgyz Republic891,3661,2692316175171,134227342
Cambodia882,9602,9945482,0431,9293,97310555
Tajikistan871,111959727617381,499143206
Congo, Republic of852,5462,357241,5641,6263,190204186
Haiti822,0182,417539889421,9307382
Somalia82343343142074325066
Rwanda801,1191,2721613673206876950
Burundi77430479511251242493523
Turkmenistan758,4166,8521,9122,1282,2874,415344188
Togo731,2851,1411406044951,0995345
Nepal714,4594,3918131,3821,3312,7137590
Fiji701,8171,5212548508461,6976632
Malawi691,2531,281885784971,0743028
Macedonia, FYR693,6073,0785501,8191,6703,489156213
Barbados682,0902,0384961,2661,1552,4213255
Niger661,7241,558594293798083342
Estonia656,4925,5388034,5664,1558,721171184
Mauritania648167292904394689063440
Botswana632,9793,7473,8452,4692,8535,322201205
Benin622,5432,2253796685821,2501729
Burkina Faso603,0262,5822415984441,0426651
Chad561,9041,5951467974771,2744259
Central African Republic56933837912992045041526
Lao, People’s Dem. Republic531,3741,3881444884209082544
Mongolia518498332286745611,2353235
Swaziland511,3951,1531861,2401,1842,4243450
Albania494,4183,7046581,4441,3172,76115188
Lesotho357946443056655731,2384934
Equatorial Guinea331,8551,6501101,9611,8443,80411286
Gambia, The31262292632081954031412
Belize19705702674983798771321
San Marino17790735571,1831,1472,3306278
Vanuatu17197188281831483311717
Djibouti16447452582942775711915
Eritrea16416490234073477545755
St. Lucia15506514763683106781111
Guinea-Bissau1417116197771171934739
Antigua and Barbuda1456254268430385815368
Grenada12332313652522164681111
Samoa122061864711110121286
Solomon Islands10211228191561573131512
Cape Verde1060852160325285609820
Comoros922819764617013165
St. Kitts and Nevis92612674522115537793
Seychelles9543523484714088791226
St. Vincent and the Grenadine:82692734418916135069
Dominica81871983115313128459
Maldives8494493109423384807108
Timor-Leste8240268442102254354933
Sao Tome and Principe742401533255832
Tonga711911220888317068
Bhutan64884422602332284601313
Kiribati65243283576111852
Micronesia, Fed. States of5166175711231162391211
Marshall Islands4757826587213153
Palau, Republic of38992098781761310
Source: Finance and Statistics Departments.

For the three countries that have not yet consented to, and paid for, their quota increases, Eleventh Review proposed quotas are used.

Traditional variables used in the existing five formulas.

Source: Finance and Statistics Departments.

For the three countries that have not yet consented to, and paid for, their quota increases, Eleventh Review proposed quotas are used.

Traditional variables used in the existing five formulas.

13. The existing five formulas were used with the updated data set to estimate calculated quotas and quota shares for all members. The results for country groups and for individual members are shown in Table 1 and Table A3, respectively.

Table 1.Distribution of Quotas and of Updated Quota Formula Variables 1/(In percent)
Actual Quotas 2/Existing Five Formulas (updated) 3/Existing Five Formulas (previous) 4/GDP 2001-03Openness 5/

1999-2003
Variability 6/

1991-2003
Reserves 7/

2003
Advanced economies61.667.668.377.170.661.643.8
Major advanced economies46.047.948.866.050.043.932.9
Of which: United States17.417.217.831.816.220.13.3
Other advanced economies15.619.619.511.120.617.810.9
Developing countries30.927.727.019.924.831.648.6
Africa5.52.32.31.51.93.73.2
Asia 8/10.315.814.910.014.214.132.0
Middle East, Malta and Turkey7.64.54.63.03.76.16.3
Western Hemisphere7.55.15.25.45.17.77.1
Transition economies7.54.74.73.14.56.87.6
Total100.0100.0100.0100.0100.0100.0100.0
Source: Finance and Statistics Departments.

Individual country shares are provided in the Statistical Appendix. The variables shown here have been discussed recently by the Executive Board (see Alternative Quota Formulas--Considerations (SM/01/293, 9/27/01)).

For the three countries that have not yet consented to, and paid for, their quota increases, Eleventh Review proposed quotas are used.

Based on 1991-2003 data and computed as traditionally specified, except that current receipts and payments have not been adjusted for official transfers, reexports, and international banking interest.

See Quotas--Updated Calculations (SM/04/305, 8/30/04), p.7.

Average sum of current receipts and payments, not adjusted for official transfers, reexports, and international banking interest.

Variability of current receipts and net capital inflows, measured as a standard deviation from centered three-year trend.

Average international reserves in 2003 based on end-month data.

Including Korea and Singapore.

Source: Finance and Statistics Departments.

Individual country shares are provided in the Statistical Appendix. The variables shown here have been discussed recently by the Executive Board (see Alternative Quota Formulas--Considerations (SM/01/293, 9/27/01)).

For the three countries that have not yet consented to, and paid for, their quota increases, Eleventh Review proposed quotas are used.

Based on 1991-2003 data and computed as traditionally specified, except that current receipts and payments have not been adjusted for official transfers, reexports, and international banking interest.

See Quotas--Updated Calculations (SM/04/305, 8/30/04), p.7.

Average sum of current receipts and payments, not adjusted for official transfers, reexports, and international banking interest.

Variability of current receipts and net capital inflows, measured as a standard deviation from centered three-year trend.

Average international reserves in 2003 based on end-month data.

Including Korea and Singapore.

Table A3.Quotas and Updated Variables by Member(In percent unless otherwise noted)
Actual Quotas 1/

(In millions of SDRs)
Actual Quota SharesExisting Five Formulas 2/GDPOpenness 3/Variability 4/Reserves 5/
2001-20031999-20031991-20032003
United States37,149.317.38217.24031.79416.22920.1083.284
Japan13,312.86.2297.19312.5055.6875.38121.593
Germany13,008.26.0876.9796.2598.6297.1782.239
France10,738.55.0254.2654.5285.1023.3971.326
United Kingdom10,738.55.0255.6694.8076.8103.4581.547
Italy7,055.53.3013.4603.7514.0452.1141.448
Saudi Arabia6,985.53.2691.0050.5870.7981.0570.880
Canada6,369.22.9803.1322.3263.5282.2261.422
China6,369.22.9805.0694.4605.3404.12414.175
Russia5,945.42.7821.3351.0831.2051.9512.314
Netherlands5,162.42.4162.7711.3183.3041.8700.467
Belgium4,605.22.1552.2020.7792.4371.3280.447
India4,158.21.9461.0691.5510.9220.7553.229
Switzerland3,458.51.6181.6260.8511.9011.2261.823
Australia3,236.41.5141.0911.2671.1001.0631.025
Spain3,048.91.4272.0992.0802.4711.8731.117
Brazil3,036.11.4210.9491.4840.8681.7771.818
Venezuela2,659.11.2440.4040.3030.2890.6150.509
Mexico2,585.81.2101.8611.9222.0361.9802.153
Sweden2,395.51.1211.2710.7641.3661.1920.738
Argentina2,117.10.9910.3880.5090.3961.0640.476
Indonesia2,079.30.9730.7340.5230.6881.0101.290
Austria1,872.30.8761.0960.6501.3340.7540.373
South Africa1,868.50.8740.3800.3940.4300.5460.255
Nigeria1,753.20.8200.3440.1460.2260.7710.288
Norway1,671.70.7820.8230.5820.8051.1021.334
Denmark1,642.80.7691.0420.5450.9761.1251.299
Korea1,633.60.7642.2251.6422.1572.3465.271
Iran1,497.20.7010.3560.6380.2930.2800.850
Malaysia1,486.60.6961.3170.2881.1201.0441.501
Kuwait1,381.10.6460.3240.1110.2230.5200.328
Ukraine1,372.00.6420.2480.1290.2390.5650.226
Poland1,369.00.6410.6580.5900.6650.9161.229
Finland1,263.80.5910.5390.4150.6100.5830.385
Algeria1,254.70.5870.2880.1780.1800.4511.136
Iraq1,188.40.5560.2320.0470.1470.2560.045
Libya1,123.70.5260.2030.0730.1150.3310.681
Thailand1,081.90.5060.8720.3870.8600.9981.512
Hungary1,038.40.4860.4240.1990.4690.4880.509
Pakistan1,033.70.4840.1790.2360.1700.2410.395
Romania1,030.20.4820.1710.1430.1830.1570.280
Turkey964.00.4510.6640.5680.6571.5911.191
Egypt943.70.4420.2340.2560.2340.3070.529
Israel928.20.4340.5700.3300.5520.6150.959
New Zealand894.60.4190.2140.1890.2400.2810.164
Philippines879.90.4120.5040.2280.4690.5650.540
Portugal867.40.4060.4880.3800.5700.3550.324
Singapore862.50.4043.2440.2671.8612.3103.443
Chile856.10.4010.2760.2100.2720.3530.623
Ireland838.40.3921.6070.3761.4712.9080.153
Greece823.00.3850.4150.4240.4610.8920.197
Czech Republic819.30.3830.4770.2250.5030.4910.990
Colombia774.00.3620.1950.2450.1970.2680.416
Bulgaria640.20.3000.0950.0490.0960.1290.206
Peru638.40.2990.1330.1720.1190.2500.384
United Arab Emirates611.70.2860.6130.2080.5360.6380.576
Morocco588.20.2750.1540.1140.1580.1310.462
Bangladesh533.30.2500.1000.1490.1080.0660.085
Congo, Dem. Republic of533.00.2490.0250.0250.0200.0860.004
Zambia489.10.2290.0220.0110.0170.0600.017
Serbia / Montenegro467.70.2190.0570.0480.0430.0500.141
Sri Lanka413.40.1930.0740.0510.0820.0600.077
Belarus386.40.1810.1100.0450.0980.1000.024
Ghana369.00.1730.0400.0180.0400.0590.032
Kazakhstan365.70.1710.1430.0760.1240.3650.151
Croatia365.10.1710.1320.0720.1350.1340.269
Slovak Republic357.50.1670.2190.0780.1930.2830.401
Zimbabwe353.40.1650.0260.0450.0260.0250.000
Trinidad and Tobago335.60.1570.0550.0290.0490.0630.085
Vietnam329.10.1540.1930.1110.2150.1040.229
Cote d’Ivoire325.20.1520.0620.0370.0580.0470.082
Sudan315.10.1470.0340.0430.0330.0370.024
Uruguay306.50.1430.0440.0430.0430.1650.051
Ecuador302.30.1410.0730.0620.0820.3320.035
Syrian Arab Republic293.60.1370.1130.2740.0790.0790.002
Tunisia286.50.1340.1010.0660.1170.0960.103
Angola286.30.1340.1920.0330.0870.4300.026
Luxembourg279.10.1311.6460.0670.8600.4250.009
Uzbekistan275.60.1290.0640.0300.0390.3050.066
Jamaica273.50.1280.0490.0250.0540.0610.049
Kenya271.40.1270.0380.0380.0420.0460.050
Qatar263.80.1230.1190.0580.1090.1680.095
Myanmar258.40.1210.0300.0260.0300.0390.021
Yemen, Republic of243.50.1140.1160.0310.0520.2840.188
Slovenia231.70.1080.1340.0700.1400.0780.303
Dominican Republic218.90.1020.1180.0600.1250.1210.015
Brunei Darussalam215.20.1010.0590.0130.0450.1580.004
Guatemala210.20.0980.0610.0690.0650.0700.102
Panama206.60.0970.1000.0370.1000.1220.048
Lebanon203.00.0950.0830.0520.0650.1560.462
Tanzania198.90.0930.0310.0300.0270.0170.068
Oman194.00.0910.1430.0620.1100.1380.131
Cameroon185.70.0870.0310.0360.0320.0530.025
Uganda180.50.0840.0230.0180.0180.0370.037
Bolivia171.50.0800.0220.0240.0240.0200.026
El Salvador171.30.0800.0640.0430.0650.0610.070
Jordan170.50.0800.0760.0280.0740.0780.188
Bosnia-Herzegovina169.10.0790.0630.0180.0490.0960.054
Costa Rica164.10.0770.0860.0510.0900.0820.065
Afghanistan, Islamic Republic161.90.0760.0500.0100.0360.1010.032
Senegal161.80.0760.0220.0160.0230.0220.028
Azerbaijan160.90.0750.0320.0180.0310.0590.027
Gabon154.30.0720.0450.0160.0320.0440.007
Georgia150.30.0700.0150.0110.0150.0250.007
Lithuania144.20.0670.0860.0440.0780.0860.109
Cyprus139.60.0650.0620.0330.0670.0830.110
Namibia136.50.0640.0190.0110.0220.0230.012
Bahrain135.00.0630.1460.0260.1100.2180.072
Ethiopia133.70.0630.0750.0200.0230.2710.036
Papua New Guinea131.60.0620.0270.0120.0230.0380.015
Bahamas, The130.30.0610.0330.0150.0310.0420.019
Nicaragua130.00.0610.0200.0120.0230.0290.019
Honduras129.50.0610.0360.0200.0380.0230.056
Liberia129.20.0600.0030.0020.0020.0040.000
Latvia126.80.0590.0460.0290.0500.0670.051
Moldova123.20.0580.0180.0050.0130.0300.011
Madagascar122.20.0570.0170.0140.0150.0380.016
Iceland117.60.0550.0330.0260.0390.0540.021
Mozambique113.60.0530.0200.0130.0190.0230.033
Guinea107.10.0500.0100.0100.0110.0160.000
Sierra Leone103.70.0490.0040.0030.0030.0110.003
Malta102.00.0480.0560.0130.0490.0460.072
Mauritius101.60.0480.0310.0150.0320.0270.055
Paraguay99.90.0470.0390.0190.0330.0670.030
Mali93.30.0440.0130.0110.0130.0090.030
Suriname92.10.0430.0080.0020.0060.0200.004
Armenia92.00.0430.0120.0070.0110.0110.017
Guyana90.90.0430.0150.0020.0090.0280.010
Kyrgyz Republic88.80.0420.0200.0050.0080.1050.013
Cambodia87.50.0410.0280.0120.0280.0170.030
Tajikistan87.00.0410.0170.0040.0110.0630.004
Congo, Republic of84.60.0400.0290.0090.0220.0570.001
Haiti81.90.0380.0140.0100.0140.0250.003
Somalia81.70.0380.0020.0010.0020.0020.001
Rwanda80.10.0370.0080.0050.0050.0150.009
Burundi77.00.0360.0030.0020.0020.0070.003
Turkmenistan75.20.0350.0450.0270.0310.0580.106
Togo73.40.0340.0090.0050.0080.0140.008
Nepal71.30.0330.0200.0180.0190.0270.045
Fiji70.30.0330.0130.0060.0120.0100.014
Malawi69.40.0320.0070.0050.0080.0090.005
Macedonia, FYR68.90.0320.0280.0120.0250.0650.030
Barbados67.50.0320.0160.0080.0170.0170.027
Niger65.80.0310.0060.0060.0060.0130.003
Estonia65.20.0310.0570.0220.0610.0570.044
Mauritania64.40.0300.0070.0030.0060.0120.016
Botswana63.00.0290.0570.0150.0380.0630.212
Benin61.90.0290.0090.0090.0090.0090.021
Burkina Faso60.20.0280.0090.0100.0070.0160.013
Chad56.00.0260.0090.0060.0090.0180.008
Central African Republic55.70.0260.0040.0030.0040.0080.005
Lao, People’s Dem. Republic52.90.0250.0060.0060.0060.0140.008
Mongolia51.10.0240.0090.0030.0090.0110.013
Swaziland50.70.0240.0160.0050.0170.0150.010
Albania48.70.0230.0240.0150.0190.0270.036
Lesotho34.90.0160.0100.0030.0090.0100.017
Equatorial Guinea32.60.0150.0280.0070.0270.0260.006
Gambia, The31.10.0150.0030.0010.0030.0040.003
Belize18.80.0090.0060.0030.0060.0060.004
San Marino17.00.0080.0200.0030.0160.0240.003
Vanuatu17.00.0080.0030.0010.0020.0050.002
Djibouti15.90.0070.0040.0020.0040.0050.003
Eritrea15.90.0070.0080.0020.0050.0170.001
St. Lucia15.30.0070.0040.0020.0050.0030.004
Guinea-Bissau14.20.0070.0040.0010.0010.0120.005
Antigua and Barbuda13.50.0060.0070.0020.0060.0020.004
Grenada11.70.0050.0030.0010.0030.0040.004
Samoa11.60.0050.0020.0010.0010.0020.003
Solomon Islands10.40.0050.0030.0010.0020.0040.001
Cape Verde9.60.0040.0040.0020.0040.0060.003
Comoros8.90.0040.0010.0010.0010.0010.004
St. Kitts and Nevis8.90.0040.0030.0010.0030.0010.002
Seychelles8.80.0040.0060.0020.0060.0080.003
St. Vincent and the Grenadine8.30.0040.0020.0010.0020.0030.002
Dominica8.20.0040.0020.0010.0020.0030.002
Maldives8.20.0040.0050.0020.0060.0020.006
Timor-Leste8.20.0040.0060.0010.0030.0100.002
Sao Tome and Principe7.40.0030.0010.0000.0000.0010.001
Tonga6.90.0030.0010.0000.0010.0030.001
Bhutan6.30.0030.0040.0020.0030.0040.014
Kiribati5.60.0030.0020.0000.0010.0010.016
Micronesia, Fed. States of5.10.0020.0020.0010.0020.0030.004
Marshall Islands3.50.0020.0010.0000.0010.0010.001
Palau, Republic of3.10.0010.0020.0000.0010.0030.000
Source: Finance and Statistics Departments.

For the three countries that have not yet consented to and paid for their quota increases, Eleventh Review proposed quotas are used.

Based on 1991-2003 data and computed as traditionally specified, except that current receipts and payments have not been adjusted for official transfers, reexports, and international banking interest.

Average sum of current receipts and payments, not adjusted for official transfers, reexports, and international banking interest.

Variability of current receipts and net capital flows, measured as a standard deviation from centered three-year trend.

Average international reserves in 2003 based on end-month data.

Source: Finance and Statistics Departments.

For the three countries that have not yet consented to and paid for their quota increases, Eleventh Review proposed quotas are used.

Based on 1991-2003 data and computed as traditionally specified, except that current receipts and payments have not been adjusted for official transfers, reexports, and international banking interest.

Average sum of current receipts and payments, not adjusted for official transfers, reexports, and international banking interest.

Variability of current receipts and net capital flows, measured as a standard deviation from centered three-year trend.

Average international reserves in 2003 based on end-month data.

14. In general, the calculated quota shares for the main country groups are broadly similar to those presented previously using data through 2002.13 The share of the advanced economies declines by about one percentage point, but remains well above their actual quota share (Table 1). The calculated quota share of developing countries as a group increases, reflecting a further increase for the Asian economies, whose aggregate share in calculated quotas exceeds their share in actual quotas by a wide margin. The converse is true for the other three main regional sub-groups, as well as for the transition economies.

15. The data set through 2003 was also used to update information on the group of countries that had actual quota shares significantly out of line with calculated quota shares. The criterion used for determining this group was based on the ratio of each member’s calculated to actual quota share using the existing five formulas.14 Preliminary calculations using the updated data set indicate that there are 16 countries whose calculated quota shares exceed actual quota shares by more than 50 percent.15 This criterion has been considered relevant in the past in identifying members whose actual quota shares were regarded as being most seriously out of line.16

16. In sum, the results of updating the data set do not alter the broad conclusions reached in earlier papers. Quota adjustments based on a metric that uses the economic and financial variables and weights that have been considered broadly appropriate by the Board in the past would imply a larger quota share for the economies in Asia, which has been widely recognized as an issue. However, this would tend to come at the expense of the other regional sub-groups of developing economies, and the quota share of developing and transition economies as a whole would tend to decline while that of the advanced economies would increase. This suggests that an alternative mechanism would need to be found if the Board considered that an increase in the share of developing and transition economies was desirable. Given this, and the Fund’s current and prospective near-term liquidity situation, the next section considers the options for adjusting quotas and voting power outside of a general increase.

IV. Options for Adjustments in Quotas and Voice

17. The Fund’s Articles of Agreement specify several principles that govern any adjustment of quotas. First, “[t]he Board of Governors shall at intervals of not more than five years conduct a general review, and if it deems it appropriate propose an adjustment, of the quotas of the members.” Second, the Board of Governors “may also, if it thinks fit, consider at any other time the adjustment of any particular quota at the request of the member concerned.” (Article III, Section 2 (a)). Third, any change in quotas requires an 85 percent majority of the total voting power (Article III, Section 2 (c)). Fourth, the quota of a member may not be changed without that member’s consent (Article III, Section 2 (d)).

18. The Articles of Agreement do not explicitly reference how quotas should be adjusted or the role of quota formulas in the adjustment process. In addition, the Executive Board has not formally adopted any specific formula in adjusting quotas. In principle, an agreement on a quota formula is not needed to adjust quotas. However, in practice, the Executive Board has found it useful to have an agreed measure of members’ relative economic positions as a basis for allocating selective quota increases in the context of general reviews and for deciding on the eligibility for and amongst members for ad hoc quota increases.

19. As is evident, the Fund’s Articles provide for substantial flexibility in the adjustment of quotas. Adjustments can take place at any time, in the context of and outside of general reviews. Such adjustments can be in either direction and the Board has flexibility in determining the basis for such adjustments. The constraining factors are the very high majority involved for any change in quotas, and the fact that a member’s quota cannot be changed without the member’s consent.

20. In practice, general quota increases have been the main vehicle for adjustments in members’ quotas and quota shares. General quota increases allow an adjustment of quota shares to take place in a situation where all members potentially benefit from an increase in their actual quotas, thereby helping facilitate achievement of the necessary voting majority. Moreover, adjustments in quota shares in the context of general reviews have been gradual (Table 2). This reflects the fact that general quota increases have typically had a large equiproportional element, i.e., increases distributed in proportion to existing actual quota shares. As a result, general quota increases have shifted actual quota shares only slowly in the direction of calculated quota shares. Reflecting this, the “adjustment coefficient,” which measures the extent to which deviations between actual and calculated quota shares are reduced by quota adjustments, has consistently been relatively low though it has varied significantly from review to review (from 1.7 percent to 28.0 percent since the Fifth Review).17

Table 2.Evolution of Quota Shares by Major Country Groups 1/(In percent)
Proposed Quota Shares
19761978198319901998Actual Quota Shares
Sixth ReviewSeventh ReviewEighth ReviewNinth ReviewEleventh Review
Advanced economies65.465.464.261.962.161.6
Major advanced economies50.450.349.346.346.446.0
Of which: US21.521.520.018.417.517.4
Other advanced economies15.115.014.915.615.715.6
Developing countries33.233.334.731.330.330.9
Africa6.76.76.45.95.55.5
Asia 2/10.29.610.59.39.610.3
Middle East, Malta & Turkey6.77.38.98.17.77.6
Western Hemisphere9.69.78.97.97.57.5
Transition economies1.31.31.26.87.67.5
Total100.0100.0100.0100.0100.0100.0
Source: IFS and Finance Department.

Includes countries that were members at the time of the Executive Board decision.

Including Korea and Singapore.

Source: IFS and Finance Department.

Includes countries that were members at the time of the Executive Board decision.

Including Korea and Singapore.

21. The above discussion suggests that quota adjustments are possible outside of a general quota increase provided that the necessary high degree of consensus can be obtained. In principle, significant adjustments in quota shares may be more readily facilitated in the context of a general quota increase, but in practice, adjustments in quota shares in general reviews have in any event been relatively gradual. Thus, the absence of a general increase need not constrain the ability of the Executive Board to agree on an adjustment in quota and voting shares designed to strengthen the Fund’s governance structure. As discussed below, three broad avenues are available.18

A. Ad Hoc Quota Increases

22. Ad hoc quota increases address the relative position of individual members. These have been used relatively sparingly in the past, typically to address the most serious disparities in the quota distribution or to account for special circumstances. Ad hoc increases can take place within general quota increases or on a stand-alone basis. Ad hoc increases do not reduce other members’ actual quotas but do reduce their actual quota shares. The magnitude of the impact on actual quota shares will depend on the size of the ad hoc adjustment(s).

23. Since the early 1970s, ad hoc quota increases have been limited (Box 3). The Executive Board became less inclined to support ad hoc increases in quotas and generally concluded that such increases should normally be considered in the context of a general review of quotas. This position has reflected a general desire to effect changes in the ranking of quotas relatively slowly and to avoid unduly large and possibly temporary changes in the overall quota structure. Four ad hoc increases were agreed outside of general quota reviews to reflect special circumstances, while Japan received an ad hoc increase in the Ninth General Review. In the Eleventh General Review, however, the ad hoc component was 10 percent of the overall increase, of which 9 percent was distributed to 38 members with ratios of calculated to actual quota shares greater than one. Five members—Korea, Luxembourg, Singapore, Malaysia, and Thailand—whose quotas were farthest out of line and who were expected to be able to contribute to the Fund’s liquidity over the medium term (all five were also participants in the NAB) received the remaining 1 percent of the overall increase.

Box 3.Ad Hoc Increases in Fund Quotas

A. Outside a General Quota Review 1/
MemberYear Resolution AdoptedJustification for Increase
France1946Low initial level
Paraguay1946Low initial level
Egypt1948Low initial level
Iran1948Low initial level
Honduras1952Its quota was reduced at its request in 1948, but restored to the original amount in 1952.
Philippines1958Low initial level
Australia1960“Catch-up” to 1959 review
Chile1960“Catch-up” to 1959 review
Colombia1960“Catch-up” to 1959 review
Yugoslavia1960“Catch-up” to 1959 review
Egypt1962Export variability
Israel1964“Borderline” case associated with increases in the quotas for other members linked to the Compensatory Financing Decision of 1963
Malaysia1964“Borderline” case associated with increases in the quotas for other members linked to the Compensatory Financing Decision of 1963
Italy1964Improve Fund liquidity and comparability with quotas of other members
Lao People’s Dem. Rep.1969“Catch up” to Fourth Review
China1980Change in representation
Saudi Arabia1981Improve Fund liquidity and comparability, taking account also of large past and prospective Fund borrowing with Saudi Arabia.
Cambodia1994Resumption of Fund relations
China2001Resumption of sovereignty over Hong Kong SAR
B. In the Context of General Reviews 2/
MemberYear Resolution AdoptedJustification for Increase
1959 Review 3/
Canada1959Reflect economic position and ability to provide liquidity
Germany1959Reflect economic position and ability to provide liquidity
Japan1959Reflect economic position and ability to provide liquidity
Fourth Review 4/
Austria1965Enhance the Fund’s liquidity
Canada1965Enhance the Fund’s liquidity
Germany1965Enhance the Fund’s liquidity
Japan1965Enhance the Fund’s liquidity
Sweden1965Enhance the Fund’s liquidity
Ninth Review 5/
Japan1990Reflect economic position (by redistributing G-7 quota shares so that other members shares were unaffected)
Eleventh Review199810 percent of the overall increase, of which: (i) 9 percent distributed to 38 members with ratios of calculated to actual quota shares greater than one; and (ii) one percent distributed to five members (Korea, Luxembourg, Singapore, Malaysia, and Thailand) whose quotas were significantly out of line with their relative economic positions

The first section of this box reproduces Table A.2. in Quota Distribution—Selected Issues (SM/03/255, 7/17/03). The quota increases shown here exclude the quota increases authorized under the small quota policy of 1955 and in connection with the 1963 Decision on Compensatory Financing of Export Fluctuations.

Prior to the Eighth Review, when selective increases were allocated only to a subset of members, the distinction between selective and ad hoc elements was not clear cut.

A group of 14 countries also received special quota increases in connection with the 1959 Review.

Selective increases were authorized for 16 countries whose quotas were low relative to their economic positions, including the five industrial countries listed above.

In addition, very small quotas were rounded up in multiples of SDR 0.5 million.

The first section of this box reproduces Table A.2. in Quota Distribution—Selected Issues (SM/03/255, 7/17/03). The quota increases shown here exclude the quota increases authorized under the small quota policy of 1955 and in connection with the 1963 Decision on Compensatory Financing of Export Fluctuations.

Prior to the Eighth Review, when selective increases were allocated only to a subset of members, the distinction between selective and ad hoc elements was not clear cut.

A group of 14 countries also received special quota increases in connection with the 1959 Review.

Selective increases were authorized for 16 countries whose quotas were low relative to their economic positions, including the five industrial countries listed above.

In addition, very small quotas were rounded up in multiples of SDR 0.5 million.

24. This experience suggests that ad hoc increases can play a role but may not of themselves be sufficient to address broader concerns about voice. Recent ad hoc quota increases outside of a general review have only been agreed in situations involving a major change in a country’s relationship with the Fund that has a bearing on its quota. Ad hoc increases also have been agreed in the context of general quota reviews for countries whose quotas are considered most out of line with their relative economic positions and to enhance the Fund’s liquidity. These increases have generally been limited in number and scale, though a somewhat broader approach was agreed in the Eleventh Review. Such increases imply a reduction in quota share of all other members not receiving an ad hoc increase. Ad hoc increases could contribute to addressing concerns about voice as part of the Thirteenth General Review if the necessary broad consensus exists. This would also likely require agreement on a new quota formula to provide a common basis against which to assess the eligibility for and extent of ad hoc increases.

B. Voluntary Adjustments

25. In some previous quota reviews, members have voluntarily accepted a reduction in their quota shares as part of the broader agreement on an overall quota increase. In particular, such arrangements have helped to facilitate agreement on ad hoc increases for one or a group of members by limiting the impact of such increases on the broader membership. This has typically involved: (i) an overall increase in total quotas; and (ii) an agreement by a member or group of members to accept a lower increase than would otherwise have applied, including a smaller than equiproportional adjustment, in order to offset the effect of larger increases for some other members. Examples have included the reduction in quota share of the United Kingdom in the Fifth General Review, the agreement among the industrial countries in the Sixth General Review to accept a lower quota share in the context of larger increases for the major oil-exporting countries, and the agreement on a realignment of quota shares among the G-7 countries during the Ninth General Review (see Box 4).

Box 4.Experience with Voluntary Adjustments

Voluntary reductions in quota shares by some members have helped facilitate agreement on requests for ad hoc increases for other members by limiting the impact of such increases on the broader membership. While voluntary reductions in quota shares, in practice, have taken place in the context of general quota increases, voluntary reductions in actual quotas could take place without a general quota increase if members agreed to such reductions.

An agreement by a member or group of members to voluntarily accept a lower quota share in the context of a general quota increase represents a willingness on the part of a member or group of members to give up a part of their potential quota increase. Examples of such voluntary reductions took place during the Fifth, Sixth, and Ninth General Reviews of quotas, and although facilitated by a general increase in quotas, these cases could shed light on the dynamics of such processes.

An agreement among a group of industrial countries during the Fifth General Review of Quotas resulted in a voluntary reduction in a member’s quota share—the United Kingdom—in order to accommodate an increase in the quota shares of other members. The Group of Ten (G-10) industrial countries had agreed to a distribution of quota shares within the G-10, and as a result of that agreement, there were increases in quota shares of 78 members under the general review. Specifically, the quota shares of 78 members increased by amounts larger than the equiproportional increase, offset by an increase in the quota of the United Kingdom that was less than the equiproportional increase.

In the context of the Sixth General Review of Quotas, a similar agreement, as that for the G-10 during the Fifth Review, was reached among a larger group of industrial countries. In this case, the increase in the quota share of the major oil-exporting countries as a group was matched by a decline in the share of the industrial countries in total quotas.

Japan’s request for an ad hoc increase within the Ninth Review was facilitated by agreement among the Group of Seven (G-7) countries to accept voluntary reductions in quota shares. There was a redistribution of quota increases among the G-7 to accommodate an ad hoc increase in the quota of Japan in such a manner that the quota increases for the rest of the membership were unaffected.

26. Agreement on a voluntary quota reduction by a member or a group of members could facilitate a broader adjustment in quota shares even in the absence of a general quota increase. A key difference with the past would be that this would require some members to agree that their actual quotas would be reduced, thus giving these members an effective veto over a desired redistribution of quota shares.19 Given that the economic and financial variables that have been considered reasonable for inclusion in a new quota formula tend to imply a higher calculated quota share for the advanced economies, as noted above, a broad political consensus on some redistribution of actual quotas relative to that implied by the traditional variables, may be needed. For example, a voluntary reduction in quotas among the advanced economies could facilitate an increase in aggregate quotas for developing and transition economies and/or mitigate the effects on their quota shares of quota adjustments for a sub-group of countries considered most seriously out of line. An important additional consideration in this context would be the impact on the Fund’s liquidity, given that a redistribution of quotas in the absence of a general quota increase could imply a reduction in the Fund’s usable currencies.

C. Basic Votes

27. As noted above, the Board has previously discussed an increase in basic votes as one possible element of a package in the context of a general quota increase under the Thirteenth Review. The Articles of Agreement (Article XII, Section 5) provide that each member shall have 250 “basic” votes plus one vote for each SDR 100,000 of quota. The absolute level of basic votes has not been changed since the Bretton Woods Agreement, with the result that the share of basic votes in total voting power has declined from 11 percent to just over 2 percent at present (Table 3). The declining role of basic votes is perceived by some as a weakening of the voice of small developing countries in the decision-making process within the Fund and the World Bank.20

Table 3.Relative Importance of Basic Votes, 1945-Present
Basic Votes
Number of MembersTotal VotesNumberPercent of Total
Schedule A 1/4599,39011,25011.3
195868108,93017,00015.6
1965101179,92825,25014.0
1970115236,83528,75012.1
1976132319,71433,00010.3
1978140432,41535,0008.1
1983145646,41536,2505.6
19901521,387,91038,0002.7
1998 2/1832,166,04045,7502.1
Present 2/3/1842,176,03746,0002.1
Source: Finance Department.

Schedule A refers to Schedule A in the Articles of Agreement, as agreed at the Bretton Woods Conference in July 1944, which entered into force on December 27, 1945. Includes the votes of Denmark, whose initial quota was not specified in Schedule A and the former Soviet Union, which did not become a member of the Fund.

Including countries whose voting power was/is suspended.

Based on actual quotas as of end-April 2005.

Source: Finance Department.

Schedule A refers to Schedule A in the Articles of Agreement, as agreed at the Bretton Woods Conference in July 1944, which entered into force on December 27, 1945. Includes the votes of Denmark, whose initial quota was not specified in Schedule A and the former Soviet Union, which did not become a member of the Fund.

Including countries whose voting power was/is suspended.

Based on actual quotas as of end-April 2005.

28. An increase in basic votes could be considered as one option to address concerns about voice in the Fund. Various options have been examined in the past, including:

  • Increasing the number of basic votes by the same fixed amount for all members. Under this approach, the smaller a member’s quota relative to the Fund-wide average, the larger would be the proportionate increase in that member’s voting power.
  • Establishing the total number of basic votes as a fixed percentage of total quotas.
  • Increasing the number of basic votes by a fixed amount, but only for members that belong to a particular category; e.g., small or developing countries.

29. Any such change would require an amendment of the Articles, and the necessary broad support for such a change has not so far existed. Proposals for changes in basic votes have traditionally been considered in the context of general quota reviews because increases in either quotas or basic votes affect total voting power and both require the same broad majority as is needed for an amendment of the Articles of Agreement. Most recently, an increase in basic votes as a means of enhancing the voice of developing countries in the Fund’s decision-making was discussed in the context of the Twelfth Review and again in July 2003.21

30. An increase in basic votes could play a role in addressing issues of voice in the Fund in the absence of a general quota increase. However, because the effect would be concentrated on the smaller members, it may not of itself be sufficient to address broader concerns about the relative voting power of groups of members. By way of illustration, the impact of restoring the level of basic votes to 5 or 10 percent of the total voting power on the shares of major country groups, without a change in quotas, is shown in Table A4.

Table A4.Basic Votes and Voting Shares
Current Quota (In millions of SDRs)Quota-based VotesCurrent Basic Votes (250 each)Basic Votes (5 percent of Total Votes) 1/Basic Votes (10 percent of Total Votes) 1/
Basic VotesTotal VotesVoting share (In percent)Basic VotesTotal VotesVoting share (In percent)Basic VotesTotal VotesVoting share (In percent)
Advanced economies131,6341,316,3446,5001,322,84460.615,8861,332,23059.233,5661,349,91056.8
Major advanced economies98,372983,7201,750985,47045.14,277987,99743.99,037992,75741.8
Of which: US37,149371,493250371,74317.0611372,10416.51,291372,78415.7
Other advanced economies33,262332,6244,750337,37415.511,609344,23315.324,529357,15315.0
Developing countries65,969659,69232,500692,19231.779,430739,12232.9167,830827,52234.8
Africa11,739117,38912,750130,1396.031,161148,5506.665,841183,2307.7
Asia 2/21,996219,9577,750227,70710.418,941238,89810.640,021259,97810.9
Middle East, Malta & Turkey16,301163,0074,000167,0077.69,776172,7837.720,656183,6637.7
Western Hemisphere15,934159,3398,000167,3397.719,552178,8918.041,312200,6518.4
Transition economies16,116161,1567,000168,1567.717,108178,2647.936,148197,3048.3
Total213,7192,137,19246,0002,183,192100.0112,4842,249,676100.0237,4662,374,658100.0
Source: Finance Department.

Details may not add due to rounding.

Including Korea and Singapore.

Source: Finance Department.

Details may not add due to rounding.

Including Korea and Singapore.

V. Conclusions and Issues for Discussion

31. This paper has sought to respond to the requests for further consideration of the issues of quotas and voice in the context of the Thirteenth General Review of Quotas. Its main conclusions are summarized below.

32. The results of updating the quota data base through 2003 do not significantly change the broad conclusions presented in earlier papers; namely, that quota formulas using the economic and financial variables and weights that have been considered broadly appropriate by the Board in the past—including a substantial weight for GDP as the most important indicator of economic size—are likely to yield results that would tend to imply a larger quota share for the advanced economies and a smaller share for the developing and transition economies as a group, though it could involve a significant redistribution within that group.

33. Agreement on a new quota formula remains an important objective. Considerable progress was made in previous Board discussions towards agreement on a new formula that is simpler and more transparent than the traditional formulas, but views differed on the details of the variables to be included. Quota formulas measure members’ relative economic positions and therefore represent a key metric for assessing issues relating to the distribution of quotas. Thus, agreement on a new formula will be an important element in future quota discussions. However, agreement on a new formula alone is unlikely to address broader questions regarding voice in the Fund, given the gradual nature of past quota adjustments and the results of updating the database for the key quota variables.

34. In this context, Directors have previously seen considerable merit in a package approach that would include elements of benefit to the membership as a whole. These discussions were couched within the framework of a general quota increase that would include a relatively large selective element, though most Directors have also considered that there was no need for a quota increase in view of the Fund’s satisfactory liquidity position. Recent developments in the Fund’s current and prospective liquidity position suggest that this picture remains broadly unchanged, as reported in a separate paper. This raises the question of the scope for addressing issues of the distribution of quotas and voting power without a general quota increase.

35. The Fund’s Articles provide for substantial flexibility in the adjustment of quotas. Adjustments can take place at any time, in the context of or outside of a general review. The Board also has considerable flexibility in determining the basis for such adjustments. Thus, scope exists for addressing issues relating to the distribution of quotas and voting power without a general quota increase. This said, general quota increases have been the main vehicle for adjusting quotas in the past, and have the advantage of allowing adjustments in circumstances where all members receive some increase. Even in this situation, adjustments have been gradual and it has often been difficult to obtain the needed consensus. These difficulties could be compounded in the absence of a general quota increase, considering the need for some members to accept a reduction in their actual quotas. Thus, a strong political consensus on the needed adjustment would be essential, given that any quota adjustments require a near unanimity, and that no adjustments in individual member’s quotas can take place without their consent.

36. Three broad options exist for adjustments in quotas and voting power in the absence of a general increase. Such options could be explored either individually or in combination as part of a package. The Board could consider ad hoc increases for selected countries whose quotas are most out of line. Such increases have been agreed in the past and could be accommodated without necessarily requiring a reduction in other members’ actual quotas, although quota shares would decline for all other members. Voluntary adjustments among country groups or individual members are also an option. Such adjustments have been implemented in the past, though always in the context of general quota increases and not in situations where reductions in some members’ actual quotas would be needed. The implications for the Fund’s liquidity would also need to be considered. A third option is an increase in basic votes. This would affect the distribution of voting power—particularly for the Fund’s smallest members—without an adjustment in quotas, but requires an amendment of the Articles, and may not of itself be sufficient to address broader concerns about relative voting power across the membership as a whole.

37. To some extent, these options address two distinct but related issues; namely, the need to ensure that the distribution of quotas adequately reflects developments in the world economy and the desire to strengthen the voice of developing and transition economies. Ad hoc quota increases for countries most out of line can and have played a role in addressing the former. However, strengthening the voice of developing and transition economies as a whole may require some additional elements, which could include voluntary adjustments in quotas and/or raising basic votes.

38. In their discussion, Directors may wish to comment on the following issues:

  • How do Directors assess the overall scope for progress on the issues relating to the distribution of quotas and voting power in the Fund in the absence of a general quota increase?
  • What options for addressing voice issues do Directors consider most promising, including the three options identified in this paper for adjustments in the absence of a general quota increase? Would Directors favor further staff work to explore proposals involving some combination of these options?
  • Do Directors share the view that agreement on a new quota formula should be part of any adjustment in actual quotas, and how do they assess prospects for narrowing the remaining differences on this issue? Would they agree that further staff work on options for a new, simpler, and more transparent quota formula should be undertaken in parallel with exploration of the broader options for addressing issues of quotas and voice considered in this paper?
Evolution of the Size and Structure of the Executive Board

In line with the expectations of the drafters of the original Articles of Agreement in 1946 about the likely size of the membership of the Fund, Article XII, Section 3(b) called for an Executive Board of not fewer than 12 Executive Directors, of whom 5 were to be appointed by the members with the largest quotas, and 7 to be elected by the members not entitled to appoint Executive Directors.22 Article XII, Section 3 (b), in its initial version, further specified as follows: “When governments of other countries become members, the Board of Governors may, by a four-fifths majority of the total voting power, increase the number of directors to be elected.”

The large increase in Fund membership and related pressure to expand the size and/or alter the structure of the Board grew from some key historical currents: the process of decolonization and independence for countries in Africa and Asia in the 1950s and 1960s; the growth of new sources of economic dynamism, especially in Asia, in the 1970s and 1980s; and the move to embrace market systems by the CIS, Eastern European and Baltic countries in the 1990s. It also reflected the need to take into account the changes in the relative economic weight between countries that these currents often precipitated. The size of the Board, in terms of the total number of chairs, has doubled since 1946 (Table A1).

Table A1.Changes in the Number of Executive Directors in the Fund
Regular ElectionAppointedElectedTotal
19465712
1947 (interim election)5813
1948 (interim election)5914
195251116
195651217
19586 1/1218
196051318
1963 (interim election)51419
196451520
19686 2/1420
19706 3/1420
19786 4/1521
19806 5/1622
199251924

Canada appointed an Executive Director under Article XII, Section 3 (c).

Italy appointed an Executive Director under Article XII, Section 3 (c).

Japan appointed an Executive Director upon becoming one of the five largest quota-holders with the effectiveness of its quota under the Fifth General Review.

Saudi Arabia appointed an Executive Director under Article XII, Section 3 (c).

Saudi Arabia appointed an Executive Director under Article XII, Section 3 (c).

Canada appointed an Executive Director under Article XII, Section 3 (c).

Italy appointed an Executive Director under Article XII, Section 3 (c).

Japan appointed an Executive Director upon becoming one of the five largest quota-holders with the effectiveness of its quota under the Fifth General Review.

Saudi Arabia appointed an Executive Director under Article XII, Section 3 (c).

Saudi Arabia appointed an Executive Director under Article XII, Section 3 (c).

The Board grew gradually throughout the 1950s and 1960s, reflecting these forces, to stand at 20 chairs at the time of the Second Amendment of the Articles of Agreement in 1978. To reflect this evolution, Article XII, Section 3 (b) was changed in the Second Amendment, to specify an Executive Board of 20, with five Directors appointed by the five members having the largest quotas, and 15 to be elected by the other members.23 Article XII, Section 3 (b), as amended in the Second Amendment, further provides that the Board of Governors may, by an 85 percent majority of the total voting power, increase or decrease the number of elected Executive Directors for any regular election, which is held every two years.

In 1972, in response to concerns expressed by the African members, an understanding was reached that there should be two African constituencies and Executive Directors. This understanding was reflected in the Report of the Executive Board to the Board of Governors on the Size and Structure of the Executive Board of July 25, 1972.24 The Board of Governors took note of the report—and thereby implicitly of this understanding—in the context of its decision on the Size and Composition of the Executive Board (Resolution No. 27-12, effective August 31, 1972). This understanding was confirmed at the time of the Second Amendment of the Articles, and has continued to apply for the regular elections of Executive Directors since then.25

The principles regarding the size and composition of the Board elaborated during the discussion on the Second Amendment have continued to guide the Board of Governors in particular cases where the size of the Board is an issue.26 For instance, in 1978, Saudi Arabia became entitled to appoint an Executive Director, as it had become one of the two largest Fund creditors (under the provisions of Article XII, Section 3 (c)),27 and in 1980, when China participated in the regular election for the first time in a number of years, following the clarification of the representation of China on the Boards of the Fund and the Bank, it had sufficient votes to elect its own individual Director. To accommodate this without upsetting the previous outline of constituencies, the Board of Governors decided to increase the number of elected Executive Directors to 16, bringing the total number of chairs to 22.28

In 1992, to reflect the increase in membership in particular by the CIS and Eastern European countries, as well as by Switzerland, the Board of Governors agreed to increase the number of elected Executive Directors to 19.29 That number has been maintained for the subsequent regular elections. With the five members with the largest quotas appointing Executive Directors, the total number of Executive Directors in the Board now stands at 24.

Basic Information about Quotas

A Fund member’s quota is broadly determined by its economic position relative to the economic positions of other members. Various economic factors are considered in determining changes in quotas, including GDP, current account transactions, and official reserves. When a country joins the Fund, it is assigned an initial quota in the same range as the quotas of existing members considered by the Fund to be broadly comparable in economic size and characteristics. Any changes in quotas require broad support, as they must be approved by an 85 percent majority.

Member’s quotas are reviewed periodically. The five-yearly regular reviews of quotas established under the Fund’s Articles are designed to meet several key objectives.30 These include to ensure that the Fund continues to have sufficient resources to fulfill its responsibilities and that the distribution of quotas adequately reflects developments in the world economy. In this regard, the reviews conducted by the Executive Board have focused on key topics as follows:

  • The role and size of the Fund;
  • The adequacy of Fund resources and the need for a possible quota increase;
  • The distribution of quotas including possible changes to quota formulas; and
  • Governance and representation.

Quota Reviews

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 Fund 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. Of the twelve general reviews that have been conducted so far, five have concluded that no increase in quotas was needed.

Second, a general review allows for increases in members’ quotas to reflect changes in their relative positions in the world economy. Ad-hoc quota increases outside general reviews have been rare in recent decades, although China was granted a higher quota in 2001 following its resumption of sovereignty over Hong Kong SAR.

The last quota increase under a general review—the Eleventh—took effect in January 1999. The 45 percent overall increase reflected changes in the size of the world economy, the increased risk of financial crisis, and the rapid liberalization of trade and capital flows.

During the Twelfth General Review, the Executive Board discussed the role and size of the Fund and the adequacy of its resource base. It also considered the distribution of Fund quotas that would best reflect changes in the world economy, as well as measures to strengthen the governance structure of the institution. The Review was concluded on January 30, 2003 with no proposal by the Board of Governors to increase quotas.

The period of the Thirteenth General Review began after the conclusion of the Twelfth Review and is to be completed by January 30, 2008. The resolution concluding the Twelfth General Review indicated that the Executive Board intended, during the period of the Thirteenth General Review to monitor and assess the adequacy of Fund resources, to consider measures to achieve a distribution of quotas that reflects developments in the world economy, and to consider measures to strengthen the governance of the Fund.

Actual Quotas and Calculated Quotas

As noted actual quotas are assigned to members when they join the Fund based on their relative economic position in the world economy. The Board has usually relied on quota formulas as an independent measure of members’ relative economic size. Typically, the quota resulting from the formulas—the calculated quotas—is different from the actual quota of a member and, in the most recent quota review, actual quotas were on average less than half of calculated quotas. However, quota formulas, though one element in determining actual quotas, in practice have had a limited role in this area and also in determining actual quota adjustments.

The shifts in actual quotas and quota shares during General Reviews have broadly reflected the differences in economic developments among members between the Reviews. Increases in members’ quotas during general reviews typically consist of an equiproportional element and a selective element. The equiproportional element is distributed to all members according to their existing quota shares. The selective element is distributed to either all members or a subset of members. The selective element is used to attain a change in quota shares among members. For any overall increase in quotas, the larger the selective increase, the greater the redistribution of quota shares. In practice, the selective component has tended to be relatively small.

The distribution of selective quota increases has generally been based on calculated quotas. Calculated quotas have played a key role both in determining which countries are eligible for selective quota increases and in the distribution of selective quota increases. Since the Eighth Review (1983), the selective quota increases have been allocated to all members in proportion to their calculated quotas. However, large discrepancies between actual and calculated quota shares remain for certain members.

The extent to which distributions of calculated and actual quotas have converged over time for the membership as a whole can be approximated by the “convergence index,” defined as 100 percent minus the aggregate of positive (or aggregate of negative) deviations of actual from calculated quota shares. According to this measure, until recently, quota adjustments have on average restored the convergence index to a level that prevailed just after previous general reviews.31 (Table A4).

Most recently, under the Eleventh Review in 1998, 25 percent of the quota increase was selective. The quota formulas helped determine each member’s share of the selective increase as follows: (1) 15 percent of the total increase (three-fifths of the selective element) was distributed to all members; (2) 10 percent of the total increase was distributed to those countries whose ratio of calculated to actual quotas was considered to be most “out of line” where out of line was defined as those countries with ratios of calculated to actual quotas above one. There were 38 members that met this criterion.

The Original Bretton Woods Formulas and Impetus for Change

The original Bretton Woods formula was a single equation intended to provide a comprehensive measure of the relative size of a country’s economy that took into account important differences in the economic structures of countries. The formula contained the following variables: (i) national income as a measure of a country’s economic size and ability to contribute to Fund resources; (ii) reserves, also as a measure of a member’s capacity to finance Fund operations, but with a smaller weight; (iii) merchandise imports as an indicator of possible need to use IMF resources; (iv) variability of exports with a high weight to reflect vulnerability to external trade shocks that could lead to a need for financing; and (v) a multiplicative factor that increased the role of exports relative to national income in the determination of calculated quotas.

The Bretton Woods formula was revised and a number of alternative formulas were added in 1962/63. In order to increase the quotas of smaller primary commodity producing countries and to bring calculated quotas closer to actual quotas for most other countries, three main changes were made to the Bretton Woods formula: (i) the original coefficients were reduced by half to bring calculated quotas more in line with the sum of actual quotas; (ii) the measure of variability was modified to remove the rising trend in exports; and (iii) imports and exports were replaced with current payments and current receipts. The original variables were retained as Set I data, while the new variables were referred to as Set II data.

The revised Bretton Woods formula did not adequately capture the economic structure of smaller primary commodity producing countries. Therefore, four derivative formulas were developed that provided greater emphasis on trade and variability and reduced the role of national income and reserves. A member’s calculated quota was determined as the larger of the Bretton Woods formula or the average of the two lowest calculated quotas from the derived formulas. In effect, a dual structure of ten formulas was utilized (i.e., five formulas based on two sets of data) with the larger countries relying primarily on the Bretton Woods formula and smaller, more open economies with highly unstable external sectors using the supplementary formulas.

The quota formulas were simplified and updated in 1981/82. These changes consisted of: (i) eliminating five of ten formulas by focusing on Set II data; (ii) replacing nominal income with GDP, which is viewed as a more comprehensive and readily available measure of national output; (iii) broadening the measure of reserves to include holdings of SDRs, ECUs, and IMF reserve positions and calculation of the holdings as a 12-month average rather than an end-of period total; and (iv) reducing the coefficient of variability in the four derivative formulas by 20 percent to moderate the impact of the very sharp increases in the prices of certain commodities, especially the increases in oil prices in 1973/74 and 1979. There have been no changes in the formulas since 1983, although the Executive Board considered proposals for changes, mostly in the variables to be included, on several occasions (Box A1).

Box A1.Existing Quota Formulas

Quota formulas have evolved over time. A formula that was used in 1944 as a basis for determining the broad configuration of the initial quota distribution became known as the Bretton Woods formula. This formula contained five variables: national income, official reserves, imports, export variability, and the ratio of exports to national income. A multi-formula approach was introduced in the early 1960s, when the Bretton Woods formula was supplemented with four other formulas containing the same basic variables but with larger weights for external trade and external variability. The quota formulas were last modified in the context of the Eighth General Review (1982/83) but their basic structure was retained (for a more comprehensive overview of quota formulas, see Alternative Quota FormulasConsiderations, Annex II, (SM/01/293, 9/27/01)).

The current five formulas, used from the Eighth to the Eleventh Reviews, are:

Bretton Woods: Q1 = (0.01Y + 0.025R + 0.05P + 0.2276VC) (1 + C/Y);

Scheme III: Q2 = (0.0065Y + 0.0205125R + 0.078P + 0.4052VC) (1 + C/Y);

Scheme IV: Q3 = (0.0045Y + 0.03896768R + 0.07P + 0.76976VC) (1 + C/Y);

Scheme M4: Q4 = 0.005Y + 0.042280464R + 0.044 (P + C) + 0.8352VC;

Scheme M7: Q5 = 0.0045Y + 0.05281008R + 0.039 (P + C) + 1.0432VC;

where:

  • Q1, Q2, Q3, Q4 and Q5 = Calculated quotas for each formula;
  • Y = GDP at current market prices for a recent year;
  • R = twelve-month average of gold, foreign exchange reserves, SDR holdings and reserve positions in the IMF, for a recent year;
  • P = annual average of current payments (goods, services, income, and private transfers) for a recent five-year period;
  • C = annual average of current receipts (goods, services, income, and private transfers) for a recent five-year period; and
  • VC = variability of current receipts, defined as one standard deviation from the centered five-year moving average, for a recent 13-year period.

For each of the four non-Bretton Woods formulas, quota calculations are multiplied by an adjustment factor so that the sum of the calculations across members equals that derived from the Bretton Woods formula. The calculated quota of a member is the higher of the Bretton Woods calculation and the average of the lowest two of the remaining four calculations (after adjustment).

During the Eleventh General Review of Quotas, concern was expressed that the current quota formulas did not reflect changes in the world economy, such as the growing role of emerging markets and the increased importance of international capital flows. As a result, the Quota Formula Review Group (QFRG) was convened in 1999 to provide the Executive Board with an independent review of quota formulas.32 The QFRG reviewed the history of quota formulas and provided an analysis of possible variables that could be included in a revised formula.33 The QFRG also suggested criteria for assessing proposals for changes in the formulas, notably a sound economic basis for variables, reflecting changes in the world economy, consistency with the multiple functions of quotas, and simplicity and transparency. Finally, the QFRG recommended a single formula with two variables: GDP as a measure of the ability to contribute resources to the Fund, and variability of current receipts and net long-term capital flows, as a measure of external vulnerability, with the GDP variable having the larger weight.

The staff commentary supported the objectives of the QFRG. The staff agreed in particular with the goal of simplicity and the use of variables that reflect the functions of quotas. Staff also supported the use of GDP, converted to a common base at market exchange rates, and a broader definition of variability to indicate potential vulnerability. However, staff expressed concern that the QFRG variability measure would not reflect vulnerability from short-term capital shocks. In addition, a partial quantification of the QFRG-recommended formula indicated a distribution of calculated quotas that most members would consider unacceptable. A subsequent, more comprehensive and updated quantification confirmed this preliminary calculation.

A wide divergence of views on the issues raised in the QFRG report and the staff commentary were expressed at the Executive Board seminar. Directors generally recognized the need to simplify the current formulas and to update them to take account of the growing role of capital flows. Concern was expressed, however, that the specific formula recommended by the panel pointed toward a greater concentration of quotas among the largest industrial countries.

During the October 2001 seminar, Directors considered that quota formulas should be simple and transparent, reflect the financial functions of quotas, and produce results that are broadly acceptable to the membership.34 They supported the inclusion of GDP in quota formulas, as an indicator of countries economic size and their potential to either provide resources to the Fund or use Fund resources. Many Directors supported the use of an openness variable in the quota formulas to reflect countries’ integration in the world economy, although a few Directors noted that current receipts and payments on the one hand, and GDP on the other hand, are highly correlated. Many Directors supported inclusion of a measure of variability in the quota formula to capture countries’ potential need for Fund resources, and saw variability of external receipts as an appropriate measure, while some Directors considered that measures of openness could also be indicative of vulnerability.

In June 2002, Executive Directors reached understandings on broad principles for arriving at an alternative quota formula.35 Specifically, there was general endorsement of a simpler and more transparent approach in specifying the variables in quota formulas. It was also agreed that variables included in the quota formulas should be indicators of members’ economic position in the world. In this regard, the Board has also agreed to limit consideration to three or four variables used in existing quota formulas, but updated and modernized. These variables include GDP, a measure of openness, variability, and possibly international reserves. As noted, the Executive Board reaffirmed these broad conclusions in the July 2003 discussion on quota-related topics.

Selection of the Database, Derivation of Quota Variables, and Other Issues36

This appendix discusses the required data, the selection of the database, and the derivation of the data series that were used for the quota calculations.

Required Data

The quantification of existing and alternative quota variables used in this paper requires the following data for 184 member countries (converted into SDRs as the common denominator):

  • GDP (Gross Domestic Product), for three years (2001–03).
  • Current receipts (goods, services, income, and current transfers)37 for 13 years (1991–2003). Current receipts are defined as the credit component of all economic transactions between resident and nonresident entities other than those relating to financial transactions and reserves.
  • Current payments (goods, services, income, and current transfers)38 for five years (1999–2003). Current payments are defined as the debit component of all economic transactions between resident and nonresident entities other than those relating to financial transactions and reserves.
  • Net capital flows for 13 years (1991–2003). Capital flows relate to cross-border transactions in all foreign financial assets and liabilities except reserve assets, Fund credit and loans, and exceptional financing.
  • Official reserves (average over the 12 months of 2003), defined as the sum of foreign exchange, SDR holdings, reserve position in the Fund, and monetary gold valued at SDR 35 per fine troy ounce.

Errors and omissions have not been included in the measure of variability of current receipts and net capital inflows. In many analytical presentations of the balance of payments, errors and omissions are considered financing flows and included with short-term capital. However, errors and omissions are, by definition, a residual item, which reflects recording errors that cannot be ascribed to any particular balance of payments category and staff does not believe that recording errors should be a factor in determining quotas. This is fully in line with the definition of capital flows in the balance of payments manual.

At the same time, Fund credit and loans, and exceptional financing have been excluded from the variability measure for the same reason that reserve changes have been excluded. Such transactions, including Fund borrowing, payment arrears, and debt forgiveness or rescheduling, represent exceptional measures undertaken to finance balance of payments needs. Exceptional financing flows are normally shown “below the line” because they are not autonomous transactions affecting the balance of payments position of a country. For these reasons, the staff believes that these transactions should not be included in the variability measure.

Along these same lines, changes in both reserve assets and liabilities should, in principle, be excluded from net capital flows so that only autonomous, and not financing, flows are captured. Data on transactions in reserve assets are available for most members in IFS and have been excluded from net capital flows. However, because of the continuing lack of data on reserve liabilities for many members (reserve liabilities are not a standard component in BPM5), changes in reserve liabilities have not been excluded from the measure of net capital flows in this paper.

Data Sources

The database containing the variables used in the quota calculations would ideally have the following attributes: it should be comprehensive; i.e., contains all required data—compiled in line with internationally accepted concepts and definitions—for all members; the data would be from official sources (central banks and national statistical agencies); and the data would be comparable (consistent and coherent) across time and countries. This would ensure similar treatment for all countries’ data and facilitate the comparability of results in a transparent manner. It would also be helpful if the database could be updated without major additional use of staff resources.

As in past quota updates, the main source of data used in the quota calculations was the Fund’s central macroeconomic database of country, regional, and global statistics. This database is managed by the Statistics Department (STA) for international statistical cooperation and publication purposes, and to support the Fund’s surveillance and use of Fund resources functions. This database, which encompasses a number of component databases and is collectively known as the Economic Data Facility (EDF), embodies the application of general methodological guidelines for the compilation of economic and financial data. These guidelines promote international comparability and methodological continuity in the database over time. The database is used to compile the Fund publication—International Financial Statistics (IFS).39

The IFS data are reported to STA by central banks and national statistical agencies, and are based on internationally consistent definitions, such as the fifth edition of the Balance of Payments Manual (BPM5) and the 1993 System of National Accounts (SNA). STA makes an effort to compile these data into long time series that are consistent across time and countries However, gaps exist in some of the data. For instance, there are some missing data for GDP and for current account transactions for more recent years and, as in the past, current receipts and payments data for early years in the case of transition countries are not available. Also, for many members there are data gaps in the capital account of the balance of payments.

Missing observations were largely supplemented using the World Economic Outlook (WEO) database. The WEO data are provided primarily by the Area Departments through their consultations with member countries. In the Eleventh Review of Quotas, IFS data were supplemented by other official data and staff estimates obtained from area departments and Finance Department (FIN) staff estimates.

Although WEO data should reflect a presentation of the balance of payments that is consistent with the BPM5, the definition of balance of payments variables does not necessarily need to exactly conform to BPM5 until such time as (a) national compilers have revised the respective country’s balance of payments accounts or (b) the staff report for the country reflects the new definitions.

At the outset of the development of the database for the quota calculations, STA was aware that for some member countries there exist large differences between the IFS and the WEO data sets. As noted above, some of these differences are related to the use of different classification systems, i.e., use of a national presentation in WEO while the standardized BPM5 presentation was reported to STA. In other cases, the WEO may have contained updated information that had not yet been transmitted to STA. In the same vein, it is possible that some of the historical data may have been updated in only one of the two sets of data. There were instances where WEO data were used to fill gaps in an IFS data set where there were large differences in the periods where data were reported for both datasets.

These data discrepancies between the two data sources may also have been influenced by the varying institutional, legal, and accounting contexts of data compilation across member countries (see Box A2). At this point in the work on alternative quota formulas, data differences between the IFS and WEO have not been addressed. In addition, the database for the quota calculations has not been reviewed by the Fund’s Area Departments or by national authorities. The primary focus of the staff’s work on quota formulas at this stage is the exploration of the broad performance of the formulas, and not the derivation of accurate shares for each member country. While data discrepancies exist, they are not believed to be of magnitudes that would undermine the general assessment of the performance of the formulas at aggregate levels.

Box A2.Methodological Issues

With regard to GDP data, the System of National Accounts (1993 SNA) extended the scope of GDP slightly, adding in some instances, production of goods for own final use as well as including capital formation on mineral exploration, computer software, and artistic originals. Typically, this has resulted in an increase in reported GDP levels of up to 5 percent. By the beginning of 2001, about 50 members had adopted the 1993 SNA for reporting GDP data to the IFS. Some of them have revised historical data. The size of data inconsistencies across countries due to the revisions related to the 1993 SNA is likely to be smaller than other differences related to known measurement problems with GDP (e.g., under coverage of surveys).

With regard to the current receipts and payments (goods, services, income, current transfers, and BPM5’s capital account), the BPM5 introduced changes in the conceptual presentation of balance of payments accounts. Broadly, the BPM5 strives to make a clear distinction between transactions and other changes in the accounts—valuation, reclassification, and other adjustments. The latter are included among adjustment items affecting the international investment position (IIP). Also, the BPM5 introduced a distinction between current and capital transfers to increase harmonization with the SNA. These methodologies have been only partially adopted by the membership, and it is not feasible to adjust the data so that they are defined consistently across countries. Data are taken as reported by member countries and the changes in methodology may have contributed to slight breaks in some series.

With regard to financial account transactions, the accuracy of financial account data in many countries, including those in the IFS database, is uneven and the data are generally less comprehensive than the other data used for the quota formulas. This reflects classification and practical difficulties encountered by countries in compiling the data. Financial account data, particularly on the private nonbank sector, are generally difficult and resource intensive to compile. The switch from data collection systems based predominantly on government and balance sheet records to systems (particularly surveys) incorporating large nonbank private sector transactions has been slow. Many countries are still in the midst of adapting their collection and recording systems to take account of changes in the composition and magnitude of financial transactions, including new instruments such as financial derivatives. Institutional and accounting requirements for data compilation differ markedly across countries (for example, a recent summary of country reporting practices with respect to direct investment documents the number of gaps in recording and differences in treatment),1 and data availability on the private nonbank sector varies. In the IFS, in many instances, only aggregates and not component series are reported.

With regard to official reserves, the Data Template on International Reserves and Foreign Currency Liquidity has been approved as the benchmark for the reporting of data to the Fund on official reserves. The Operational Guidelines for the Data Template, issued in 2001, clarify existing concepts on international reserves and provide guidelines for reporting the data on a consistent basis across countries.

1 See Foreign Direct Investment Statistics: How Countries Measure FDI, 2001, (IMF/OECD, March 2003). In addition, individual country metadata for 54 of the countries that participated in the 2003 Survey of Implementation of Methodological Standards for Direct Investment has recently been posted on the Fund’s website.

Data Availability and Adjustments

The bulk of Fund members that report balance of payments statistics to STA (157 of the 178) do so on the basis of the BPM5. Data were prepared for current receipts and payments and net capital inflows (as defined above). Where members reported comprehensive balance of payments statistics to STA, the data stored in the IFS database were used without any adjustment. When data were not available for some members for the timeframe required for the quota calculations, estimates were made largely on the basis of the WEO. The estimation technique, or gap filling, extrapolates from nearby non-zero data based on growth rates in comparable (but not necessarily identical) WEO series.40 For members where neither IFS nor WEO data were available, FIN staff obtained data from Article IV staff reports, country desk data, and the Eleventh Review database.

The following sections describe for each of the data categories the general procedures employed by STA to construct the required database for the quota calculations.

Current Receipts and Payments

Goods and services transactions

Data reported by members and maintained in IFS were used for each country. Where there were data gaps after the latest year of reporting to STA, estimates were made by applying the growth rates derived from the WEO for the missing year(s) to the latest reported annual data (debits and credits). When the data gaps were in respect of years prior to the latest reported data to STA, the WEO data were inserted for those years to complete the series.

For credit transactions, the IFS database is the source of data for 178 members, with WEO growth rates applied to 83 of these where there were data gaps. WEO data were substituted completely in the case of 13 members, and no IFS or WEO data were available for 6 members. With respect to debit transactions, the IFS database is the source of data for 178 members, with WEO growth rates applied to 83 of these. WEO data were substituted completely for 7 members and no IFS or WEO data were available for 6 members.

Income and current transfers

Data reported by members and maintained in IFS were used for each country. Where there were data gaps estimates were derived using WEO data series. As the WEO data for these series are available only on a net basis, the adjustment procedure involved adding the change in the balance on transactions from the WEO data to the STA data of the previous year—credits if WEO showed a net credit balance or debits if a net debit balance was shown. Where there were gaps in the data prior to the latest reported data to STA, the net credit or the net debit figures from WEO were substituted directly to estimate income and current transfers credits and debits, respectively.

For income and current transfers credit transactions, the IFS database is the source of data for 177 members, with the change from the WEO series applied to 77 of these. Net credit figures from WEO were substituted directly for 6 members, and no IFS or WEO data were available for 7 members. With respect to income and current transfers debit transactions, the source of data for 177 members was the IFS, and the net change from the WEO series was applied directly for 81 members. Net debit figures from WEO were substituted directly for 6 members, and no IFS or WEO data were available in the case of 7 members.

“Capital account” transactions 41

The primary source for data on “capital account” transactions was the IFS data series. When IFS values were unavailable, the change in the WEO balance for that year was used to derive an estimate. The paucity of IFS “capital account” data may reflect the inclusion of capital transfers in current transfers by some members. In some cases, the use of the WEO data may have produced some duplication; i.e., use of WEO data for capital transfers, which may have been classified under current transfers in the IFS series.

For the “capital account” credit transactions, the IFS is the source of data for 171 members, with the data from the change in WEO applied to 10 of these. With regard to “capital account” debit transactions, the IFS was the source of data for 171 countries, with the data from the change in WEO applied to 72 of these.

Net capital flows

The primary source for data on net capital flows was the IFS financial account data provided by member countries to STA. When IFS values were unavailable, a WEO value was used to fill the gaps. The IFS database is the source of data for 171 members, with WEO data substituted for 72 of these members with some years of missing data. No IFS or WEO data were available for 13 members.

Official reserves

The data on official reserves—comprising monetary gold, SDR holdings, reserve position in the Fund, and foreign exchange holdings—were obtained from IFS with monetary gold valued at SDR 35 per fine troy ounce. In deriving annual average holdings of official reserves for 2003, the data for the 12 months of 2003 were summed and then divided by 12 (or by the number of months for which data were available).

Gross domestic product

The IFS and WEO databases provided GDP data for 181 members. The IFS database is the source of data for 132 members, WEO data were used for 17 members, and WEO growth rates were applied to the latest IFS data to estimate missing data for 32 members. GDP data for 11 members that are compiled and reported on a fiscal year basis were first adjusted to calendar year basis by recalculating the annual GDP as an average of the quarters of the fiscal year.

Valuation

The balance of payments and the GDP data series in U.S. dollars were converted to SDRs using period-average exchange rates.

Missing data series

In the case of Somalia, data for the various series were assumed unchanged from the Eleventh Review. For Bosnia-Herzegovina, current receipts data were estimated based on the Eleventh Review and the Country Desk Data database. For Eritrea, the Eleventh Review and the WEO database were used. For Liberia, data were estimated based on the country desk data database. For Iraq, the Marshall Islands, Micronesia, and Palau, the recent Article IV staff reports and the country desk data database were used. The data series for San Marino were estimated on the basis of the IFS database and recent Article IV staff reports. For Serbia-Montenegro, data from the WEO and country desk data databases and recent Article IV staff reports were used. For Turkmenistan and Uzbekistan, data were taken from the WEO database and the recent Article IV staff reports. The data series for Afghanistan and reserves data for Democratic Republic of Congo and Kiribati were computed using the recent Article IV staff reports. Lastly, Timor-Leste data were estimated based on the data in the recent Article IV staff report.

Balance of payments data prior to 2002 for Belgium were estimated as the difference between data for the Belgium–Luxembourg Economic Union and Luxembourg. For China, balance of payments data were adjusted for trade between the mainland and Hong Kong SAR based on Direction of Trade database.

1

See Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund, Washington D.C., 4/16/05.

2

See Completion of the Twelfth General Review of Quotas—Voting Results (SM/02/355, Supplement 2, 1/30/03, Corrected: 2/3/03). The Board of Governors’ Resolution No. 58-1 was adopted on the basis of recommendations contained in Twelfth General Review of Quotas—Report of the Executive Board to the Board of Governors, Decision No. 12926-(03/1), adopted 1/3/03.

3

The Resolution also took note of the Executive Board’s intention to establish, as the discussion may warrant, a Committee of the Whole (COW) to make specific recommendations. The period of the Thirteenth General Review began after the conclusion of the Twelfth Review. However, appointment of a COW would constitute the formal start of the Thirteenth General Review of Quotas that is to be completed by January 30, 2008. A one-year minimum period is stipulated in Rule D-3 for a COW to be constituted prior to the scheduled completion of a review.

4

The IMF reviews its liquidity position semi-annually.

5

See Report of the Executive Board to the IMFC on Quotas, Voice, and Representation (IMFC/Doc/8/03/2, 9/12/03). See Report of the Executive Board to the IMFC on Quotas, Voice, and Representation (IMFC/Doc/10/04/4, 9/28/04). See Voice and Participation of Developing and Transition Countries, Background Note by IMF Staff (DC 2005-0007, 4/13/05).

6

Based on understandings reached during the Eleventh General Review of Quotas, which was completed in early 1998, the Executive Board has been conducting a comprehensive review of the formulas used to derive calculated quotas. As a first step in the process, the recommendations of a group of external experts—see External Review of Quota Formulas (EBAP/00/52, 5/1/00, Supplements 1 and 2, 5/1/00 and Supplement 3, 5/2/00) and Staff Commentary on the External Review of the Quota Formulas (EBAP/00/66, 6/7/00)—were discussed at an Executive Board seminar in August 2000. Further discussions based on follow-up work by the staff have taken place at an Executive Board seminar in October 2001 and at a meeting in June 2002. See IMF Executive Board Informally Discusses Quota Formulas, PIN No. 01/118, November 7, 2001, and IMF Executive Board Discusses Further Considerations in the Twelfth General Review of Quotas, PIN No. 02/105, September 20, 2002.

7

See IMF Executive Board Discusses Quota Distribution Issues, PIN No. 03/106, August 29, 2003.

8

See IMF Executive Board Discusses Quota Distribution Issues, PIN No. 03/106, August 29, 2003.

9

See Quotas—Updated Calculations (SM/04/305, 8/30/04). Data through 2002 were used in the calculations. The previous calculations used data through 1999.

10

See Appendix III for details on the five existing formulas. The data obtained cover current receipts and net capital flows (1991–2003), current payments (1999–2003), GDP (2001–03), and reserves (monthly data for 2003), all in SDRs.

11

For details of compilation and composition of the data, see Appendix IV.

12

These adjustments have been made only in the context of Quota Reviews. For details on past adjustments, see Annex I in Alternative Quota Formulas—Considerations (SM/01/293, 9/27/01).

13

See Quotas—Updated Calculations (SM/04/305, 8/30/04).

14

See Eleventh General Review of Quotas—Preliminary Quota Calculations (EB/CQuota/95/1, 8/10/95), pp. 20-23. See also Alternative Quota Formulas—Further Considerations (SM/02/132, 5/6/02), pp. 26–27.

15

The 16 members are Bahrain, Botswana, China, Equatorial Guinea, Estonia, Ireland, Korea, Luxembourg, Malaysia, Mexico, Oman, San Marino, Singapore, Thailand, Timor-Leste, and United Arab Emirates.

16

In comparison, out-of-lineness was measured using the 16 different formula variants in the 2002 Board paper on quota issues. Actual quota shares were consistently among the lowest relative to calculated quota shares for a small group of members. These eight members were Bahrain, Botswana, Ireland, Korea, Luxembourg, Singapore, Thailand, and Turkey. See Alternative Quota Formulas—Further Considerations (SM/02/132, 5/6/02), pp. 26–27

17

A zero value of this measure implies no reduction in the deviation between actual and calculated quota shares while 100 percent would indicate a complete elimination of differences between actual and calculated quota shares. For more discussion on convergence over time of actual quotas toward calculated quotas, see External Review of the Quota Formulas—Annex (EBAP/00/52, Supplement 1, 5/1/00). See also Quota Distributions—Selected Issues, (SM/03/255, 7/17/03).

18

Suggestions have also been made that issues of changes in the size and/or composition of the Executive Board should be part of the debate.

19

All members have an effective veto over changes in their own quotas. But, on occasions in the past when individual members have not consented to an increase in their quotas, this has implied a larger quota share for the nest of the membership.

20

See The IMF and the World Bank At Sixty, Edited by Ariel Buira for the G24 Research Program, Anthem Press, 2005, pp. 15–16 and Challenges to the World Bank and the IMF, Developing Country Perspectives, Edited by Ariel Buira for the G24 Research Program, Anthem Press, pp. 14–17.

21

In Alternative Quota Formulas—Further Considerations (SM/02/132, 6/6/02), pp. 27–30 address the proposals by some Executive Directors to base voting power on a weighted average of quotas, populations, and basic votes; and alternatively to add a constant in the quota formulas. There was not broad support for these proposals and it was recognized that quota formulas should not be overloaded with too many objectives.

22

Furthermore, if the members entitled to appoint Executive Directors did not include the two members that made available the largest absolute amount of resources utilized by the Fund, on the average over the two preceding years, then these two members were required to appoint Executive Directors, see Article XII, Section 3 (b) (ii) and (c), initial version.

23

Article XII, Section 3 (b) (ii) and (c), requiring two additional appointed Executive Directors, was amended to allow the respective members the option of not appointing an Executive Director and of participating instead in the election of Executive Directors.

24

See paragraph 2, Report of the Executive Board to the Board of Governors on the Size and Structure of the Executive Board, in SM/72/154, Sup. 1, 7/25/72: “ There was widespread support for the view that, if the large number of countries in this area [Africa] were to elect only one Executive Director, the burden on him would be excessive, and he would be unable to give adequate attention to the interests of all members that elected him. Concern was expressed that this result would hinder the efficient conduct of the business of the Executive Directors, particularly when the interests of these members were involved. There was widespread support for the view that it was desirable that this large number of countries should have the opportunity to elect two Executive Directors under the present Articles.”

25

See Board of Governors Resolution No. 36-3, effective April 27, 1981: “[The Board of Governors] [r]esolved: (1) The Board of Governors reaffirms that the Fund, when determining the number of Executive Directors to be elected in each regular election of Executive Directors, shall continue to be governed by the objectives and considerations, including the desirability of broadly maintaining the existing geographical balance in the composition of the Executive Board, set forth in Section 2(a) of Chapter O, “Organizational Matters (Article XII and Schedules D and E),” in Part II, “Commentary”, in Proposed Second Amendment to the Articles of Agreement of the International Monetary Fund: A Report by the Executive Directors to the Board of Governors.”

26

In the Commentary on the Second Amendment, it is stated: “…the Fund has been guided by the objectives of ensuring that the size of the Executive Board will contribute to the effective dispatch of its business, that a desirable balance will be maintained in the composition of the Executive Board, and that the size of constituencies will not place undue burdens on Executive Directors and hinder the efficient conduct of the business of the Board, that members will be as free as possible within the provisions of the Articles and the regulations for the elections to form the constituencies of their choice, and that a relative equilibrium will be achieved in the voting power of the constituencies electing Executive Directors.” (Section 2(a) of Chapter O, “Organizational Matters (Article XII and Schedules D and E),” in Part II, “Commentary”, in Proposed Second Amendment to the Articles of Agreement of the International Monetary Fund: A Report by the Executive Directors to the Board of Governors (March 1976), p. 64.)

27

Saudi Arabia appointed an Executive Director until the 1992 regular election, when it ceased to be one of the Fund’s two largest creditors, but it has elected its own individual Executive Director since then, see International Monetary Fund: 1992 Regular Election of Executive Director—Issues for Consideration, EB/CREED/92/1, 6/16/92, p. 4.

28

Board of Governors Resolution No. 35-8, effective September 8, 1980.

29

Board of Governors Resolution No. 47-19, effective September 22, 1992, based on a proposal by the Committee for the 1992 Regular Election of Executive Directors and a Report of the Executive Board to the Board of Governors on the 1992 Regular Election of Executive Directors, see EBD/92/200, 04/09/92, Annex I.

30

The Articles of Agreement provide for General Reviews of Quotas by the Board of Governors at intervals of not more than five years (Article III, Section 2).

31

For more discussion on convergence over time of actual quotas toward calculated quotas, or lack thereof, see External Review of the Quota Formulas—Annex (EBAP/00/52, Supplement 1, 5/1/00).

32

The eight-member panel, chaired by Professor Richard Cooper (Harvard University), was asked to review the quota formulas with respect to “their adequacy to help determine members quotas … in a manner that reasonably reflects’ members relative positions in the world economy as well as their relative need for and contributions to the IMF’s financial resources, taking into account change in the functioning of the world economy and the international financial system in light of increasing globalization of markets.

33

See External Review of Quota Formulas (EBAP/00/52, 5/1/00, Supplements 1 and 2, 5/1/00 and Supplement 3, 5/2/00) and Staff Commentary on the External Review of Quota Formulas (EBAP/00/66, 6/7/00). Further discussions based on follow up work by the staff have taken place at an Executive Board seminar in October 2001, and at a meeting in June 2002.See IMF Executive Board Informally Discusses Quota Formulas, PIN No. 01/118, November 7, 2001; and IMF Executive Board Discusses Further Considerations in the Twelfth General Review of Quotas, PIN No. 02/105, September 20, 2002.

34

See IMF Executive Board Informally Discusses Quota Formulas, PIN No. 01/118, November 7, 2001.

35

See IMF Executive Board Discusses Further Considerations in the Twelfth General Review of Quotas, PIN No. 02/105, September 20, 2002.

36

Balance of payments and GDP data for the updated quota calculations were compiled by STA in coordination with FIN. The STA team comprised Qi He, Paul Austin, Lisbeth Rivas, Olga Laveda, and Dwayne Raiford.

37

Current transfers include both private and official transfers, unlike past quota calculations that excluded official transfers. The capital account (as defined in the fifth edition of the Fund’s Balance of Payments Manual) is included here with the current account to improve data comparability across countries as many countries have difficulty in distinguishing current and capital transfers in their balance of payments systems.

38

Ibid.

39

In this paper, the data drawn from the EDF are referred to as the IFS database, following the practice in past quota review papers.

40

This method has been used to fill gaps for the purpose of publishing world and regional summary tables in the Balance of Payments Statistics Yearbook (BOPSY), Part 2, and was used in External Review of Quota Formulas—Quantification (EBAP/01/29, 4/13/2001).

41

“Capital account” (in quotation marks) refers to the capital account as defined in BPM5.

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