Chapter

Article III

Author(s):
International Monetary Fund
Published Date:
June 2007
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Quotas and Subscriptions

Adjustment of Quotas

The first interval of five years, at the end of which the Fund shall review the quotas of the members in accordance with Article III, Section 2, began on the date when the Fund Agreement, in accordance with Article XX, Section 1,1 entered into force; i.e., on December 27, 1945.

Decision No. 408-2,

March 11, 1949

Increase in Quotas of Fund Members—Eleventh General Review

Report of the Executive Board to the Board of Governors

1. Article III, Section 2(a) of the Articles of Agreement provides that “The 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. It may also, if it thinks fit, consider at any other time the adjustment of any particular quota at the request of the member concerned.” This report and the attached Resolution on increases in quotas under the current, i.e., Eleventh General Review are submitted to the Board of Governors in accordance with Article III, Section 2.

2. The five-year period prescribed by Article III, Section 2(a) for the Eleventh General Review of Quotas ends on March 31, 1998, five years from the date on which the Tenth General Review of Quotas should have been concluded. The Tenth General Review of Quotas was completed in early 1995 without recommending an increase in quotas to the Board of Governors. At that time, the Executive Board reported to the Board of Governors that:

…the Fund is at present relatively well-positioned to meet a prospective substantial demand for its resources over the next three years. Nevertheless, the Fund’s liquidity position is expected to decline over the next few years from its currently strong position. Furthermore, considerable uncertainties can be expected as regards the supply of usable resources, which depends on the continued relative strength in the balance of payments and reserve positions of mainly the industrial countries in the Fund. The continued adequacy of member’s quotas, including the Fund’s liquidity position, will be closely monitored by the Executive Board in the period ahead.

3. The conduct of the Eleventh General Review of Quotas has been guided by the views expressed by the Interim Committee since the Spring of 1995. At its meeting in April of that year, the Interim Committee requested the Executive Board “to continue to review the adequacy of the Fund’s resources, and, in connection with its review of the role of the Fund, to carry forward its work on the Eleventh General Review of Quotas.” At its meeting in October 1995, the Committee “welcomed the progress already made by the Executive Board on Fund quotas, and requested the Board to move forward with the Eleventh Quinquennial Review....” The Committee’s April 1996 Communiqué stated, with respect to the Fund’s financial resources and assistance to members, that the Committee “notes the progress made by the Executive Board in preparatory work for the Eleventh General Review of Quotas and stresses the need to ensure the adequacy of the quotas for the Fund to continue to carry out its mandate, taking into account changes in the world economy since the last increase in quotas was agreed in 1990.” In September 1996, the Committee reiterated its request to the Executive Board “to continue its work on the Review and to do its utmost to reach a conclusion as soon as possible.” In April 1997, the Committee requested the Executive Board to complete its work on quotas as soon as possible and to report to it in time for the Hong Kong meeting of the Committee. The Committee also stated that “the proposed distribution should be predominantly equiproportional while contributing to a correction of the most important anomalies in the present quota distribution. The Executive Board should also review the quota formulae promptly after the completion of the Eleventh Review of Quotas.” The Executive Board reached agreement on the size and distribution of the increase in quotas, which was endorsed by the Interim Committee at its meeting on September 21, 1997, in Hong Kong, China.

4. The Interim Committee agreed that:

  • — the present total of Fund quotas would be increased by 45 percent;

  • — 75 percent of the overall increase would be distributed in proportion to present quotas;

  • — 15 percent of the overall increase would be distributed in proportion to members’ shares in calculated quotas (based on 1994 data), so as to better reflect the relative economic positions of members; and

  • — the remaining 10 percent of the overall increase would be distributed among those members whose present quotas are out of line with their positions in the world economy (as measured by the excess of their share in calculated quotas over their share in actual quotas), of which 1 percent of the overall increase would be distributed among five members whose current quotas are far out of line with their relative economic positions, and which are in a position to contribute to the Fund’s liquidity over the medium term.

The Committee requested the Executive Board to submit before the end of this year a proposed resolution for the approval of the Board of Governors to effect the agreed increases in quotas. The Committee reiterated its view that the formulas used to calculate quotas should be reviewed by the Board promptly after the completion of the Eleventh General Review.

5. In its discussions on the Eleventh General Review, the Executive Board has considered, inter alia (i) the size of the overall increase in quotas; (ii) the distribution of the overall increase; (iii) the procedures for consent and payment for the increase in quotas, including by members with overdue obligations in the General Resources Account; and (iv) the media for payment for the increase in quotas. In its preparatory work on the Review, the Executive Board also considered issues relating to the role of the Fund in providing balance of payments financing, the quota formulas used in making quota calculations, and the declining share in quotas of developing countries in the Fund.

6. In assessing the Fund’s need for resources over the medium term in order to carry out its purposes, the Executive Board stressed that (i) the Fund is the central institution in the international monetary system and it must be adequately endowed with financial resources to enable it to act effectively when dealing with members’ balance of payments difficulties; (ii) the Fund, in fulfilling its function at the center of the system, must ensure that its resources are fully safeguarded, including by the adoption and implementation of appropriate policies by members supported by use of the Fund’s general resources, and that its resources are provided on a temporary basis, thereby ensuring that its resources revolve; and (iii) the Fund must hold a level of usable assets that are sufficient to protect the liquidity and immediate usability of members’ claims on the Fund, so as to maintain members’ confidence in and support of the institution.

7. In its consideration of the size of the increase in quotas, the Executive Board has taken into account a range of factors, including the growth of world trade and payments since 1990; the scale of potential payments imbalances, including imbalances that may stem from sharp changes in capital flows; the prospective demand for Fund resources, including the need for the Fund to support members’ growth-oriented adjustment programs, which, in many cases, may involve far-reaching economic and structural reforms; and the rapid globalization and the associated liberalization of trade and payments, including on capital account, that has characterized the development of the world economy since the last increase in quotas was agreed in 1990. The Executive Board has also considered the Fund’s current and prospective liquidity position, and has also taken into account the adequacy of the Fund’s borrowing arrangements, in particular the General Arrangements to Borrow (GAB) and the prospective coming into effect of the New Arrangements to Borrow (NAB). These borrowing arrangements are an important buttress to the Fund’s liquidity but are not a substitute for larger quotas. The Executive Board reiterated its view that the Fund should continue to rely on its quota resources as its principal form of financing and should resort to borrowing only in exceptional circumstances.

In its consideration of the prospective demand for the Fund’s resources in the context of the globalized economy, the Executive Board stressed that members should approach the Fund at an early stage of their balance of payments difficulties, and take all appropriate steps to maintain the confidence of markets, not only through the pursuit of adequate and transparent policy actions but also through the timely and transparent provision of economic and financial information to the markets.

8. In the light of these considerations, and taking into account the agreement reached by the Executive Board at the Annual Meetings in Hong Kong which was endorsed by the Interim Committee at its meeting on September 21, 1997 in Hong Kong, the Executive Board now proposes to the Board of Governors that the present total of Fund quotas be increased by 45 percent, from approximately SDR 146 billion to approximately SDR 212 billion.

9. As regards the distribution of the overall increase in quotas, the Executive Board has been guided by the views of the Interim Committee as expressed in its Communiqués of April and September 1997, and summarized in paragraph 4 above.

10. In reaching the agreement on the size and distribution of the increase in quotas, Directors confirmed that there was no intention to re-open the issues of the size and composition of the Executive Board, and that the existing representation of developing countries should not be affected.

11. The Executive Board also proposes adjustments in the quotas of France, Germany, Italy, and the United Kingdom in a manner that would maintain unchanged the increases in quotas for all other members as determined under paragraph 4 above. The Executive Board notes that the United Kingdom and France have agreed to maintain the equal distribution of quotas between themselves under the Eleventh General Review as first agreed under the Ninth General Review.

12. The Executive Board proposes that the quotas determined in paragraph 4 above be rounded to the nearest multiple of SDR 0.1 million. The quotas proposed under the Eleventh Review for those members that have not yet consented or paid for their proposed increase in quotas under the Ninth Review (Resolution 45-2 of the Board of Governors) have been calculated on the basis of their proposed Ninth Review quotas.

13. The list of proposed quotas for all members is to be found in the Annex to the draft Resolution proposed for adoption by the Board of Governors.

14. Under the proposed Resolution, a member that does not have overdue obligations with respect to purchases, charges or assessments to the General Resources Account will be able to consent to the amount of quota proposed for it in the Annex to the proposed Resolution. The member will be able to consent to the increase in its quota at any time before 6:00 p.m., Washington time, January 29, 1999. In order to meet this deadline, the member will have to have completed before that date whatever action may be necessary under its laws to enable it to give its consent. The Executive Board is authorized by paragraph 4 of the proposed Resolution to extend the period of consent.

15. A member’s quota cannot be increased until it has consented to the increase and paid the subscription. Under the proposed Resolution, the increase in a member’s quota will take effect only after the Fund has received the member’s consent to the increase in quota and the member has paid the increase in subscription, provided that the quota increase cannot become effective before the date on which the Fund determines that the participation requirement in paragraph 3 of the proposed Resolution has been satisfied. The participation requirement in paragraph 3 of the proposed Resolution will be reached when the Fund determines that members having not less than 85 percent of the total of quotas on December 23, 1997 have consented to the increases in their respective quotas as set out in the Annex.

16. Taking into consideration the situation of members that may still wish to consent to or pay for their quota increases under the Ninth Review, the Executive Board recommends that the periods for consent and payment for quota increases under the Ninth Review be extended until the date when the participation requirement in paragraph 3 of the proposed Resolution on the Eleventh Review has been reached. Such extension of the periods of consent and payment for quota increases under the Ninth Review is provided for in paragraph 7 of the proposed Resolution.

17. The proposed Resolution provides that a member must pay the increase in its subscription within 30 days after (a) the date on which the member notifies the Fund of its consent, or (b) the date on which the participation requirement is met, whichever is the later. A member may not make such a payment unless it is current in its obligations with respect to repurchases, charges and assessments to the General Resources Account. The Executive Board is authorized in paragraph 5 of the proposed Resolution to extend the period for payment.

18. The Executive Board has agreed that, when considering any extension of the period for consent or payment, it shall give particular consideration to the situation of members that may still wish to consent to or pay for the increase in quota, including those members with protracted arrears to the General Resources Account, consisting of overdue repurchases, charges, or assessments to the General Resources Account, that are judged to be cooperating with the Fund toward the settlement of these obligations.

19. Article III, Section 3(a) provides that 25 percent of any increase in quota shall be paid in special drawing rights, but permits the Board of Governors to prescribe, inter alia, that this payment may be made on the same basis for all members, in whole or in part, in the currencies of other members specified by the Fund, subject to their concurrence. Paragraph 8 of the Resolution provides that 25 percent of the increase in quotas proposed as a result of the current review should be paid in SDRs or in currencies of other members selected by the Fund, subject to their concurrence, or in any combination of SDRs and such currencies. The balance of the increase shall be paid in a member’s own currency. A reserve asset payment will help strengthen the liquidity of the Fund and will not impose an undue burden on members because under the existing decisions of the Fund, a reserve asset payment will either enlarge or create a reserve tranche position of an equivalent amount. In addition, the Fund stands ready to assist members that do not hold sufficient reserves to make their reserve asset payments to the Fund to borrow SDRs from other members willing to cooperate; these loans would be made on the condition that such members would repay on the same day the loans from the SDR proceeds of drawings of reserve tranche positions which had been established by the payment of SDRs.

20. The Executive Board recommends that the Board of Governors adopt the attached Resolution that covers all the matters on which the Governors are requested to act. The adoption of the Resolution requires positive responses from Governors having an 85 percent majority of the total voting power.

Proposed Resolution of the Board of Governors1

Whereas the Executive Board has submitted to the Board of Governors a report entitled “Increases in Quotas of Fund Members—Eleventh General Review” containing recommendations on increases in the quotas of individual members of the Fund; and

Whereas the Executive Board has recommended the adoption of the following Resolution of the Board of Governors, which Resolution proposes increases in the quotas of members of the Fund as a result of the Eleventh General Review of Quotas and deals with certain related matters, by vote without meeting pursuant to Section 13 of the By-Laws of the Fund;

Now, THEREFORE, the Board of Governors hereby RESOLVES that:

1. The International Monetary Fund proposes that, subject to the provisions of this Resolution, the quotas of members of the Fund shall be increased to the amounts shown against their names in the Annex to this Resolution.

2. A member’s increase in quota as proposed by this Resolution shall not become effective unless the member has notified the Fund of its consent to the increase not later than the date prescribed by or under paragraph 4 below and has paid the increase in quota in full within the period prescribed by or under paragraph 5 below, provided that no member with overdue repurchases, charges or assessments to the General Resources Account may consent to or pay for the increase in its quota until it becomes current in respect of these obligations.

3. No increase in quotas shall become effective before the date of the Fund’s determination that members having not less than 85 percent of the total of quotas on December 23, 1997 have consented to the increases in their quotas.

4. Notices in accordance with paragraph 2 above shall be executed by a duly authorized official of the member and must be received in the Fund before 6:00 p.m., Washington time, January 31, 2000, provided that the Executive Board may extend this period as it may determine.1

5. Each member shall pay to the Fund the increase in its quota within 30 days after the later of (a) the date on which it notifies the Fund of its consent, or (b) the date of the Fund’s determination under paragraph 3 above, provided that the Executive Board may extend the payment period as it may determine.

6. When deciding on an extension of the period for consent to or payment for the increase in quotas, the Executive Board shall give particular consideration to the situation of members that may still wish to consent to or pay for the increase in quota, including members with protracted arrears to the General Resources Account, consisting of overdue repurchases, charges or assessments to the General Resources Account, that, in its judgment, are cooperating with the Fund toward the settlement of these obligations.

7. For members that have not yet consented to their increases in quotas under the Ninth Review, the period for consent to such quota increases shall extend to the date determined under paragraph 3 above. For members that have not yet paid for their quota increases under the Ninth Review, the period for payment for such quota increases shall extend to 30 days after the date determined under paragraph 3 above.

8. Each member shall pay 25 percent of its increase either in special drawing rights or in the currencies of other members specified, with their concurrence, by the Fund, or in any combination of special drawing rights and such currencies. The balance of the increase shall be paid by the member in its own currency.

ANNEX: Members and Proposed Quotas(In millions of SDRs)
1. Afghanistan, Islamic State of161.92. Albania48.7
3. Algeria1,254.74. Angola286.3
5. Antigua and Barbuda13.56. Argentina2,117.1
7. Armenia92.08. Australia3,236.4
9. Austria1,872.310. Azerbaijan160.9
11. Bahamas, The130.312. Bahrain135.0
13. Bangladesh533.314. Barbados67.5
15. Belarus386.416. Belgium4,605.2
17. Belize18.818. Benin61.9
19. Bhutan6.320. Bolivia171.5
21. Bosnia and Herzegovina169.122. Botswana63.0
23. Brazil3,036.124. Brunei Darussalam215.2
25. Bulgaria640.226. Burkina Faso60.2
27. Burundi77.028. Cambodia87.5
29. Cameroon185.730. Canada6,369.2
31. Cape Verde9.632. Central African Republic55.7
33. Chad56.034. Chile856.1
35. China4,687.236. Colombia774.0
37. Comoros8.938. Congo, Democratic Republic of the533.0
39. Congo, Republic of84.640. Costa Rica164.1
41. Côte d’Ivoire325.242. Croatia365.1
43. Cyprus139.644. Czech Republic3
45. Denmark1,642.846. Djibouti15.9
47. Dominica8.248. Dominican Republic218.9
49. Ecuador302.350. Egypt943.7
51. El Salvador171.352. Equatorial Guinea32.6
53. Eritrea15.954. Estonia65.2
55. Ethiopia133.756. Fiji70.3
57. Finland1,263.858. France10,738.5
59. Federal Republic of Yugoslavia (Serbia/Montenegro)1/467.760. Gabon154.3
61. Gambia, the31.162. Georgia150.3
63. Germany13,008.264. Ghana369.0
65. Greece823.066. Grenada11.7
67. Guatemala210.268. Guinea107.1
69. Guinea-Bissau14.270. Guyana90.9
71. Haiti81.972. Honduras129.5
73. Hungary1,038.474. Iceland117.6
75. India4,158.276. Indonesia2,079.3
77. Iran, Islamic Republic of1,497.278. Iraq1,188.4
79. Ireland838.480. Israel928.2
81. Italy7,055.582. Jamaica273.5
83. Japan13,312.884. Jordan170.5
85. Kazakhstan365.786. Kenya271.4
87. Kiribati5.688. Korea1,633.6
89. Kuwait1,381.190. Kyrgyz Republic88.8
91. Lao People’s Democratic Republic52.992. Latvia126.8
93. Lebanon203.094. Lesotho34.9
95. Liberia129.296. Libya1,123.7
97. Lithuania144.298. Luxembourg279.1
99. Macedonia, former Yugoslav Republic of68.9100. Madagascar122.2
101. Malawi69.4102. Malaysia1,486.6
103. Maldives8.2104. Mali93.3
105. Malta102.0106. Marshall Islands3.5
107. Mauritania64.4108. Mauritius101.6
109. Mexico2,585.8110. Micronesia, Federal States of5.1
111. Moldova123.2112. Mongolia51.1
113. Morocco588.2114. Mozambique113.6
115. Myanmar258.4116. Namibia136.5
117. Nepal71.3118. Netherlands5,162.4
119. New Zealand894.6120. Nicaragua130.0
121. Niger65.8122. Nigeria1,753.2
123. Norway1,671.7124. Oman194.0
125. Pakistan1,033.7126. Palau, Republic of3.1
127. Panama206.6128. Papua New Guinea131.6
129. Paraguay99.9130. Peru638.4
131. Philippines879.9132. Poland1,369.0
133. Portugal867.4134. Qatar263.8
135. Romania1,030.2136. Russia5,945.4
137. Rwanda80.1138. Samoa11.6
139. San Marino17.0140. São Tomé and Príncipe7.4
141. Saudi Arabia6,985.5142. Senegal161.8
143. Seychelles8.8144. Sierra Leone103.7
145. Singapore862.5146. Slovak Republic357.5
147. Slovenia231.7148. Solomon Islands10.4
149. Somalia81.7150. South Africa1,868.5
151. Spain3,048.9152. Sri Lanka413.4
153. St. Kitts and Nevis8.9154. St. Lucia15.3
155. St. Vincent and the Grenadines8.3156. Sudan315.1
157. Suriname92.1158. Swaziland50.7
159. Sweden2,395.5160. Switzerland3,458.5
161. Syrian Arab Republic293.6162. Tajikistan87.0
163. Tanzania198.9164. Thailand1,081.9
165. Togo73.4166. Tonga6.9
167. Trinidad and Tobago335.6168. Tunisia286.5
169. Turkey964.0170. Turkmenistan75.2
171. Uganda180.5172. Ukraine1,372.0
173. United Arab Emirates611.7174. United Kingdom10,738.5
175. United States37,149.3176. Uruguay306.5
177. Uzbekistan275.6178. Vanuatu17.0
179. Venezuela2,659.1180. Vietnam329.1
181. Yemen, Republic of243.5182. Zambia489.1
183. Zimbabwe353.4

New Period for Consent—Increases of Quotas of Members Under the Eleventh General Review

Whereas paragraph 4 of the Board of Governors’ Resolution No. 53-2 states that, to become effective, duly executed notices for consent to increases in quota under the Resolution must be received in the Fund before 6:00 p.m., Washington time January 31, 2000, provided that the Executive Board may extend this period as it may determine;

Whereas the last extension of the period established in accordance with paragraph 4 of the Resolution expired at 6:00 p.m., Washington time, July 31, 2004;

Whereas the Executive Board has recommended the adoption of a Resolution of the Board of Governors, by vote without meeting pursuant to Section 13 of the By-Laws of the Fund, setting a new period for receipt of consents to increases in quota under Board of Governors Resolution No. 53-2, so as to give members that have been unable to consent to their proposed increases in quotas under such Resolution a further opportunity to do so;

Now, THEREFORE, the Board of Governors hereby RESOLVES that:

Fund members that have not consented to an increase in their quotas as proposed by Board of Governors Resolution No. 53-2 within the period established in accordance with paragraph 4 of that Resolution, shall have until 6:00 p.m., Washington time September 19, 2005, to submit notices in accordance with paragraph 2 of Resolution No. 53-2, by a duly authorized official of the member, provided that the Executive Board may extend this period as it may determine.1

Resolution No. 59-4,

September 20, 2004

Increase in Quotas of Fund Members—Twelfth General Review of Quotas

Report of the Executive Board to the Board of Governors

Article III, Section 2(a) of the Articles of Agreement provides that “the 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 quotas of members.” The five-year period for the Twelfth Review will end on January 30, 2003. The Executive Board has established a Committee of the Whole in accordance with Rule D-3.

The Executive Board’s discussions for the Twelfth Review have taken place against a background of ongoing reform of the Fund, to take account of changes in the world economy, the globalization of financial markets, and the increased size and volatility of international capital flows. The Executive Board has discussed issues regarding the role and size of the Fund and the adequacy of its resource base. The Executive Board has also considered the distribution of Fund quotas to reflect changes in the world economy, including reforms of the formulas used to calculate quotas. Measures to strengthen the governance structure of the Fund have also been discussed, including a possible amendment to the Articles of Agreement to increase the number of basic votes. However, there is not the necessary broad support among Executive Directors for a recommendation to increase quotas or implement changes in the distribution of quotas or the governance of the institution. At this time, the Fund’s liquidity position appears adequate, barring unforeseen developments that could result in large new demands for Fund resources.

Therefore, the Executive Board recommends that the Board of Governors adopt a resolution concluding the Twelfth General Review by January 30, 2003 with no proposal to increase quotas. Furthermore, the resolution also notes the intention of the Executive Board during the period of the Thirteenth General Review, which the Articles of Agreement provide commences upon completion of the present 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. The Executive Board will provide a status report on its discussions to the International Monetary and Financial Committee by the 2003 Annual Meeting and establish, as the discussion may warrant, a Committee of the Whole to make specific recommendations.

In view of the foregoing considerations, the Executive Board recommends that the Board of Governors adopt the resolution set out in the attachment to this report.

Proposed Resolution of the Board of Governors1

Resolved:

That the Board of Governors, having noted the report of the Executive Board entitled Twelfth General Review of Quotas—Report of the Executive Board to the Board of Governors, hereby resolves to conclude this review under Article III, Section 2(a) with no proposal to increase quotas. It notes the intention of the Executive Board during the period of the Thirteenth General Review, which the Articles of Agreement provide commences upon completion of the present 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. It also notes the intention of the Executive Board to provide a status report on its discussions to the International Monetary and Financial Committee by the 2003 Annual Meeting and establish, as the discussion may warrant, a Committee of the Whole to make specific recommendations.

Gold and Currency Subscribed to the Fund and Accounting by Members for Transactions With the Fund

The following principles should be observed by members in reflecting their participation in the Fund in their accounts:

1. Gold and currency subscribed to the Fund are clearly within its unrestricted ownership. They do not belong in any way to the subscriber.

2. Although the accounting practices of a member are primarily its own concern, each member should prepare its accounts in such a way that misconceptions as to the ownership of the gold and currency subscribed to the Fund would be avoided… .

Decision No. 170-3,

May 20, 1947

Guidelines on Payment of Reserve Assets in Connection with Subscriptions

The Executive Board approves the draft “Guidelines for Determining the Amount of Reserve Assets to Be Paid in Connection with Subscriptions” set forth [below].

Decision No. 6266-(79/156),

September 10, 1979

Guidelines for Determining the Amount of Reserve Assets to be Paid in Connection with Subscriptions

The following are proposed for adoption by the Executive Board as guidelines for Committees of the Executive Board when considering the amount of a subscription that should be paid in reserve assets:

1. These guidelines shall be taken into account by a Committee of the Executive Board established to consider an application for membership in the Fund or to consider a request for an increase in quota that is made outside the framework of a general review of quotas. In applying the guidelines, a Committee shall pay due regard to present and prospective economic and financial circumstances of the country concerned.

2. In view of the requirement of Article II, Section 2, that the terms for membership, including the terms for subscriptions, shall be based on principles consistent with those applied to other countries that are already members, new members will be expected to pay a part of their initial subscription in reserve assets. The payment of reserve assets in connection with the initial subscription of a new member is largely a matter of exchanging one form of reserves for another.

3. The amount of the subscription to be paid in reserve assets shall be determined in the light of all the payments of reserve assets made by existing members and the country’s external reserve position at the time of membership.

4. A reasonable approximation of the amount of the subscription that has been paid in reserve assets in the past is the average of all reserve assets actually paid in terms of the quotas of all members, rather than the proportions paid in the past by individual members. In making the calculation of the reserve assets to be paid, account will be taken of the repurchases made in the past by members, including those made in accordance with Schedule B of the amended Articles, and of sales of the currencies of members made to reduce to that level the amounts of the member’s currency paid in excess of 75 percent of quota by a member that had joined the Fund before the date of the Second Amendment.

Taking into account the asset payments made by all members in connection with the Sixth General Review of Quotas and adding them to the sum of asset payments taken as the equivalent of 25 percent of total quotas as of the date of the Second Amendment, the reserve asset payments made by all members average 20 percent of present quotas. In the event that all eligible members consent to the full increases in their quotas approved under the Seventh General Review of Quotas and taking into account that 25 percent of any increase in quotas is to be paid in SDRs (or acceptable currency for nonparticipants), the reserve asset payment made by eligible members will average 21.7 percent of total quotas.

Consequently, for the period prior to the coming into effect of the quotas approved under the Seventh General Review of Quotas, the reserve asset payment for a country applying for membership can normally be expected to be of the order of 20 percent of its initial quota; after the Seventh General Review is completed, the reserve asset payment for a country applying for membership would rise to the order of 21.7 percent of its initial quota.

5. Normally, countries joining the Fund would be expected to make a payment of reserve assets in the amount, in terms of quota, calculated along the lines outlined in paragraph 3 above. However, consideration may be given, at the request of a prospective new member, for a payment of reserve assets smaller than the average size of such payments in terms of all quotas. In exceptional circumstances, and in light of the actual and prospective balance of payments and gross reserve position of the prospective member (including its ability to acquire or mobilize external financial assets and also any allocations of SDRs that might be in prospect) at the time its application is being considered, the size of the reserve asset payment may be reduced, provided that it is not less than the equivalent of 10 percent of the member’s gross reserves or 10 percent of initial quota, whichever was the higher.

6. In determining the amount of the reserve asset payment, account should also be taken of the effect the size of such payment would have on the remuneration that might be payable to the new member. This factor would ameliorate a higher reserve asset payment in terms of quota because the acquisition of a remunerated reserve tranche position would tend to ease the loss of interest income involved in the payment of a reserve asset. However, there may be circumstances where the new member has a reserve level somewhat below the average level of all members or when other features of its external financial position would seem to call for some mitigation of the payment. In such circumstances, the norm for remuneration could be applied for the new member rather than the average of reserve asset payments made in the past noted in paragraph 3 above. As the norm for remuneration is likely to rise over time, the applicability of this approach would need to be kept under review and would be subject to the minimum payment in paragraph 5 above.

7. As regards the amount of reserve asset payments to be made in connection with ad hoc increases in quotas which occur outside a general review of quotas, and to the extent that such increases are effectively a “catching up” of the quota increases already granted to other members in past general reviews, the amount of the reserve assets to be paid shall be based on the amount of reserve assets required as a result of such past general reviews. For other ad hoc increases, if any, the amount of the reserve asset payment shall be equivalent to 25 percent of the increase in quota.

8. As regards the media of payment, payments of reserve assets shall be made in SDRs to the maximum extent practicable or in a currency that is acceptable to the Fund and which is included in the operational budget as a currency that could be sold on a net basis for the foreseeable future.

Ed. Note: Corresponds to Article XXXI, Section 1 of the Articles of Agreement after the Second Amendment.

Ed. Note: Adopted by the Board of Governors, effective January 30, 1998, and designated Resolution No. 53-2.

Ed. Note: The Executive Board extended this period until 6:00 p.m., Washington time, on January 31, 2002 (Decision No. 12533-(00/76), July 18, 2001). The period was further extended to July 31, 2002 (Decision No. 12672-(02/11), January 31, 2002).

Ed. Note: Decision No. 13778-(06/76), August 25, 2006, extended the period for receiving notices of consent to 6:00 p.m., Washington time, September 28, 2007.

Ed. Note: Adopted by the Board of Governors, effective January 28, 2003, and designated Resolution No. 58-1.

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