Selected Decisions and Selected Documents of the International Monetary Fund
Chapter

I. Increases in Quotas of Member—Ninth General Review

Author(s):
International Monetary Fund
Published Date:
August 1997
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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.” The five-year period since the completion of the previous review of quotas ended on March 31, 1988. The Ninth Review was not completed by that date. In April 1988 the Board of Governors decided to continue its review and requested the Executive Board to report on this matter and submit appropriate proposals to the Board of Governors not later than April 30, 1989. In May 1989, the Board of Governors again decided to continue its review and requested the Executive Board to complete its work on the Ninth Review with a view to a decision by the Board of Governors on the completion of the Review before the end of this year. The Executive Board believes that further consideration is needed of the substantive issues relating to the Ninth Review before it will be in a position to make appropriate recommendations to the Board of Governors. The Executive Board is submitting this report, and the attached draft resolution, to the Board of Governors, the organ competent under the Articles to deal with an adjustment of quotas, in accordance with Article III, Section 2 and Resolution No. 44-1, adopted May 30, 1989.

2. Since April 1989, the Executive Board has considered: (i) the role of the Fund in the early 1990s; (ii) the size of the overall increase in quotas; (iii) the issues bearing on the distribution of the overall increase, including the question of ad hoc increases in the context of the review, and an examination of the position of the developing countries in the Fund, in particular, those members with very small quotas; and (iv) the mode of payment for the increase in quotas. The Executive Board also considered the issues relating to the quota formulas used in making quota calculations for the Ninth Review. The Directors have concluded certain technical aspects of their work and have made considerable progress in their discussions relating to the role of the Fund, as well as on the size, distribution, and payment for the increased subscriptions. However, the Directors have concluded that further consideration of the main issues relating to the increase in quotas is needed. Consequently, the Executive Board is not in a position to complete its work on the Ninth Review in time to enable the Board of Governors to complete the Ninth Review before the end of this year.

3. The Interim Committee considered the subject of the Ninth General Review during the thirty-first, thirty-second, and thirty-third meetings of the Committee in Berlin (West) on September 25-26, 1988, and, for the latter two meetings, in Washington, D.C., on April 3, 1989, and September 24-25, 1989, respectively. In connection with its latest meeting, the Executive Board submitted a report on the Ninth General Review which outlined the progress made in its work relating to the Ninth General Review and requested guidance from the Committee in particular on the size of an overall increase and on the principles that could be followed in distributing an enlargement of the Fund between members. Paragraph 4 of the Communiqué issued at the conclusion of the meeting reads in part as follows:

There was widespread support in the Committee on the need for a substantial increase in quotas under the Ninth General Review, although a few members believe that the Fund has adequate resources at the present time to fulfill its responsibilities. The Committee underscored the central role of the Fund in fostering a stable international monetary system and in promoting a strong and sound global economy. It agreed that it is of fundamental importance further to reinforce the role of the Fund as the central monetary institution and that it must be adequately endowed to fulfill its systemic responsibilities in the first half of the 1990s, while reducing reliance on borrowing. It also agreed that the Fund must be able to respond in an effective manner to the balance of payments needs of individual members that implement strong programs of growth-oriented adjustment—and to assist them in mobilizing support from other sources—while maintaining a strong liquidity position and the revolving character of its resources. In this context, the Committee noted that prolonged use of Fund resources by some countries could impair the revolving character of the Fund and asked the Executive Board to examine actions that could be taken to address these problems.

The Committee reiterated that the size and distribution of any quota increase should take into account changes in the world economy since the last review of quotas as well as members' relative positions in the world economy and the need to maintain a balance between different groups of countries, and the Fund's effectiveness in fulfilling its systemic responsibilities, including its role in the strengthened debt strategy. The main principles that could guide the distribution of the enlargement of the Fund among members are (i) all members should receive a meaningful increase in quotas and (ii) the distribution should be based on uniform methods. The Committee agreed that, in the case of a general quota increase, an ad hoc increase in quotas should be considered where appropriate.

4. In light of the above, and taking into account the conclusion of the Interim Committee as expressed in its latest Communiqué, the Executive Board proposes that the Board of Governors continue its review and that the Executive Board submit a report to the Board of Governors, together with appropriate recommendations regarding the size of the overall increase in quotas, increases in the quotas of individual members and on the mode of payment for increases in subscriptions, with a view to enable the Board of Governors to complete the Ninth Review not later than March 31, 1990.

5. In view of the foregoing considerations, it is recommended that the Board of Governors adopt the resolution set forth in the attachment to this report.

November 28, 1989

Proposed Resolution of the Board of Governors*

Resolved:

That the Board of Governors, having noted the report of the Executive Board entitled Increases in Quotas of Members—Ninth General Review, hereby resolves to continue its review of quotas under Article III, Section 2(a), and requests the Executive Board to complete its work on the Ninth General Review of Quotas with a view to a decision by the Board of Governors on the completion of the Ninth Review not later than March 31, 1990.

Adopted by the Board of Governors, effective December 28, 1989, and designated No. 44-5.

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