K. Increases in Quotas of Fund Members-Ninth General Review
- International Monetary Fund
- Published Date:
- June 1991
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 Ninth General Review are submitted to the Board of Governors in accordance with Article III, Section 2. The views expressed by the Interim Committee in the communiques issued by the Committee at the conclusion of its thirtieth, thirty-first, thirty-second, thirty-third, and thirty-fourth meetings are set out in the Appendix to this Report.
2. The Eighth General Review of Quotas was completed by Board of Governors’ Resolution No. 38-1, adopted March 31, 1983. The five-year period prescribed by Article III, Section 2(a) since the completion of the Eighth General Review ended on March 31, 1988. On March 27, 1987, the Ninth General Review commenced with the formation of a Committee of the Whole of the Executive Board. As the Ninth Review was not completed by March 31, 1988, the Board of Governors adopted a number of Resolutions which continued its review of quotas under the Ninth General Review. The last Resolution, adopted on March 29, 1990, was as follows:
- 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 June 30, 1990.
3. 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; (iv) the mode of payment for the increase in quotas; and (v) the timing of the next review of quotas. The Executive Board also considered the issues relating to the quota formulas used in making quota calculations for the Ninth Review.
4. The Executive Board has considered the need for an increase in the Fund’s resources to enable the Fund to promote more effectively its purposes, as set out in its Articles of Agreement, namely: to promote stability and growth in the world economy; to contribute to the maintenance of an open system of trade and payments and to encourage further liberalization of trade; and to make its resources temporarily available to its members on appropriate terms and conditions in support of their programs of growth-oriented balance of payments adjustment.
In assessing the Fund’s need for resources over the medium term in order to carry out its purposes, the Executive Board has stressed that (i) the Fund is the central institution in the international monetary system and it must be adequately endowed so as to maintain an effective presence at the center of the system, and (ii) the Fund is a monetary institution and must preserve its monetary character by providing balance of payments assistance on a temporary basis, ensuring that its resources revolve, and holding a level of usable assets sufficient to protect the liquidity and immediate usability of members’ claims on the Fund, and thereby maintaining members’ confidence in and support of the institution.
As reflected in its report to the Interim Committee in September 1989, the Executive Board is agreed that the Fund must have adequate resources to meet the temporary balance of payments financing needs of all members on appropriate terms and conditions. The financing provided by the Fund should be such as to encourage members to take early measures of adjustment, including the liberalization of trade and capital flows and to pursue appropriate exchange rate policies, which would help avoid the emergence of crisis situations that may cause strains that could impair the working of the international monetary system.
The Fund’s role in the financing of members’ payments deficits is now essentially catalytic. This role is of enhanced significance in the strengthened international debt strategy, which needs to be considered in the context of the Fund’s basic responsibility of providing general balance of payments financing in support of growth-oriented adjustment programs. The Fund’s purpose is achieved primarily through promoting adjustment, thereby helping members to achieve sustainable external payments positions, renewed economic growth, and price stability, and to increase or restore members’ creditworthiness with official and private creditors. Through an appropriate combination of adjustment and financing, it can, moreover, encourage increased flows, both official and private, which would provide the bulk of the external financing needs of members. The Executive Board is agreed that the Fund must not replace private market financing with its own resources.
5. In its consideration of the size of the increase in quotas, the Executive Board has taken into account a number of factors, as discussed by the Interim Committee, including changes in the world economy since the last review of quotas, the imbalance in international payments, the Fund’s systemic responsibilities, and the support of members’ growth-oriented adjustment programs, of which some may involve far-reaching economic reforms. The Executive Board has also taken into account the Fund’s current and prospective liquidity position as well as the conclusion of the Interim Committee at its September 1988 meeting that the Fund should reduce its reliance on borrowing to exceptional circumstances.
6. In light of these considerations and the understandings reached during the course of the thirty-fourth meeting of the Interim Committee on May 7 and 8, 1990, the Executive Board now proposes to the Board of Governors that the present total of Fund quotas be increased by 50 percent, from approximately SDR 90.1 billion to approximately SDR 135.2 billion before applying the rounding procedures and adjustments for the very small quotas agreed by the Executive Board and described in paragraphs 9 and 10 below.
7. In accordance with Article III, Section 2(a), the Board of Governors must conduct the Tenth General Review of Quotas not later than March 31, 1993, that is, five years from the date on which the Ninth Review of Quotas should have been conducted. The Interim Committee at its meeting on May 7 and 8, 1990, noted that “the review could be conducted earlier if there is a clear need to do so.”
8. As regards the distribution of the overall increase in quotas, the Executive Board has been guided by the principles agreed by the Interim Committee as expressed in its communiques of April and September 1989. In its communique of September 1989, “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.” The Executive Board has agreed that in order to provide all members with a meaningful increase in quotas and to help maintain a balance between different groups of countries, sixty percent of the overall increase in quotas should be distributed to all members in proportion to their present individual quotas; the remainder should be devoted to the objective of bringing members’ quotas more in line with their relative economic positions and should be distributed in proportion to members’ shares in the total of the calculated quotas.
9. The Executive Board has also considered a request for an ad hoc increase in the quotas of Japan, Iran, and Korea and has also considered the possibility of a special adjustment of very small quotas, i.e. those quotas that are currently less than SDR 10 million. The Executive Board proposes that the quota of Japan should, after being increased in accordance with paragraph 8 above, be further increased to that shown in the Annex. In making the further adjustment of the quota of Japan, the increases in quotas of Canada, France, Germany, Italy, the United Kingdom, and the United States have also been adjusted in a manner that would maintain unchanged the increases in quotas for all other members as determined under paragraph 8 above. The Executive Board notes the agreement reached between the United Kingdom and France on an equal distribution of quotas between themselves under the Ninth General Review and subsequent reviews of quotas. The quotas of Antigua and Barbuda, Bhutan, Maldives, and Seychelles shall be further increased by amounts that would increase their shares in the total of new quotas so that they correspond to their individual shares in the total of the calculated quotas before taking account of the rounding procedures described in paragraph 10 below.
10. The Executive Board proposed that the quotas determined in paragraphs 8 and 9 above be rounded to the next higher multiple of SDR 0.1 million, except that the quotas that are currently SDR 10 million or less should, after being increased in accordance with paragraphs 8 and 9 above, be rounded to the next higher multiple of SDR 0.5 million. The proposed quotas set out in the Annex to the proposed Resolution would raise Fund quotas from SDR 90,132.55 million to SDR 135,214.7 million.
11. The Executive Board reviewed the quota formulas used for calculating quotas in connection with the Ninth General Review. While accepting the quota calculations based on the present five quota formulas and on data ended 1985 as reasonable indicators, the Executive Board, as agreed in its Report to the Interim Committee in September 1989, would further examine the working of the quota formulas in the context of the preparatory work for the next general review of quotas, so as to ensure that they would take adequate account of all relevant developments bearing on members’ quotas.
12. Article III, Section 3(a) provides that 25 percent of an increase in quota shall be paid in SDRs, 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 7 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 specified 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 it 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 on the same day repay the loans from the SDR proceeds of drawing of reserve tranches which had been established by the payment of SDRs.
13. Under the proposed Resolution, a member that does not have overdue obligations with respect to repurchases, charges or assessments to the General Resources Account will be able to consent to the amount proposed for it in the Annex to the proposed Resolution. The member will be able to consent at any time before 6:00 p.m., Washington time, December 31, 1991. In order to meet this deadline, the member will have to have completed before that date whatever action that may be necessary under its laws to enable it to give its consent. The Executive Board is authorized in paragraph 4 of the proposed Resolution to extend the period for consent.
14. The participation requirement in paragraph 3 of the proposed Resolution will be reached: (i) during the period ending December 30, 1991, when the Fund determines that members having not less than 85 percent of the total of quotas on May 30, 1990 have consented to increases in their respective quotas as set out in the Annex, or (ii) thereafter on the date of the Fund’s determination that members having not less than 70 percent of the total of quotas on May 30, 1990 have consented to increases in their respective quotas as set out in the Annex. Since a member with the specified overdue financial obligations to the General Resources Account may not consent to an increase in its quota, a communication of consent from such a member will not be taken into account in the determination.
15. The Executive Board has, in the context of the discussions on the Ninth Review of Quotas and the strengthened arrears strategy, also explored the issue of an amendment of the Articles of Agreement providing for suspension of voting and related rights of members that do not fulfill their obligations under the Articles. Such an amendment is being proposed to the Board of Governors in a draft resolution separate from the draft resolution on the quota increase.
The Executive Board, taking into account the recommendations of the Interim Committee, proposes that no increase in quota shall become effective before the effective date of the third amendment of the Articles.
The Interim Committee, at its meeting on May 7 and 8, 1990, stated that “every effort should be made by members to ensure that both the quota increase and the amendment shall be effective before end-1991. If it appeared that these resolutions might not be effective by this date, the Committee would consider what steps might need to be taken.”
16. A member’s quota cannot be increased until it has paid for the increase. The proposed Resolution provides that a member must pay the increase in its quota within 30 days after (a) the date on which the member notifies the Fund of its consent, or (b) the date on which the requirement for the effectiveness of increases in quotas under paragraphs 14 and 15 has been 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.
17. 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.
18. 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 by the Board of Governors requires an 85 percent majority of the total voting power.
May 21, 1990
WHEREAS the Executive Board has submitted to the Board of Governors a report entitled “Increases in Quotas of Fund Members—Ninth 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 Ninth 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 quota shall become effective before the later of:
- (i) during the period ending December 30, 1991, the date of the Fund’s determination that members having not less than eighty-five (85) percent of the total of quotas on May 30, 1990 have consented to the increases in their quotas, or, after December 30, 1991, the date of the Fund’s determination that members having not less than seventy (70) percent of the total of quotas on May 30, 1990 have consented to the increases in their quotas; or
- (ii) the effective date of the third amendment of the Articles.
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, on December 31, 1991, provided that the Executive Board may extend this period as it may determine.
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 on which the requirement for the effectiveness of the increase in quota under paragraph 3 above has been met, 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. 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.
|(In millions of SDRs)|
|4.||Antigua and Barbuda||8.5|
|24.||Central African Republic||41.2|
|30.||Congo, People’s Republic of the||57.9|
|48.||Germany, Federal Republic of||8,241.5|
|62.||Iran, Islamic Republic of||1,078.5|
|75.||Lao People’s Democratic Republic||39.1|
|103.||Papua New Guinea||95.3|
|112.||Säo Tome and Principe||5.5|
|123.||St. Kitts & Nevis||6.5|
|130.||Syrian Arab Republic||209.9|
|135.||Trinidad and Tobago||246.8|
|139.||United Arab Emirates||392.1|
|147.||Yemen Arab Republic||70.8|
|148.||Yemen, People’s Democratic Republic of||105.7|
Adopted by the Board of Governors, effective June 28, 1990, and designated No. 45-2.