Increases in Quotas: Fourth Quinquennial Review
- International Monetary Fund
- Published Date:
- February 1996
The Fund is required at intervals of five years to review the quotas of members and to propose any adjustments that it believes to be desirable. No changes were proposed in the course of the first and second quinquennial reviews (1950 and 1955). The third review was in effect replaced by the general increase proposed by the Directors in December 1958 in the report reproduced above (pp. 421–41). The fourth quinquennial review, due in 1965, evoked the following report to the Governors, submitted on February 26, 1965. The proposals were accepted by the Governors, and took effect from February 23, 1966.
Increases in Quotas of Members—Fourth Quinquennial Review Report of the Executive Directors to the Board of Governors
(February 26, 1965)
1. At its Nineteenth Annual Meeting in Tokyo, the Board of Governors adopted the following Resolution:
That the Executive Directors proceed to consider the question of adjusting the quotas of members of the Fund and at an early date submit an appropriate proposal to the Board of Governors.
2. Pursuant to this Resolution, the Executive Directors have considered the question of adjusting the quotas of members and have concluded that in a world in which income and trade have expanded rapidly and are expected to do so, the need for the type of liquidity provided by the Fund, like the need for international liquidity in general, may be expected to grow. A reasonable expansion in quotas would increase the Fund’s resources relative to the calls that are likely to be made upon them and enhance confidence in the Fund’s ability to meet all justifiable requests for drawings. Provision of adequate resources, enabling the Fund to meet needs with a greater margin of safety, may also reduce those needs by marshaling the resources and demonstrating the international cooperation that could deter speculation. Accordingly, the Executive Directors have decided that proposals for increases in present quotas of 25 per cent, subject to the appropriate rounding of the resulting figures, and for larger increases for certain members should be submitted to the Board of Governors. For the purposes of this Report, present quotas are quotas as of February 26, 1965 or the maximum amount to which quotas could be increased under Resolutions adopted by or submitted to the Board of Governors before that date. The general increases of 25 per cent are provided for by the First of two Resolutions submitted to the Board of Governors with this Report. The formula for rounding the increased quotas is as follows: amounts below $500 million are rounded to the next higher multiple of one million, and amounts of $500 million or more are rounded to the next higher multiple of five million. The quotas to which members can consent under the First Resolution are shown in the Annex to this Report. The Second Resolution submitted with this Report provides for the special (i.e., larger) increases. If the Board of Governors agrees to propose a special increase for a member under the Second Resolution, the member will be able to consent to that increase or to the smaller increase under the First Resolution. When such a member consents, it should declare under which Resolution it is choosing to consent, and its choice will then be final.
3. The increases in quotas under the attached Resolutions are without prejudice to the adjustment of quotas that members can request under the Fund’s Decision on “Compensatory Financing of Export Fluctuations” (E.B. Decision No. 1477-(63/8), February 27, 1963). In this connection, E.B. Decision No. 1529-(63/33), June 14, 1963 will continue to be applicable.
4. The attached Resolutions are designed to enable the Board of Governors to vote at one time on all matters connected with the increases in quotas under the two Resolutions. Governors are requested to vote on both Resolutions. The First Resolution is to be voted on as a whole. In the case of the Second Resolution, Governors may vote on all or each of the special increases. Under the Resolutions, it will be possible for increases in quotas to become effective without the need for further reference to the Board of Governors. Attention is drawn to the requirement that, to be valid, votes must be received at the seat of the Fund on or before March 31, 1965.
5. If the Resolutions are adopted by the necessary majority of four-fifths of the total voting power, as required by Article III, Section 2 of the Articles of Agreement, a member may consent to the increase in its quota at any time on or before September 25, 1965. Therefore, unless this period is extended by the Executive Directors, members will have until September 25, 1965 to take whatever action may be necessary under their laws to enable them to give their consent.
6. In view of the cooperative nature of the increase in quotas under the Resolutions, it is provided that increases will not become effective until the Fund has determined that members having two-thirds of the total of quotas on February 26, 1965 have consented to increases in their quotas. In determining whether this degree of participation has been reached, the Fund will take into account all consents to increases, whether they be under the First or Second Resolutions and whether they be increases in full or by installments.
7. In view of past practice, any member consenting to a special increase under the Second Resolution will be expected to request an increase in its subscription to the capital of the International Bank for Reconstruction and Development corresponding to the special part of the increase in quota.
8. Under the Resolutions, a member may pay its additional subscription in respect of the increase in its quota at any time before it is due. If a member pays before the increase in its quota takes effect, the additional subscription will be kept in separate accounts of the Fund and returned if it should be established that the increase cannot take effect. A member is required to pay its additional subscription not later than 30 days after the later of the following events: (i) its consent to its quota increase, and (ii) the determination by the Fund, referred to in paragraph 6 above, that the condition as to participation in quota increases has been satisfied.
9. Increases in members’ quotas will take effect as follows:
(a) When a member pays its additional subscription before the later of the two events referred to in the preceding paragraph, the increase in its quota will take effect on the happening of the later of these events.
(b) If a member pays its additional subscription after the later of these two events, the increase in its quota will take effect on the day of payment.
10. Each member increasing its quota must pay an additional subscription equal to the increase, of which 25 per cent shall be in gold and the balance in its currency. Payment of both portions of the additional subscription must be made before the increase in the member’s quota can become effective, even by those members which, in accordance with the Articles of Agreement or Membership Resolutions, have not yet been required to pay their original subscriptions.
11. The increase in quotas under the Resolutions is based on the idea of a cooperative effort by the members of the Fund to provide larger resources against contingencies that may affect any member. In order to preserve the general character of that effort, it has been thought preferable not to exercise the discretion given to the Executive Directors under Article III, Section 4 of the Articles of Agreement to reduce gold payments in connection with these Resolutions. However, the payment in gold of 25 per cent of the quota increase may cause hardship in some cases, and therefore the Executive Directors have decided that the policies and practices described in the following paragraphs of this Report will be applied.
12. Under the Resolutions any member consenting to an increase in its quota may consent to an increase by installments. Each installment of the increase would correspond to the amount of additional subscription in gold and currency paid by the member. Any member consenting to an increase by installments must pay an original installment of additional subscription, and an installment in each period of 12 months thereafter. Each installment shall be one-fifth of the increase. Members may accelerate payment under this installment schedule.
13. A member that wishes to have the full increase in its quota take effect immediately or to expedite the full increase in its quota if it is paying under the installment schedule may find it a hardship to make prompt payment in gold of 25 per cent of the increase in its quota. In order to alleviate this hardship the member may request an exchange transaction in accordance with paragraphs 14 through 19 below.
14. Where a member requests an exchange transaction within the gold tranche, the established gold tranche policy and procedure will apply.
15. A member consenting to an increase in its quota under the First Resolution may request an exchange transaction beyond the gold tranche in an amount not in excess of 25 per cent of the increase. This facility will be available where (a) the member represents that it would encounter undue payments difficulties through the reduction in its reserves by the payment of the 25 per cent gold subscription or of the outstanding balance of that subscription; and (b) the member requests the exchange transaction within six months after the date of the consent to the increase or the determination by the Fund that the condition as to participation in quota increases has been satisfied, whichever is later.
16. The Fund will expect that a member requesting an exchange transaction under paragraph 15 above will represent that it will make a repurchase corresponding to the exchange transaction in accordance with the principles of E.B. Decision No. 102-(52/11) of February 13, 1952 and the following sub-paragraphs:
(i) The member will be expected to represent that it will make a repurchase corresponding to the exchange transaction in equal annual installments, to commence one year after the transaction and to be completed not later than five years after the transaction.
(ii) If the member, when requesting the exchange transaction or at any time thereafter, represents that, because of other repurchase commitments or for such other reasons as it shall submit, the schedule referred to in (i) above would create undue payments difficulties, the Fund may accept a representation that the member will repurchase in accordance with the provisions of E.B. Decision No. 102-(52/11).
17. The representation of a member with respect to undue payments difficulties referred to in paragraphs 15 and 16 above would not be challenged by the Fund except where it was clearly evident that the representation was without basis.
18. In order to facilitate the exchange transactions referred to in paragraph 15 above, the Fund will be prepared, where necessary, to grant a waiver of the quantitative limits prescribed in Article V, Section 3 (a) (iii) of the Articles of Agreement. The Fund will also be prepared to grant such a waiver, in appropriate cases, to the extent that an exchange transaction in accordance with the preceding paragaphs is still outstanding.
19. A member requesting an exchange transaction in accordance with the preceding paragraphs will be expected to consult the Managing Director on the currency to be drawn under E.B. Decision No. 1371-(62/36) of July 20, 1962. Many such members are likely to use the currency drawn to purchase gold from the monetary authorities of the member whose currency was drawn either to pay their additional gold subscription or to restore the level of their gold holdings if they have already paid the additional subscription. Normally, these members would purchase the gold from a reserve currency member. With a view to alleviating the impact on the gold holdings of the reserve currency members that would result from such purchases, the Fund, in the course of the consultation on the currency to be drawn, will suggest that certain of these exchange transactions, up to the equivalent of $150 million, be made in currencies which the Fund would then replenish by the sale of gold under Article VII, Section 2 (ii) up to the amount of such transactions.
20. The exchange transactions and replenishment of currency referred to in the preceding paragraphs will partially alleviate the impact of the additional gold subscriptions of members on the gold holdings of the reserve currency members. However, it is expected that, notwithstanding this alleviation and the likelihood that many members will meet their additional gold subscription from their own gold holdings, other members will purchase a substantial amount of gold from the reserve currency members, and in particular the United States and the United Kingdom. In order to provide a measure of further alleviation solely in connection with the quota increases provided for by the Resolutions submitted with this Report, the Fund will make general deposits of gold with its gold depositories designated by the United States and the United Kingdom in a total amount not exceeding the equivalent of $350 million. Approximately $250 million in gold will be placed on general deposit with the Fund’s depository in the United States and approximately $100 million with the Fund’s depository in the United Kingdom. Within the limit of $350 million or the reduced amount under paragraph 21 below, adjustments may be made in the amounts held on general deposit in these two depositories on the basis of the actual impact on the gold holdings of each of the two members of the sales of gold by them in connection with the additional subscriptions of other members.
21. If the Fund determines that the total sales of gold by the United States and the United Kingdom in connection with the additional subscriptions of other members are less than the equivalent of $350 million, the Fund will reduce its general deposits accordingly.
22. The general deposits will be subject to the following principles:
(a) A general deposit of gold by the Fund shall be a demand deposit. Accordingly, the Fund shall be entitled, at its sole discretion and on its demand to the depository, to the immediate transfer to an earmarked account in the sole name of the Fund at the depository, free of any claims, liens or encumbrances in favor of any other party, of an amount of gold not in excess of the amount then held by the Fund on general deposit with the depository, which transfer shall be made without charge or cost to the Fund.
(b) Whenever a member that designated the depository with which a general deposit is held so requests, the Fund shall demand that the depository transfer gold in the amount requested to an earmarked account.
(c) On the occasion of any use of gold, the Fund would normally use, in appropriate proportions, earmarked gold and gold on general deposit in accordance with the good management of its assets.
(d) The Managing Director will report periodically to the Executive Directors on the Fund’s general deposits, and the Executive Directors shall review the policy with respect to general deposits not later than five years after the first such deposit is made.
February 26, 1965
|(Million U.S. dollars)|
|13. Central African Republic||7.50||10|
|19. Congo (Brazzaville)||7.50||10|
|20. Congo, Democratic Republic of||45.00||57|
|21. Costa Rica||20.00||25|
|25. Dominican Republic||25.00||32|
|27. El Salvador||20.00||25|
|32. Germany, Federal Republic of||787.50||985|
|47. Ivory Coast||15.00||19|
|59. Malagasy Republic||15.00||19|
|67. New Zealand||125.00||157|
|79. Saudi Arabia||72.00||90|
|81. Sierra Leone||11.25||15|
|83. South Africa||150.00||188|
|87. Syrian Arab Republic||30.00||38|
|91. Trinidad and Tobago||20.00||25|
|95. United Arab Republic||120.00||150|
|96. United Kingdom||1,950.00||2,440|
|97. United States||4,125.00||5,160|
|98. Upper Volta||7.50||10|
RESOLUTIONS SUBMITTED TO THE BOARD OF GOVERNORS
WHEREAS the Executive Directors have considered the question referred to them by the Resolution of the Board of Governors of the International Monetary Fund at its Nineteenth Annual Meeting:
“That the Executive Directors proceed to consider the question of adjusting the quotas of members of the Fund and at an early date submit an appropriate proposal to the Board of Governors.”
Have found that proposals to carry out increases in quotas should be submitted to the Board of Governors; and
Have submitted to the Board of Governors a Report entitled “Increases in Quotas of Members—Fourth Quinquennial Review” and the following Resolutions of the Board of Governors for a vote without meeting pursuant to Section 13 of the By-Laws of the Fund, which Resolutions propose increases in the quotas of all members of the Fund, make provision for consents by members, and establish the conditions upon which the increases shall take effect;
Now, THEREFORE, the Board of Governors, noting the said Report of the Executive Directors, hereby resolves that:
1. (a) The International Monetary Fund proposes that, subject to the provisions of this First Resolution, the quotas of all members of the International Monetary Fund in effect on February 26, 1965 or the maximum quotas to which members could consent under Resolutions adopted by or submitted to the Board of Governors before that date shall be increased by 25 per cent, with the resulting amounts rounded according to the following formula:
amounts below $500 million shall be rounded to the next higher multiple of one million;
amounts of $500 million or more shall be rounded to the next higher multiple of five million.
(b) When an increase in quota proposed in this First Resolution is calculated on the basis of a quota that includes an increase to which a member can consent under another Resolution adopted by or submitted to the Board of Governors before February 26, 1965 and there is no consent to such increase, the increase proposed in this First Resolution shall be 25 per cent of the quota in effect on February 26, 1965, rounded in accordance with paragraph 1 (a).
2. None of the increases in quotas proposed in this First Resolution shall become effective unless:
(i) The member concerned has notified the Fund that it consents to the increase in its quota; and
(ii) The Fund determines that members having not less than two-thirds of the total of quotas on February 26, 1965 have consented to increases in their quotas under the First or Second Resolution; and
(iii) The member concerned has paid the full increase in its quota.
Subject to paragraph 6 (c), each increase in quota shall become effective upon the date of the latest of these three events.
3. Notices in accordance with paragraph 2 (i) shall be executed by a duly authorized official of the member.
4. Notices in accordance with paragraph 2 (i) shall be received in the Fund not later than September 25, 1965, provided that the Executive Directors may extend this period as they may determine.
5. Subject to paragraph 6 (b), each member shall pay to the Fund within 30 days after the later of the two events in paragraph 2 (i) and (ii), 25 per cent of the increase in gold and the balance in its own currency.
6. (a) In giving notice in accordance with paragraph 2 (i), any member may consent to the increase in its quota as an increase by installments.
(b) Notwithstanding paragraph 2 (iii), a member increasing its quota by installments shall pay not less than one-fifth of the gold and currency prescribed in paragraph 5 within 30 days after the later of the two events in paragraph 2 (i) and (ii) and shall pay further installments of gold and currency of not less than one-fifth of the increase in each twelve months after the first payment until the full amount prescribed in paragraph 5 has been paid.
(c) Subject to paragraph 2, on the completion of the payment of each installment of the increase, the member’s quota shall be increased by an amount equal to the installment.
7. Since it is in the interests of the Fund and its members that the contemplated increase in its resources be expedited, members are invited to comply as soon as possible with the procedure for notice and payments to the Fund under this First Resolution. Any payment made by a member before the effective date of increase in its quota will be kept in separate accounts of the Fund. If the Fund decides that such increase cannot become effective under this First Resolution, the payment will be returned to the member.
1. The International Monetary Fund proposes that, subject to the provisions of this Second Resolution, the quotas of the following members shall be increased to the amounts shown against their names:
|4. Germany, Federal Republic of||1,200|
|13. South Africa||200|
2. Paragraphs 2 through 7 of the First Resolution shall apply to this Second Resolution.
3. Members named in paragraph 1 of this Second Resolution shall be entitled to consent under either the First or the Second Resolution but not under both. Any such member shall declare under which Resolution it is consenting, and such choice shall be final.
Board of Governors Resolutions Nos. 20–6 and 20–7
Adopted March 31, 1965