The General Resources Account (GRA) is the principal account in the General Department and handles by far the largest part of transactions between the IMF and its membership, most notably, payments to the IMF for quota subscriptions, purchases (drawings) and repurchases (repayments) by members, receipt of periodic charges (analogous to interest) on the use of IMF resources, and disbursements for remuneration on remunerated reserve tranche positions.6 Members’ quotas determine the size of the IMF and constitute its financial base. These resources can be supplemented, if circumstances so warrant, by borrowed resources whose receipt, use, and repayment are also handled through the GRA.

The General Resources Account (GRA) is the principal account in the General Department and handles by far the largest part of transactions between the IMF and its membership, most notably, payments to the IMF for quota subscriptions, purchases (drawings) and repurchases (repayments) by members, receipt of periodic charges (analogous to interest) on the use of IMF resources, and disbursements for remuneration on remunerated reserve tranche positions.6 Members’ quotas determine the size of the IMF and constitute its financial base. These resources can be supplemented, if circumstances so warrant, by borrowed resources whose receipt, use, and repayment are also handled through the GRA.

For extending balance of payments support from the GRA to member countries, the IMF uses its ordinary resources and, if available, borrowed resources. Ordinary resources consist of currencies and SDRs, originating in quota subscriptions paid by members and in the undistributed net income from use of those resources. The value of these resources is established and maintained in terms of the SDR, the IMF’s unit of account. Borrowed resources consist of amounts made available under borrowing arrangements the IMF has entered into from time to time.


Each member of the IMF is assigned a quota, which is expressed in SDRs and is equal to its subscription of capital to the IMF. Members’ quotas, apart from providing the IMF with its financial resources, serve several other functions with respect to their financial and organizational relations with the IMF. A member’s quota determines its voting power in the IMF; each member has 250 basic votes plus one additional vote for each SDR 100,000 of quota.7 The quota also determines the maximum amount of balance of payments assistance that a member can normally obtain from the IMF. Finally, the quota determines a member’s share in allocations of SDRs (see Chapter V).

The sum of members’ quotas represents the pool of assets (gold, SDRs, and currencies) held by the IMF. As described in Chapter I, part of a member’s quota subscription is normally payable in reserve assets (originally in gold, and, since the Second Amendment of the IMF’s Articles of Agreement in 1978, in SDRs or currencies of other members), and the remainder is payable in the member’s own currency. When quotas are increased, 25 percent of each member’s increase is normally payable in SDRs, although the IMF may accept payment in other members’ currencies, with their concurrence, or in the member’s own currency;8 the balance of the quota increase is payable in the member’s currency. The reserve asset portion of quota payments has, on average, been 23.5 percent.

Determination of Initial Quotas

The initial quotas of the original members of the IMF were determined at the Bretton Woods Conference in 1944 (Schedule A of the Fund Agreement); those of subsequent members have been determined by the IMF’s Board of Governors, based on principles consistent with those applied to existing members. In other words, the IMF follows the principle of nondiscrimination; an applicant’s quota should be in the same range as the quotas of existing members of comparable economic size and characteristics. When a country applies for membership, the staff collect data on its economy (GDP, current account transactions in its balance of payments, and official reserves) and recommend a quota, which is then considered, along with other terms and conditions of membership, by a committee of the Executive Board. The membership committee prepares a report for adoption by the Executive Board, which in turn forwards a membership resolution for approval by the Board of Governors. The country becomes a member of the IMF when it signs the Articles of Agreement, and it becomes eligible to use IMF resources when it has paid its quota subscription and has met all other requirements of the membership resolution.

Review and Adjustment of Quotas

The Articles of Agreement call for the institution to conduct, at intervals of not more than five years, general quota reviews. Such general reviews allow the IMF to assess the adequacy of quotas in terms both of members’ needs for conditional liquidity and of its ability to finance those needs, that is, reviews deal with the question of whether the size of the IMF enables it to promote effectively its purposes and to fulfill its central role in the international monetary system. A general review also allows for adjustments of members’ quotas to better reflect changes in their relative positions in the world economy. A member may also request at any other time that the Board of Governors consider an adjustment of its quota.

The main issues that have been dealt with in general quota reviews typically include both the size of an overall increase in quotas and the combination of equiproportional and selective adjustments within the overall increase. Of the 12 general reviews of quotas since 1950, the date of the first five-year review,9 4 reviews, including the Tenth Review of 1994–95, concluded that no increase in quotas was needed. In the other 8 reviews, the overall quota increase ranged from 34 percent to 61 percent (Tables 1 and 2). The bulk of quota increases have taken the form of equiproportional increases, whose main impact has been to stabilize the quota shares of individual members. Selective and/or ad hoc increases in quotas have also taken place, with the goal of bringing the quotas of members better into line with their relative economic size, and, on some occasions, also to strengthen specifically the liquidity position of the IMF (if the increase in quota represents an inflow of fully usable assets).

Table 1.

General Reviews of IMF Quotas1

(In percent)

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Quota increases under a General Review comprise: (1) an equiproportional component, that is, a uniform percentage for all members participating in the review, and (2) a selective increase, which adjusts members’ quota shares, generally in order to align them with their relative economic size.

Includes the effect of special increases for some members, as well as the general increase for all members as proposed under the quota review.

Provided for an equiproportional increase of 50 percent and special increases for 3 countries; the resolution adopted in April 1959 provided for special increases for 14 additional countries.

The date, still to be determined, 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.

Table 2.

Changes in IMF Quotas

(Quotas in millions of SDRs)

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Number and quotas of countries that withdrew from membership or whose memberships were conferred to successor countries are shown in parentheses.

Figures shown are as of the dates of adoption of Board of Governors’ resolutions proposing adjustments in members’ quotas. The resolution on the Eleventh General Review (1998) was adopted on January 30, 1998, but the increases shown will come into effect only when members having not less than 85 percent of the total of quotas on December 23, 1997 have consented to the increases in their quotas.

Summation of columns (4)–(6).

Excluding Australia, Haiti, Liberia, New Zealand, and the U.S.S.R., which did not join the IMF at the time of the Bretton Woods Agreement (see Schedule A of the Articles of Agreement), and including increases agreed for Egypt, France, Iran, and Paraguay shortly after the IMF began operations.

The quota of Honduras was reduced at its request in 1948 but was restored to the original amount in 1951.

Includes SDR 121.0 million under small quota policy.

Includes SDR 255.0 million under compensatory financing decision.

Includes SDR 194.0 million under compensatory financing decision.

Includes Cambodia, which did not participate in the Ninth General Review.

Includes the Federal Republic of Yugoslavia (Serbia/Montenegro), which has consented to the quota increase proposed under the Ninth General Review, but has not yet succeeded to IMF membership or paid the increase.

Includes increases of SDR 3,261.4 million, which were based on the terms and conditions of the Ninth General Review.

Based on Ninth General Review quotas for all members. Iraq, Liberia, Somalia, and Sudan have not consented to the quota increase proposed under the Ninth General Review; the Federal Republic of Yugoslavia (Serbia/Montenegro) has consented to the quota increase proposed under the Ninth General Review but has not yet succeeded to IMF membership or paid for the increase.

The formulation of selective and ad hoc quota increases in the context of a quota review has varied over time. In earlier reviews—from 1958/59 to the Seventh Review—the selective element took the form of quota increases for a subset of the IMF’s membership, and these increases were related to the difference between calculated quotas and actual quotas, where the former are based on the use of quota formulas (see Box 3) and serve as a measure of countries’ relative economic size. In the Eighth, Ninth, and Eleventh Reviews, the selective element has been distributed among all members in proportion to their shares in calculated quotas.10 In some quota reviews, the quotas of a small group of countries were adjusted on an ad hoc basis to reflect unusual circumstances, such as a doubling of the quota share of the major oil-exporting countries in the Sixth Review, a rearrangement of quota shares among the seven largest members in the Ninth Review,11 and the setting aside of 10 percent of the overall increase of the Eleventh Review (see below).

The other main issues that have arisen in general quota reviews have differed according to the circumstances. For example, in the Seventh Review, the method of payment—along with other issues relating to the SDR—was an important issue (at that time, the Interim Committee also agreed to recommend a resumption of allocations of SDRs in each of the years 1979 to 1981). In the event, it was agreed in the Seventh Review that the reserve asset payment be made in SDRs by members participating in the SDR department. The timing of the completion of the Eighth Review was influenced by the Latin American debt crisis that erupted in 1982, whereas the timing of the initiation of the Eleventh Review was brought forward by the Mexican crisis of 1994–95. The coming into effect of the quota increases under the Ninth Review was linked to the Third Amendment of the IMF’s Articles to strengthen the IMF’s strategy for prevention and deterrence of arrears to the IMF. In the Seventh, Ninth, and Eleventh Reviews, a review of the quota formulas was specifically called for to be undertaken following completion of the review or as preparation for the next general quota review, and changes to the quota formulas were adopted in the Eighth Review. A major review of the working of the quota formulas in the Tenth Review did not result in any changes to the formulas, which were viewed at that lime as working broadly as intended, that is, as a reasonably comprehensive measure of the relative economic size of member countries.

Eleventh General Review

The most recent general review of quotas—the Eleventh—was completed in January 1998 when the Board of Governors adopted a resolution proposing to increase the total of IMF quotas by 45 percent (from SDR 146 billion to SDR 212 billion). In assessing the IMF’s need for resources over the medium term, the Executive Board stressed in its report to the Board of Governors that the IMF must be adequately endowed with financial resources for dealing with members’ payments difficulties. The Executive Board also stressed that the IMF must ensure that its resources are fully safeguarded, including by the adoption and implementation by members of appropriate policies, and that the IMF must hold a level of usable assets that would protect the liquidity and immediate usability of members’ claims on it, so as to maintain their confidence in and support of the institution.

The main considerations underlying the size of the agreed increase were (1) the growth of world trade and payments: (2) the scale of potential payments imbalances, in particular those that may stem from sharp changes in private capital flows; (3) the prospective demand for IMF resources in support of members’ adjustment programs; (4) the rapid globalization and the associated liberalization of trade and payments, notably on capital account, that has characterized the development of the world economy since the last increase in quotas was agreed upon in 1990; and (5) the weakening of the IMF’s liquidity position (especially in light of the crisis in Asia).

The agreed upon distribution of the overall quota increase was guided by the views expressed by the Interim Committee in April 1997 supporting a distribution that would be predominantly equiproportional while in part correcting the most important anomalies in the quota distribution. In September 1997 the Interim Committee agreed that, of the overall increase:

  • 75 percent would be distributed in proportion to present quotas;

  • 15 percent 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

  • 10 percent 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 present quotas are far out of line with their relative economic positions, and which are able to contribute to the IMF’s liquidity over the medium term.

In addition, in a voluntary redistribution of quota shares, the quotas of France and the United Kingdom, after being raised according to the uniform methods described above, were equalized, as established in an agreement reached under the Ninth General Review, and there was a further reallocation of the quotas of Italy and Germany, while increases in quotas for all the other members were kept unchanged.

The quota increase under the Eleventh Review is expected to bring in about SDR 45 billion of usable assets, which represents the quota increase of countries whose currencies presently are usable in IMF transactions. The increase will become effective once members representing 85 percent or more of the total of quotas on December 23, 1997, have consented to their proposed increases, A member with overdue repurchases, charges, or assessments to the GRA may neither consent to nor pay for the increase in its quota under the Eleventh Review until it becomes current in respect of these obligations.12 The IMF has made arrangements to assist members with insufficient reserves to pay the reserve asset portion of their quota increases through a same-day borrowing/repayment of SDRs.13 The quota resolution provides that 25 percent of the increase in quotas should be paid in SDRs or in the currencies of other members specified by the IMF, subject to the concurrence of those members, or in any combination of SDRs and such currencies. The balance of the quota increase is to be paid in the member’s own currency.

Quota Formulas

The Articles of Agreement do not indicate how a member’s quota should be determined, although from the very start quotas have been related to, but not strictly determined by, economic criteria, such as national incomes and the values of external trade and payments. A formula that was used as a basis for determining the quotas of the original members became known as the Bretton Woods formula and was specified as follows:


where Y was national income in 1940; R was gold and dollar balances on July 1, 1943; M was average imports during 1934–38; V was the maximum variation in exports during 1934–38; and X was average exports during 1934–38. This formula also served through the late 1950s as a basis for determining the initial quotas of new members.

A multi-formula approach was adopted in the early 1960s, when the Bretton Woods formula was revised and supplemented by four other formulas containing the same basic variables but with larger weights for external trade and the variability of exports. The variability component was redefined,1 and the coefficients of the variables were reduced or set so as to make the sum of the resulting calculations correspond roughly with the IMF quotas then in force. The nonlinear element, comprising the ratio of exports to national income in the Bretton Woods formula, was eliminated in two of the four reweighted formulas. The coverage of the data was extended; in addition to calculations using data on national income, reserves, exports, imports, and the variability of exports (known as Set I data), calculations were made with another set of data (Set II), in which current receipts, current payments, and the variability of current receipts were substituted for exports, imports, and the variability of exports. The results of these formulas were used in general quota reviews and as a basis for determining the initial quotas of new members until the early 1980s.

The quota formulas were last modified in 1982–83, although their basic structure was retained. The economic criteria were improved by modifying the definitions of some of the variables. National income was replaced by GDP, and the concept of reserves was broadened to include SDRs, ECUs (European currency units), and reserve positions in the IMF. Furthermore, the weight of the variability of current receipts was reduced by 20 percent in the formulas that contained high weights for this variable, and the use of the so-called Set I data was discarded in favor of the more broadly based Set II data, thereby reducing by half the number of calculations.

The following five formulas have been in use since 1982–83:

Reduced Bretton Woods formula:


Scheme III formula:


Scheme IV formula:


Scheme M4 formula:


Scheme M7 formula:


where Y is GDP in a recent year; R is average monthly reserves in a recent year; P and C are annual average current payments and receipts, respectively, over a recent five-year period; and VC is variability of current receipts, defined as one standard deviation from the five-year moving average over a recent 13-year period. The results of each of the four modified formulas are uniformly adjusted so that the sum of the calculations for all members equals that derived from the reduced Bretton Woods formula. For each member, a single “calculated quota” is derived as the higher of the results of: (1) the reduced Bretton Woods formula, and (2) the average of the lowest two results of the other four formulas.

For example, under the Eleventh General Review of Quotas, India’s calculated quota was based on data for GDP in 1994 of SDR 204,306.9 million, average current receipts and payments for 1990–94 of SDR 20,639.2 million and SDR 24,557.2 million, respectively, the 12-month average of reserves for 1994 of SDR 12,130.0 million and variability of current receipts for the period 1982–94 of SDR 880.6 million. The results of each of the five formulas were as follows:

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Since the reduced Bretton Woods formula resulted in a higher figure (SDR 4,156 million) than the average of the lowest two results of the other four formulas (SDR 3,518.81 million), the Bretton Woods figure was taken as the calculated quota.

1 The original concept of variability of exports was modified because it mainly reflected the upward trend of exports rather than its fluctuation. The measure of variability adopted in 1962–63 was the standard deviation from trend, which brought it into line with the concept employed in connection with the Compensatory Financing Facility established in 1963.


Apart from an increase in quotas (or the addition of new members), the amount of the IMF’s ordinary resources changes only as a result of its undistributed net income and the accumulation of precautionary balances.

The largest part of the IMF’s gross operational income is derived from periodic charges it levies on the use of its general resources and from surcharges on the use of those resources under special facilities:14 a much smaller portion is generated by receipts of interest on the IMF’s SDR holdings in the GRA and by service charges on purchases from the GRA. Operational expenses consist of remuneration on remunerated reserve tranche positions, payment of interest on outstanding IMF borrowing, if any, and any allocation to the first and second Special Contingent Accounts (SCA-1 and SCA-2), which were set up to hold precautionary balances in view of protracted overdue obligations to the IMF (see Chapter VI). Net operational income (operational income minus operational expenses) is used to cover the administrative expenses of the IMF, and the remainder constitutes net income.

The IMF aims to achieve net income each financial year to add to its reserves, while providing a market-related rate of return to members with remunerated reserve tranche positions. The Executive Board reviews the IMF’s position at the beginning of each financial year to determine the desirable addition to the IMF’s precautionary balances and, consequently, the rate of charge on the use of its ordinary resources. A separate midyear review establishes whether any adjustments to the rate of charge are required in view of developments during the year.

The IMF’s net income is determined by the interplay of a number of elements, notably the rate of charge on the use of general resources, the rate of interest on the SDR (which, in turn, determines the rate of remuneration paid on remunerated reserve tranche positions), any income from surcharges on the use of general resources under special facilities, the extent of use of general resources, and the level of the IMF’s administrative expenses. The IMF’s net income is placed to its reserves.15 If net income exceeds the amount projected at the beginning of the year, the IMF can retroactively reduce for that year the rate of charge or increase the rate of remuneration (to not more than the interest rate of the SDR), or both; or place all or part of any excess to reserves; or make a distribution of excess income to members; or take the excess into account as income for the subsequent financial year.16

Schedule of Charges

The IMF’s current schedule of charges on the use of its resources is as follows. First, there is a service charge of ½ of 1 percent on each purchase of IMF resources in the GRA, other than reserve tranche purchases (which constitute a use of reserve assets held by members and are not subject to any charges). The service charge is payable once, at the time of the transaction.

Second, there is a commitment charge (fee) of ¼ of 1 percent a year, payable at the beginning of each period (usually one year) on the amount that may be drawn during that period under a Stand-By or Extended Arrangement (see Chapter III). A member subsequently making a purchase under the arrangement receives a refund of the commitment charge attributable to the amount purchased. A member that purchases the full amount under the arrangement thus receives a refund of all the commitment charges that it has paid.

Third, the IMF levies periodic charges, equivalent to interest, on its holdings of a member’s currency that exceed its quota (except for an amount not in excess of 1/10 of 1 percent of quota held in the IMF No. 2 Account). Such holdings typically result from purchases that represent a use of IMF credit.

Under procedures in effect since May 1, 1981, the basic periodic rate of charge applicable to members’ use of the IMF’s ordinary resources is determined at the beginning of each financial year.17 In setting the rate, the IMF takes into account the desired amount of net income for the year, factoring in other income (such as from service charges), and estimates of credit outstanding and the remuneration cost. Since May 1, 1989, the rate of charge has been set as a proportion of the SDR interest rate, and it changes weekly with changes in the SDR interest rate.18 For financial year 1998, the proportion of the SDR interest rate was set at 109.6 percent at the beginning of the year and retroactively reduced at the end of the year to 105.6 percent. For financial year 1999, the proportion has been set at 107 percent. Under the Supplemental Reserve Facility (see Chapter III) established in December 1997, a surcharge is added to the basic rate of charge: the surcharge is 300 basis points during the first year following approval of financing under this facility, and it increases by 50 basis points at the end of that first year and every six months thereafter, until it reaches 500 basis points.

Since May 1986, under the policy of burden sharing (see Chapter VI and the Glossary), the basic rate of charge and the basic rate of remuneration have been adjusted to make up for the periodic charges not paid by members in arrears to the IMF for six months or more and to provide for precautionary balances (see “Precautionary Balances” below and “Strengthening the IMF’s Financial Position” in Chapter VI).

Charges due to the IMF in the GRA are payable in SDRs on a quarterly basis based on the IMF’s financial year. There are no provisions under the IMF’s Articles or its Rules and Regulations that permit postponement of the payment of charges.


The IMF remunerates (pays interest) every quarter to those members that have a remunerated reserve tranche position. A member’s reserve tranche position is determined on the basis of the IMF’s holdings of the member’s currency in relation to its quota. Figure 2 shows how a member’s reserve tranche changes in size under different scenarios. A remunerated reserve tranche position exists whenever the IMF’s holdings of a member’s currency19 are below its norm for remuneration. A member’s norm is the total of 75 percent of its quota before the Second Amendment of the Articles (April 1, 1978), plus the amounts of any subsequent quota increase. For countries that became members after April 1, 1978, the norm is the weighted average of the norms applicable to all other members on the date that the member joined the IMF, plus any increase in its quota after that date. With each quota increase, a member’s norm rises gradually toward 100 percent. At the end of April 1998, the average of the norms for all IMF members was 94.5 percent of quota.

Figure 2.
Figure 2.

Reserve Tranche Position

Note: See Appendix II for a numeric illustrative calculation of the reserve tranche position. This chart presents some possible situations.In situation (a), a member has paid its quota subscription in full and not drawn on its reserve tranche position. The remunerated reserve tranche position is equal to the difference between the member’s norm (level of holdings below which remuneration is payable) and the IMF’s holdings of the member’s currency, other than excluded holdings (holdings acquired as a result of a member’s use of IMF credit and holdings in the IMF No. 2 Account that are less than 1/10 of 1 percent of quota).In situation (b), the member has drawn its reserve tranche position in mil. (The reserve tranche purchase is not subject to charges.)In situation (c), the member is using IMF resources but has not drawn its reserve tranche position. The level of holdings in excess of the member’s quota is subject to charges.In situation (d), the member is using IMF resources, in addition to having drawn the reserve tranche position. The level of holdings in excess of the member’s quota is subject to charges.In situation (e), the IMF has made use of the member’s currency and pays the member remuneration on the difference between the member’s norm and the IMF’s holding of the member’s currency.

Since February 1, 1987, the rate of remuneration has been equal to the SDR interest rate, which is calculated weekly. This rate is then adjusted for burden sharing, as described in Chapter VI. Remuneration is paid in SDRs, unless the IMF or the member decides that the payment be made in the member’s own currency, immediately following the end of each financial quarter.

Precautionary Balances

The IMF’s precautionary balances consist of its reserves and the two Special Contingent Accounts. IMF reserves reflect accumulated net income. Reserves are maintained to protect the IMF’s assets from impairment, to indicate a sound financial management of the institution, and to provide some added liquidity, albeit a relatively small amount in relation to the resources provided by the quotas of members. The Special Contingent Account balances reflect periodic allocations of resources, and, except for an initial placement to the first Special Contingent Account of SDR 26.5 million, result from burden-sharing adjustments that are added to the rate of charge and subtracted from the rate of remuneration. The two contingent accounts were established by Executive Board decisions; the first Special Contingent Account protects the GRA against potential losses from overdue obligations to the IMF, and the second Special Contingent Account was established as a safeguard against possible losses arising from purchases made through the encashment of rights accumulated under a rights accumulation program, and to provide additional liquidity for the financing of those encashments (see Chapter VI).

At April 30, 1998, the IMF’s precautionary balances were SDR 4,017.4 million: reserves were SDR 2,133.5 million; the first Special Contingent Account equaled SDR 883.9 million; and the second Special Contingent Account equaled SDR 1,000.0 million. Financing of the second Special Contingent Account, which began July 1, 1990, was completed during financial year 1997.

Accounting Principles and Audit Procedures

The IMF’s By-Laws mandate that its accounts and statements provide a “true and fair view” of its financial position. The IMF follows generally accepted accounting principles. It is not bound by specific legal provisions or accounting pronouncements in effect in individual member countries. These standards and pronouncements are, however, taken into consideration in the development of the IMF’s accounting practices and in the preparation of its financial reports. In addition, in the reporting of its financial activities in the financial statements and the Annual Report, the IMF publishes extensive information on financial and other activities, allowing interested parties a comprehensive view of the IMF’s financial position.

The IMF’s procedures provide for both an external and internal audit of its accounts and financial transactions and activities. An external audit of the financial statements of the IMF’s General Department, SDR Department, Administered Accounts, and Staff Retirement Plans is conducted annually and covers the IMF financial year (May 1 through April 30). The IMF is required to publish an Annual Report containing an audited statement of its accounts and to issue, at intervals of three months or less, a summary statement of its operations and transactions and its holdings of SDRs, gold, and members’ currencies.

The external audit of the IMF is entrusted to an External Audit Committee consisting of either three or five persons, each nominated by a different member of the IMF and confirmed by the Executive Board. At least one committee member has to be nominated by one of the six largest quota holders of the IMF. The nominees have been either independent auditors or auditors in public service. The committee is also assisted by an outside independent accounting firm that provides supporting audit services and reports to the committee. The audit committee elects one of its members as chairman, determines its own procedures, and is completely independent of the management of the IMF in the conduct of the annual audit. The annual audit is conducted in accordance with generally accepted auditing standards, is comprehensive in nature, and extends as far as practicable toward ascertaining that operations and transactions have been supported by the necessary authority and that there is adequate and appropriate accounting for the assets and liabilities of the IMF. On the basis of its audit, the committee reports whether the financial statements as presented give a true and fair view of the IMF’s financial position. The audit committee submits its report to the Board of Governors through the IMF’s Managing Director and the Executive Board.


The IMF’s financial structure rests on the principle that quota subscriptions are the basic source of financing through the GRA. Nevertheless, under Article VII of the Articles of Agreement, the IMF is authorized to borrow currencies for the GRA, and borrowing has provided an important temporary supplement to usable quota resources from time to time (Table 3 shows IMF borrowing arrangements and agreements for 1962 through April 1998.)

Table 3.

IMF Borrowing

(In billions of SDRs)

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The GAB and the associated agreement have been extended for five years from December 1998.

The need for borrowing may arise when the IMF’s liquidity (its stock of SDRs and usable currencies) is low relative to the demand for its resources. Although access to the IMF’s resources under credit tranche policies was originally limited to the size of a member’s quota, the IMF has enlarged members’ access to its resources over the years, first, to a multiple of the quota, and recently, under the Supplemental Reserve Facility (SRF) approved in late 1997, without limits in relation to quota. Access has been enlarged in response to changes in the global pattern of payments imbalances and the perceived need for a strong, though still catalytic, involvement of the IMF in the financing of balance of payments adjustment by its members. Moreover, increases in demand for the IMF’s resources have not always been accompanied by commensurate increases in the size of quotas.

Sources and Evolution of IMF Borrowing

The IMF has the authority to decide the sources, timing, magnitude, terms, maturity, and techniques of its borrowing. It is permitted to borrow currencies from any source, including from nonmembers and private sources, as long as the member issuing the borrowed currency gives its consent. However, its borrowing for the GRA has so far been entirely from official sources (that is, from member countries and their central banks), from one country that was then a nonmember (Switzerland) and its central bank, and from the Bank for International Settlements (BIS).

Characteristics of Borrowing Arrangements

Although the genesis of the different borrowing arrangements of the IMF and their respective amounts, maturities, and rates of interest have varied, they have had certain common features—notably, the official character of the lenders and the maintenance of the value of the claims of lenders in terms of the SDR (except for the General Arrangements to Borrow until 1983).

The IMF’s borrowings, like its other operations, have been denominated in SDRs since the 1970s, and their maturities have been for the most part four to seven years, with an average of about 5¾ years, so as to match to the extent possible the maturity of IMF credit to member countries that was financed with the borrowed resources. The remainder of the borrowing has been for shorter periods—one to three years.

An important characteristic of most IMF borrowing is that lenders, except the Bank for International Settlements, have been entitled to early repayment of their loans (by encashment or transfer to others on terms agreed between transferor and transferee) if they experienced any balance of payments problems. This has been an especially attractive feature for member country lenders, given the possibility of unforeseen deterioration in their balance of payments and reserve positions over the period in which their loans to the IMF are outstanding. This feature has made loans to the IMF highly liquid assets, and they have been therefore treated as part of the international reserves of lenders.

The relative shares of borrowed resources used in financing IMF assistance to member countries over the period 1980 through end-April 1998 (Table 4) illustrate the basic role of quotas as the primary source of IMF financing, as well as the crucial temporary support to the IMF’s operations provided by borrowing, particularly in the early to mid-1980s.

Table 4.

General Resources Account: IMF Assistance and Borrowing

(In billions of SDRs)

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Current Borrowing Arrangements

General Arrangements to Borrow (GAB). Since October 24, 1962, the IMF has had successive arrangements for four- or five-year periods each under the GAB, which were revised and enlarged in December 1983 (Table 5). Under these arrangements the IMF may borrow, in certain circumstances, specified amounts of currencies from 11 industrial countries or their central banks: the United States, Germany, Japan, the United Kingdom, France, Italy, Canada, the Netherlands, Belgium, Sweden, and Switzerland.

Table 5.

General Arrangements to Borrow: Participants and Credit Amounts

(Lenders and amounts of credit arrangements after December 26, 1983)

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The GAB were originally conceived and designed as arrangements whereby the main industrial countries agreed to stand ready to lend to the IMF up to specified amounts of their respective currencies, thereby strengthening its financial position. These loans would be made when supplementary resources were needed by the IMF to help finance drawings by GAB participants in a setting where such financing would forestall or cope with an impairment of the international monetary system. Because the industrial countries have the largest quotas and may, when they need to, claim a large proportion of the IMF’s usable resources, the GAB provide strong support for the IMF’s financial soundness and for ensuring that resources available to other countries are not reduced.

The potential amount of credit available to the IMF under the GAB totaled the equivalent of about SDR 6 billion (in lenders’ currencies) until December 1983. The GAB were activated several times in the late 1970s. In 1977, the IMF borrowed from eight participants the equivalent of almost SDR 2.9 billion for drawings by the United Kingdom and Italy under Stand-By Arrangements, and later borrowed from two participants (Germany and Japan) in 1978 to finance a reserve tranche drawing of SDR 777 million by the United States.

In response to the growing pressure on the IMF’s usable ordinary resources caused by the emergence of the debt crisis in mid-1982, a review of the GAB was undertaken in February 1983; this review resulted in a substantial enlargement of the credit available under the GAB from about SDR 6 billion to SDR 17 billion, plus an additional SDR 1.5 billion under an associated agreement with Saudi Arabia (see Table 5). At the time of the GAB enlargement, the interest rate was raised from below market levels in the earlier GAB to the 100 percent of the combined market interest rate used to calculate the SDR interest rate, which reflects market rates on prime financial instruments in the five countries represented in the SDR basket (see Chapter V for the SDR interest rate). Other major amendments to earlier GAB provisions permit the IMF to:

  • use the GAB to finance use of IMF resources by nonparticipants, subject to specified conditions and provided that, after consultation with the Executive Board and participants, the Managing Director considers that the IMF faces an inadequacy of resources;

  • include, in certain credit arrangements with nonparticipating members or their official institutions, provisions authorizing the use of GAB resources with respect to these members as if they were participants; and

  • express credit arrangements in terms of SDRs rather than in terms of national currencies, as was formerly the case.

Since 1983, the GAB—as well as an associated borrowing agreement with Saudi Arabia—have been renewed every four or five years, without further modification. The last renewal of the GAB was for a further five-year period from December 26, 1998. The agreement with Saudi Arabia also was renewed for the same period. In July 1998, the GAB participants agreed to lend to the IMF up to the equivalent of SDR 6.3 billion in the context of augmentation of support for Russia under an Extended Arrangement, and a first call for SDR 1.4 billion was completed. This was the first activation of the GAB in 20 years, and the first time it has been used for a nonparticipant.

New Arrangements to Borrow (NAB). Following the Mexican financial crisis in 1994–95, concern that substantially more resources might be needed to respond to future financial crises prompted a call on the Group of Ten and other financially strong countries to develop financing arrangements that would double the amount available under the GAB. Representatives of 25 countries reached agreement in principle in May 1996 on the features of such new borrowing arrangements, and subsequently developed, with the assistance of the IMF staff, a draft instrument of the New Arrangements to Borrow (NAB). This instrument was adopted by the IMF’s Executive Board in January 1997. The amount of resources potentially available to the IMF under the GAB and the NAB combined will be up to SDR 34 billion (see Table 6). Commitments from individual participants are based in principle on their relative economic strength.

Table 6.

New Arrangements to Borrow1

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The NAB will enter into force when adhered to by potential participants with credit arrangements amounting to not less than SDR 28.9 billion, including the five members or institutions with the largest credit arrangements.

As of June 30, 1998, the NAB had not yet become operational. It will enter into force when the decision has been adhered to by participants with credit arrangements amounting to not less than SDR 28.9 billion (85 percent of the total), including the five members or institutions with the largest credit arrangements (namely, France, Germany, Japan, the United Kingdom, and the United States). The NAB will be in effect for five years from its effective date and may be renewed, at which time an IMF member or institution that is not currently a participant in the NAB may be accepted as a participant, if the IMF and participants representing 80 percent of the total credit arrangements agree to the request. New participants may be accepted at other times by way of an amendment to the NAB, adopted by a decision of the IMF, and with the concurrence of participants representing 85 percent of total credit arrangements.

The credit arrangements under the NAB may be activated for the benefit of an IMF member that is a participant or a nonparticipant in the NAB, under circumstances similar to those specified in the GAB, except that there is no requirement for a finding that the IMF faces an inadequacy of resources. The NAB do not replace the GAB; the GAB and the associated agreement with Saudi Arabia remain unchanged. However,

  • the maximum combined amount drawn under these two arrangements cannot exceed SDR 34 billion;

  • the NAB will be the facility of first and principal recourse in the event of a need to provide supplementary resources to the IMF except that (1) in die event of a request for drawing on the IMF by a participating member (or a member whose institution is a participant) in both the GAB and the NAB, a proposal for calls may be made under either the GAB or the NAB; and (2) in the event that a proposal for calls under the NAB is not accepted, a proposal for calls may be made under the GAB.

Valuation of the IMF’s Currency Holdings

The IMF, as an international monetary institution comprising 182 members, with nearly as many different currencies, clearly needs to operate with a commonly defined and accepted unit of account. A common unit of account also helps insulate the IMF’s own capital and the value of its balance of payments assistance to member countries from exchange rate fluctuations. The IMF’s unit of account is the SDR, whose value is determined on the basis of a basket of five currencies, currently the U.S. dollar, the deutsche mark, the Japanese yen, the French franc, and the pound sterling. Each day the IMF calculates the SDR’s value in U.S. dollar terms—based on market exchange rates—of the specified amounts of the five currencies in the valuation basket (see “Valuation of the SDR” in Chapter V).

Members’ currencies held by the IMF in the GRA are valued in terms of the SDR on the basis of each member’s representative rate of exchange as determined in accordance with the Rules and Regulations of the IMF. Each member is obligated to maintain the SDR value of the balances of its currency held by the IMF in the GRA but not those held elsewhere by the IMF (such as the Special Disbursement Account, or the Administered Accounts). The total value of the IMF’s holdings of currencies in the GRA is, therefore, kept constant in terms of the SDR through changes made to the amount of the members’ currency held. A member’s currency held by the IMF is revalued in SDR terms whenever the currency is used by the IMF in a transaction with another member, at the end of the IMF’s financial year (April 30), at the request of a member during the year, and on such other occasions as the IMF may decide. Whenever it becomes necessary to adjust the rate at which the IMF holds a member’s currency (the holdings rate; see the Glossary), the new rate becomes effective in the IMF’s accounts at the close of business on the date that the new exchange rate is determined. All holdings of a member’s currency in the GRA, including any unsettled obligations resulting from an earlier revaluation, are revalued at the new rate. The new rate is applied to all operations and transactions in that currency, including administrative receipts and payments, until such time as the rate may again need to be adjusted.

The Valuation Adjustment Account is part of the IMF’s holdings of a member’s currency in the GRA. Whenever the IMF revalues its holdings of a member’s currency, because of a change in the exchange rate, an account receivable or an account payable is established for the amount of currency payable by or to the member in order to maintain the value of holdings of the member’s currency in terms of the SDR. The balance of the accounts receivable or payable is reflected in the IMF’s currency holdings. If any amounts are owed to the IMF, they are added to the IMF’s holdings in the IMF No. 1, IMF No. 2, and Securities Accounts; if owed by the IMF, they are subtracted. Valuation adjustments are settled annually, following the close of the IMF’s financial year. Some members do, however, request settlements at other times, particularly at the end of their own financial years. Revaluation changes in members’ currencies in relation to the SDR in the other IMF accounts (the SDA and the Administered Accounts) are reported as valuation gains and losses for those accounts.

Usability of the IMF’s Resources

The liquid resources of the IMF consist of SDRs and national currencies.20 Not all the national currencies held by the IMF are usable all the time (that is, strong enough to be used in transfers to other members). The IMF closely monitors the usability and actual use of the currencies it holds in the GRA through semiannual or more frequent liquidity reviews, as necessary, and quarterly operational budgets.


The prime determinant of the IMF’s liquidity—its capacity to extend balance of payments assistance to its members from its ordinary resources in the short run—is its stock of usable assets. These consist of the IMF’s holdings of SDRs and currencies of members judged to be in sufficiently strong balance of payments and reserve positions (see also “Operational Budgets” below), supplemented, as necessary, by borrowed resources.

The stock of resources has to be viewed against the actual and probable demands for the IMF’s resources in the period ahead. These demands arise from the need to finance purchases under arrangements and other facilities in the GRA, to service borrowings by the IMF, if any, and to meet encashments of members’ reserve tranche positions and of loan claims on the IMF, if any, in cases of weakening balance of payments positions on the part of the IMF’s creditors.

The IMF’s SDR Holdings. The IMF’s holdings of SDRs in the GRA are a readily usable asset. These SDR holdings may be used independently of the external positions of any member or group of members. The IMF may acquire, hold, and dispose of them through the GRA in a variety of ways. As other holders of SDRs do, the IMF earns interest on its SDR holdings.

Flows of SDRs to the IMF occur in the following ways:

  • a member is required to pay charges in SDRs;

  • a member may, at its discretion, use SDRs to settle repurchases due to the IMF; and

  • members are required to pay 25 percent of quota increases in SDRs, or currency acceptable to the IMF.

Flows of SDRs out of the IMF occur when

  • the IMF sells SDRs to members needing to acquire them for the payment of charges, or

  • the IMF offers SDRs to members as an alternative to currencies in purchases, remuneration payments, or repayments of borrowings and payments of interest.

Members are not obliged to accept SDRs in any transaction or operation except in replenishment of the IMF’s currency holdings.21 Once members accept the SDRs, they are able to convert them, if they wish, into currency in a voluntary transaction with another holder (or the IMF will designate another member to exchange the SDRs for currency).

In recent years, the transfer of SDRs to members in purchases and other payments has represented a substantial, although variable, proportion of the total purchases financed from the IMF’s ordinary resources. The IMF’s holdings of SDRs increased sharply when the payments for the quota increases under the Ninth General Review were received in late 1992, reaching over SDR 8 billion. By early 1995, the IMF’s SDR holdings had fallen to within a range of SDR 1.0–1.5 billion, later dropping somewhat below the lower end of that range. As of April 30, 1998, the IMF’s holdings of SDRs amounted to SDR 0.8 billion.

The IMF’s Holdings of Usable Currencies. National currencies paid in subscriptions are not all available for use by the IMF at all limes. In practice, only the currencies of members in sufficiently strong balance of payments and external reserve positions are used by the IMF to finance its transactions and operations. Because the IMF holds substantial amounts of currencies of members that are indebted to the IMF and are experiencing balance of payments difficulties, and of other members whose external positions are not strong, a considerable proportion of the IMF’s national currency holdings is not usable. Furthermore, the level of usable currencies may fluctuate substantially for reasons that may be unrelated to the actual demand for IMF resources—for example, if a member suffers a substantial deterioration in its external position that is sufficient to warrant the exclusion of its currency from the list of usable currencies. In that event, the IMF’s entire stock of that currency, which may be considerable if the member has a large quota, would become unusable by the IMF.

The overall level of quotas determines the supply of all currencies lo the IMF. With the increase in members’ quotas in 1992, the IMF’s liquidity position improved considerably. Since then, owing particularly to the continuing needs of the transition economies and the large demands arising from the Asian financial crisis, the IMF’s usable resources have declined. The IMF’s holdings of usable currencies were on the order of SDR 47.3 billion at end-April 1998.

The IMF’s Liquid Liabilities. Assessing the adequacy of the IMF’s resources to assist members has to take into account the IMF’s obligations to satisfy any claims on the GRA (1) by members that wish to purchase (draw) their reserve tranche positions in the IMF and (2) by lenders to the IMF. Members can draw their reserve tranche positions at a few days’ notice whenever they have a balance of payments need, and there must never be any doubt about the IMF’s ability to finance such drawings. The sum of reserve tranche positions and any outstanding loan claims is known as the IMF’s “liquid liabilities.” At end-April 1998 liquid liabilities (consisting of reserve tranche positions) amounted to SDR 50.3 billion.

Liquidity Ratio. To assess the adequacy of its liquidity, the IMF reduces the stock of its usable resources by subtracting amounts that are already committed and working balances in currencies that need to be maintained, to produce a figure of net uncommitted usable resources, which amounted to SDR 22.5 billion as of end-April 1998. The ratio of the IMF’s net uncommitted usable resources to its liquid liabilities—the so-called liquidity ratio—rose with the payment of the Ninth Review quota increase, reaching 155 percent at end-February 1993, peaked at nearly 170 percent in January 1995, and sharply declined thereafter, to 45 percent at end-April 1998.

To maintain the confidence of both purchasing and creditor members, the IMF must always be able to meet possible demands for its resources, as well as for encashment of loan claims.

Operational Budgets

Currencies to be used in purchases and repurchases are selected by the Executive Board for successive quarterly periods through the adoption of an operational budget. The budget specifies the amount of SDRs and currencies that the IMF is expected to use in transfers to members (to finance purchases) and in receipts from members as the medium in which repurchases are made during the budget period. The operational budget is thus the mechanism through which the IMF makes its financial resources available to its members.

The selection and amounts of specific currencies to be used are based on principles set forth in the Articles and on guidelines established by the Executive Board.22 Currencies are selected on the basis of an assessment of the external position of each member. In identifying members that are in a “sufficiently strong external position,” the IMF uses a range of indicators to assess members’ balance of payments and reserve positions and developments in exchange markets. These assessments take into account all relevant factors, including in particular indicators related to short-term debt and external debt service, and involve an element of judgment.23

The IMF draws on the currencies of a wide range of members—large and small, advanced, developing, and transition—underscoring its cooperative character and the revolving nature of its resources. Upon joining the IMF, a member agrees to facilitate the use of its currency through the operational budget once the Executive Board has found its external position sufficiently strong to be included for transfers. In exchange for providing “weak” members with resources, “strong” members receive a liquid claim on the IMF, in the form of an increased reserve tranche position,24 which earns a market-related return and can be drawn on demand in the event of balance of payments need. Members cannot veto the use of their currency by the IMF through the operational budget.

Once currencies have been selected (and are thus considered “usable”), the amounts of each currency to be used to finance purchases and to be received in repurchases are calculated so as to promote over time balanced positions in the IMF among those members participating in the budget. The approach to promoting balanced positions in the IMF has varied over time. Since June 1990, currency amounts for budget transfers have been distributed among members in proportion to their gold and foreign exchange reserves (with gold valued at SDR 35 per fine ounce), subject to the limitation that IMF holdings of a member’s currency, in relation to its quota, should not be reduced below one-half the average (two-thirds until December 1996), in relation to quota, of IMF holdings of other members’ currencies included in the budget for transfers. The guidelines also indicate that the IMF will seek to maintain minimum working balances of usable currencies of not less than 10 percent of the quotas of strong members. Amounts for receipts in currencies are distributed in proportion to the reserve tranche positions of members included in the operational budget, subject to the limitation that IMF holdings of a member’s currency should not be raised above its norm for remuneration.25

The U.S. dollar is included in the budget on the basis of ad hoc proposals, rather than on the basis of the United States’ holdings of gold and foreign exchange, because of the unique role of the dollar in the international monetary system, and because the dollar is used extensively to meet the IMF’s administrative expenses. The aim of these ad hoc proposals is to maintain, to the extent possible, the IMF’s holdings of U.S. dollars close to the average of its holdings of other members’ currencies in terms of quota.

Members that have relatively large reserve tranche positions, but that are not considered in sufficiently strong external positions to be included on the transfer side of the operational budget, may have their currencies included, with their concurrence, on the receipt side of the budget to facilitate payment of repurchases. The inclusion for receipts of relatively weak members allows for a change in the composition of their reserves, with declines in their reserve tranche positions being matched by increases in foreign exchange reserves.

The IMF does not use currencies of members to which it is extending credit to finance the use of IMF resources by other members. If such a member experiences improvements in its external position and is therefore eligible to be included in the operational budget for transfers, it is expected to accelerate the repurchase of its currency from the IMF.26

If a currency included in the budget is not one of the currencies that the IMF has determined to be freely usable in the principal foreign exchange markets, the issuing member is required, if requested by a purchasing member at the time of the purchase, to exchange the amount of its currency sold by the IMF for a freely usable currency (in most cases, the U.S. dollar) at the representative exchange rate as advised by the IMF. Procedures have also been established for the exchange of each freely usable currency into other freely usable currencies. Similar procedures apply to exchanges of currencies related to repurchases.