I welcome the shared commitment to reaching an agreement under the 14th General Review within the agreed timetable, but today’s discussion also shows that views remain divided on many key issues. I will ask staff to reflect carefully on these views as we consider how best to move the process forward within the short time period remaining. Let me highlight a few key points from our discussion:
Size of the Quota Increase: Most Directors supported a substantial overall increase to ensure that the Fund has sufficient resources to meet members’ needs. Many Directors noted that, since their last discussion of this issue in April, the case for such an increase had been further strengthened by developments in the euro area, underscoring the need for the Fund to be in a position to support all its members, including advanced countries, as well as by the recent progress on reforming the Fund’s lending facilities. Against this background, most Directors indicated that they could support a doubling of quotas, with a number viewing this as an upper bound and a number of others seeing it as a minimum. A few other Directors, pointing to the expanded New Arrangements to Borrow (NAB), were not convinced about the need to increase quota resources substantially beyond that needed to achieve the targeted realignment of quota shares. Many Directors noted that with an increase in quotas, the size of the NAB should be reconsidered to maintain the appropriate balance between quota and borrowed resources.
Quota Realignment: Directors reiterated their commitment to a shift in quota share to dynamic emerging market and developing countries (EMDCs) of at least 5 percent from over- to under-represented countries. However, significant differences remain on the details.
A number of Directors viewed approaches along the lines laid out in the staff paper as providing a good basis for further work—a combination of a selective increase for all members and a sizable ad hoc component aimed primarily at EMDCs, using the compressed GDP blend variable in distributing ad hoc increases.
Many other Directors considered that a larger net shift to EMDCs than that illustrated in the staff paper is needed—of the order of 5–6 percentage points, with adequate protection for other EMDCs not benefiting from the shift. They generally stressed that PPP GDP should play a larger role in allocating ad hoc increases, and did not support protection for over-represented advanced countries. These Directors, together with a few others, maintained the view that the quota formula remains severely flawed, and they called for its reform within two years of the conclusion of the 14th Review, as well as for more frequent adjustments based on timely data.
A number of other Directors, emphasizing that the formula should remain the primary mechanism for distributing quota increases, favored only a limited ad hoc increase, as needed, to achieve the targeted shift in quota shares. These Directors and several others noted that all over-represented countries should contribute to the adjustment in quota shares, while being fully protected from becoming under-represented. Some noted that all under-represented countries should be eligible for ad hoc increases.
Some Directors reiterated their call to take account of members’ voluntary financial contributions to the Fund.
Protecting the Poorest: Directors reiterated their support for protecting the voting share of the poorest members. Many supported protecting the quota shares of these countries individually. A number of Directors preferred the approach of protecting PRGT-eligible countries, a few favored a narrower list of countries eligible for Post-Catastrophe Debt Relief, and a number of others remained open on the definition of the poorest members. A few Directors were open to the possibility of a further increase in the share of basic votes.
While many important differences remain to be resolved in the context of the general review of quotas, many of you have also pointed to inter-linkages between the work on quotas and other aspects of the governance reform. We should continue the process of informal consultations in the coming days with the goal of narrowing the remaining differences and providing the basis for a staff proposal that could command the necessary broad support.
Finally, let me call again on those members that have not yet done so to rapidly finalize their necessary domestic processes so that the 2008 quota and voice reform can become effective by the time of the Annual Meetings.