This is our first formal meeting on realigning quota shares in the context of the 14th General Review of Quotas. While we clearly have a lot of work ahead to reach agreement by the January 2011 deadline, I believe we have made a good start and look forward to a spirit of flexibility, pragmatism, and compromise from all sides in the months ahead as we seek a convergence of views.

As many Directors have pointed out, realigning quota shares is critical to enhancing the Fund’s legitimacy and effectiveness, but it is only one element of a broader package of reforms. We must make parallel progress on a range of other areas, including on the Fund’s mandate and the broader reforms of governance. Also, it is critical for the Fund’s credibility that those members that have not already done so take the necessary steps to allow the 2008 quota reforms to become effective as quickly as possible.

Within this broader context, I would like to highlight the following points to help guide our work in the period ahead:

First, I recognize that the views expressed by Directors today are preliminary. This is particularly so because the issues of the size and distribution of the quota increase under the 14th Review are closely inter-linked, although a few Directors noted that discussion on quota share redistribution can progress in advance of agreement on the size of the Fund. Directors will have an opportunity to discuss the size of the Fund in the coming weeks. Also, the derived data set through 2008 based on WEO rather than IFS data as the primary source is only indicative and should be treated with caution, pending finalization of the updated data set.

Second, there were clear differences of emphasis on the broad goals of the quota realignment. Many Directors emphasized as the objective of the review a 5 percent shift in quota shares from over- to under-represented countries, while noting that dynamic emerging market and developing countries (EMDCs) are expected to be the predominant beneficiaries of such a shift. Many others stressed more the importance of a substantial shift in quota share to EMDCs, calling for a shift of at least 5 percent. Reconciling these differences will be an important part of our work ahead.

Third, Directors also expressed differing views on whether EMDCs that are over-represented using the quota formula should be eligible for an increase in quota share if they have met clear criteria for dynamism. Several Directors were open to considering such an increase, and looked forward to further work on how to capture the concept of dynamic EMDCs. A number of Directors were skeptical about the usefulness of such work, noting that such criteria are inevitably judgmental and that dynamism is already captured in the quota formula. A number of other Directors saw scope for better capturing dynamism in the formula itself, thereby reducing reliance on arbitrary mechanisms for quota adjustment.

Fourth, Directors supported the goal of protecting the voting share of the poorest members. Many favored extending this protection to all PRGT-eligible countries, although a few preferred a narrower list; several others did not indicate a preference. Preliminary views were expressed on the modalities. Many Directors were open to exploring all possible options. Many Directors expressed support for setting aside part of any ad hoc increase for the poorest members, and a number of Directors saw merit in considering a further increase in basic votes.

Fifth, Directors noted that it is too early to discuss in detail the modalities for allocating an increase in quotas, pending the finalization of the 2008 data set. That said, many Directors expressed an initial preference for a combination of selective and ad hoc increases. A number of Directors considered it premature to rule out an equiproportional increase at this stage, noting its important role in forging a compromise in the past. Many Directors underscored that over-represented countries should not become under-represented in the process.

Sixth, many Directors maintained the view that the quota formula should not be reopened, given the tight timeframe available for completing the 14th Review. However, others called for further work on the formula to address the remaining shortcomings before it is used again. Directors took note of the discussion in the staff papers on financial contributions to the Fund but generally did not see further work on this topic as warranted at this time.

To conclude, today’s discussion has provided useful direction for our future work. Staff will proceed to finalize the 2008 data set, with a view to issuing a paper with updated quota calculations as soon as possible after the Spring Meetings. I hope we will then be in a better position to make progress on the broad range of issues that have been discussed today.