Journal Issue

Capital base: Quotas define members’ financial and organizational relations with IMF

International Monetary Fund. External Relations Dept.
Published Date:
January 1999
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On joining the IMF, each member country is assigned a quota, which represents its subscription of capital to the IMF and is expressed in SDRs. Members’ quotas, in addition to providing the IMF with the financial resources it needs to lend to members in financial difficulty, serve several other functions. They determine members’ representation on the Executive Board and their voting power in the IMF; each member has 250 basic votes plus 1 additional vote for each SDR 100,000 of quota. Quotas also determine how much balance of payments assistance members can normally obtain from the IMF and how much members receive from the IMF in any allocations of SDRs that may take place.

Determination of initial quotas

The initial quotas of the original members of the IMF were determined at the Bretton Woods Conference in 1944. Those of subsequent members have been determined by the IMF’s Board of Governors, on the basis of principles consistent with those applied to existing members. When a country applies for membership, the IMF analyzes data on its economy (GDP, current account transactions in its balance of payments, and official reserves) and calculates a quota range (calculated quota). The staff then recommends a quota for the country that is within the range of quotas of existing members whose economic size and characteristics are comparable.

A membership committee of the Executive Board considers the staff’s recommendations on the quota and other terms and conditions of membership. The committee prepares a report for adoption by the Executive Board, which forwards a membership resolution to the Board of Governors for approval. The country becomes a member of the IMF when it signs the IMF’s Articles of Agreement. It becomes eligible to use the IMF’s resources when it has paid its quota subscription and has met all other requirements of the membership resolution.

Review and adjustment of quotas

Under the Articles of Agreement, the Board of Governors is required to conduct a general review of members’ quotas at intervals of not more than five years. The review provides an opportunity to assess the adequacy of quotas in terms of both members’ needs for balance of payments assistance and the ability of the IMF to finance those needs. A general review also allows for adjustments of members’ quotas to reflect changes in their relative positions in the world economy. Thus, the main issues dealt with in general reviews have typically included both the size of an overall increase in quotas and the combination of equiproportional and selective adjustments within the overall increase. A member may request at any other time that the Board of Governors consider an adjustment of its quota. When quotas are increased, members normally pay 25 percent of their increase in SDRs, although the IMF may prescribe payment in whole, or in part, in other members’ currencies, with their concurrence; members pay the balance of the quota increase in their own currency. A member’s quota cannot be increased until the member has consented to and paid for the increase.

Eleventh General Review

The Eleventh General Review of Quotas was completed in January 1998 and took effect on January 22, 1999, when members whose quotas represented more than 85 percent of the total of IMF quotas on December 23, 1997 had consented to the increases. Under the Eleventh Review, total IMF quotas will rise to SDR 212.0 billion from SDR 145.6 billion when all members have completed payment of their quota increases.

The main considerations underlying the size of the overall increase in quotas were the growth of world trade and payments; the scale of potential payments imbalances, including those that might stem from sharp changes in private capital flows; the prospective demand for IMF resources in support of members’ economic programs; the rapid globalization and liberalization of trade and payments, including the capital account, that had characterized the development of the world economy since the previous quota increase in 1990; and the weakening of the IMF’s liquidity position as a consequence of the continued heavy demand for IMF resources.

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