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IMF Quota and Governance Reform

IMF Quota and Governance Reform

The IMF’s ongoing relevance, effectiveness and legitimacy depends on governance arrangements that represent the interests of all members, with quota shares that adequately reflect members’ relative weights in the global economy.

In December 2010, the Board of Governors of the IMF agreed to a package of reforms that improved the representation of emerging market and developing economies and protected the representation and voice of low-income countries. As the deadline set by these commitments has passed, the full implementation of these reforms as soon as possible remains a key priority.As of 15 January 2013, 130 members having 70.2 per cent of total voting power (less than the 85 per cent of the IMF’s total voting power required for the amendment to enter into force) had accepted the amendment on the 2010 reform of the IMF Executive Board. In addition, 145 members (having 77.1 per cent of total quota, more than the 70 per cent needed) have consented to the quota increases under the 14th General Review of Quotas (GRQ). The quota increase cannot become effective until the voting threshold for the governance reform has been reached.

As part of the 2010 reforms, the Board of Governors asked the IMF Executive Board to conduct a comprehensive review of the quota formula by January 2013. In 2012, the G20 provided leadership in advancing this review. In April 2012 Finance Ministers indicated they would continue to contribute towards its timely completion in January 2013, and to completing the next (15th) GRQ by January 2014. This view was reaffirmed by Leaders at Los Cabos in June 2012 and by Finance Ministers in Mexico City in November 2012.

On 30 January 2013, the IMF Executive Board decided to integrate the quota formula discussions with the 15th GRQ. The report presented to the IMF Executive Board confirms that there are some areas of broad support, such as that GDP needs to remain the most important variable with the largest weight in the formula and scope to further increase its weight, that openness should continue to play an important role in the formula and concerns regarding this variable need to be thoroughly examined and addressed, and that variability should be dropped from the formula. While the review fell short of any specific amendment to the quota formula, it has provided building blocks for a future agreement on a new quota formula.

The IFA Working Group will continue to contribute to finalising the quota formula discussions and the 15th GRQ, to ensure an outcome consistent with the spirit of the previous G20 commitments and the important role the G20 has played in IMF governance reform. The G20 will continue to provide input and momentum to the work of the IMF in this regard. This will include commencing consideration of the IMF quota increase in the context of the 15th GRQ. Additionally, the work on the quota formula should be progressed significantly, noting the 2011 data that updates individual calculated quota shares will be available from the middle of 2013.The G20 will be encouraged to continue working on further development of the Regional Financial Arrangements and strengthening of their cooperation with the IMF.