Historic Quota and Governance Reforms Become Effective in IMF
The amendment to the IMF’s Articles of Agreement creating an all-elected IMF’s Executive Board (Board Reform Amendment) entered into force yesterday. The Board Reform Amendment was part of a broader package of quota and governance reforms, which also included a doubling of IMF quotas under the 14th General Review of Quotas and a major shift in quota shares toward dynamic emerging market and developing countries. The quota increases under the 14th Review, which were conditional on the entry into force of the Board Reform Amendment, are expected to come into effect in the coming weeks. [Link: http://www.imf.org/external/np/sec/misc/consents.htm#a2]
The reforms represent a major step toward better reflecting in the institution’s governance structure the increasing role of dynamic emerging market and developing countries. The entry into force of these reforms will reinforce the credibility, effectiveness, and legitimacy of the IMF. For the first time four emerging market countries (Brazil, China, India, and Russia) will be among the 10 largest members of the IMF. The reforms also increase the financial strength of the IMF, by doubling its permanent capital resources to SDR 477 billion (about US\\$659 billion).
“I commend our members for ratifying these truly historic reforms,” IMF Managing Director Christine Lagarde said. “These reforms will ensure that the Fund is able to better meet and represent the needs of its members in a rapidly changing global environment. Today marks a crucial step forward and it is not the end of change as our efforts to strengthen the IMF’s governance will continue.”
Background information and useful links:
The entry into force of the Board Reform Amendment approved by the Board of Governors in 2010 required the acceptance by three fifths of the Fund’s members representing 85 percent of the total voting power. The entry into force was also a general effectiveness condition for the quota increases under the 14th General Review of Quotas. With the entry into force of the Board Reform Amendment and all other general effectiveness conditions met, members can now pay for their quota increases to make them effective. This process is expected to be substantially completed within one month.1
The 2010 Quota and Governance reforms were approved by the IMF’s Board of Governors in December 2010 (see Press Release No. 10/477) and built on an earlier set of reforms that were approved by the Governors in April 2008.
Main Outcomes of the 2010 Quota Reforms:
• The quotas of each of the IMF’s 188 members will increase to a combined SDR 477 billion (about US\\$659 billion) from about SDR 238.5 billion (about US\\$329 billion).
• More than 6 percent of quota shares will shift to dynamic emerging market and developing countries and also from over-represented to under-represented IMF members.
• Four emerging market countries (Brazil, China, India, and Russia) will be among the 10 largest members of the IMF. Other top 10 members include the United States, Japan, and the four largest European countries (France, Germany, Italy, and the United Kingdom).
• The quota shares and voting power of the IMF’s poorest member countries will be protected.
• For the first time, the IMF’s Board will consist entirely of elected Executive Directors, ending the category of appointed Executive Directors (currently the members with the five largest quotas appoint an Executive Director).
• The scope for appointing a second Alternate Executive Director in multi-country constituencies with seven or more members has been increased to enhance these constituencies’ representation in the Executive Board. As a result, 13 constituencies—including both African constituencies—are currently eligible to appoint an additional Alternate Executive Director.
• Advanced European countries have committed to reduce their combined Board representation by two chairs.
• Following the effectiveness of the 14th General Review of Quotas, the focus will now turn to work on the 15th General Review of Quotas and securing the necessary broad consensus, including on a new quota formula.
Additional Background:
IMF Executive Board Approves Major Overhaul of Quotas and Governance
http://www.imf.org/external/np/sec/pr/2010/pr10418.htm
IMF Quota and Governance Publications
http://www.imf.org/external/np/fin/quotas/pubs/index.htm
Quota Factsheet
http://www.imf.org/external/np/exr/facts/quotas.htm
How the IMF Makes Decisions Factsheet
http://www.imf.org/external/np/exr/facts/govern.htm
1 To make their respective new quotas effective, members must make their quota payments within 30 days of the latter of (i) the date on which the member consents to its new quota or (ii) the date on which the 14th Review General increase in quotas goes into effect. As of January 26, 2016, members representing close to 98 percent of total quotas had already consented to their quota increases.
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