Understanding the IMF's quota debate
| Author | Leo Van Houtven |
| Position | President of the Per Jacobsson Foundation and former IMF Secretary and Counsellor to the Managing Director |
| Pages | 325-339 |
Page 325
As part of its medium-term strategy, the IMF is seeking to reform its governance structure. It recently increased the quotas of four severely underrepresented countries and is now looking to redefine the formula that is used to calculate members' quotas and voting power. The IMF's former Secretary, Leo van Houtven, provides a historical perspective to the current debate over quota reform, maps out the different players, and examines their arguments.
Page 338
At the recent IMF-World Bank Annual Meetings in Singapore, the IMF's 184 Governors debated Managing Director Rodrigo de Rato's proposal for governance reform. His strategy, endorsed by an overwhelming majority of the governors, involved ad hoc quota increases for four countries-China, Korea, Mexico, and Turkey-whose calculated quotas are most seriously out of line with their actual quotas, and a two-year work program on a new quota formula. The IMF is hoping that its Executive Board will reach agreement by the fall of 2007 on a new formula to be implemented by the 2008 Annual Meetings.
In recent years, the media, policymakers, international observers, and nongovernmental organizations have repeatedly questioned whether the mandate and governance structure of the IMF adequately serves the needs of all its members. The critics argue that management and decision making in the IMF-a global institution in which industrial countries control more than 60 percent of the capital-should be reformed to make it more legitimate, participatory, and accountable. The initiative of the Managing Director reflects the importance of ensuring that the IMF remains an effective institution in the globalized economy of today.
Quotas determine the voting strength of each IMF member in decisions made by the Board of Governors and the Executive Board (see box). Changes in quotas require the backing of 85 percent of the membership. A quota also cannot be reduced without a member's consent.
Past experience has shown that a redistribution of quotas and quota shares has the greatest chance of winning approval if it is presented as part of a package that includes a general quota increase and other elements in which all members find more to vote for than to vote against. In January 2003, the Fund concluded its twelth general review of quotas...
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