IMF Executive Board approves 50% quota increase to provide vital resources to developing nations

The Executive Board of the International Monetary Fund has approved a proposal to increase the quota. The proposal involves a 50 per cent quota increase allocated to members in proportion to their current quotas. Now, the proposal will be considered and voted on by the Board of Governors, after which it will be made effective.

“The quota increase would help safeguard global financial stability by enhancing the IMF’s permanent resources and reducing reliance on borrowed resources. The proposal also includes a call for work to develop, by June 2025, possible approaches as a guide for further quota realignment,” IMF said in a statement after a meeting of the Executive Board in Washington on Tuesday.

As on date, India has a quota of 13,114.4 SDR which denotes a share of 2.75 per cent. Based on this, India has 1,32,063 votes, which denotes a share of 2.63 per cent. All these will grow when an increase in quota will be made effective..

Boosting global financial stability

Quotas are the building blocks of the IMF’s financial and governance structure. An individual member country’s quota broadly reflects its relative position in the world economy. Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account. These determine the maximum amount of financial resources a member is obliged to provide to the IMF. These are also key determinants of voting power besides the maximum amount of loan a member can avail.

“Concluding the 16 ^th Review with a quota increase will help preserve a strong, quota-based and adequately resourced IMF at the center of the Global Financial Safety Net. An adequately resourced IMF is essential to safeguard global financial stability and respond to members’ potential needs in an uncertain and shock-prone world,” IMF Managing Director Kristalina Georgieva said after the Executive Board’s decision.

The proposal envisages that once quota increases are in effect, borrowed resources comprising the Bilateral Borrowing Agreements and New Arrangements to Borrow (NAB) would be reduced to maintain the Fund’s current lending capacity.

The membership has also acknowledged the urgency and importance of quota share realignment to better reflect members’ relative positions in the world economy while protecting the quota shares of the poorest members, and many members would have supported a quota realignment now, together with the proposed quota increase. Hence, another critical element of today’s proposal is a call on the Executive Board to work to develop, by June 2025, possible approaches as a guide for further quota realignment, including through a new quota formula, under the 17 ^th General Review of Quotas. Work to implement this guidance will begin as soon as feasible after the conclusion of the 16^th Review.

“The proposed quota increase comes at a complex time for the global economy and the IMF’s membership. In the spirit of international cooperation, I am hopeful this proposal will garner the broadest possible support from the membership, and that we will then make progress on a quota realignment under the 17^th Review,” Georgieva said.

According to her, as the world grapples with rising fragmentation, today’s decision is a strong signal that the membership can still come together to support cooperative solutions that instil confidence in the IMF’s ability to effectively support its membership navigate a challenging global landscape. The Executive Board has requested that the Board of Governors vote on this proposal by December 15, 2023. Approval by the Board of Governors requires an 85 per cent majority of the total voting power.

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