The Executive Board of the International Monetary Fund (IMF) approved proposals that will lead to a major overhaul of the IMF quotas and governance, strengthening the Fund’s legitimacy and effectiveness.
“This historic agreement is the most fundamental governance overhaul in the Fund’s 65-year history and the biggest ever shift of influence in favor of emerging market and developing countries to recognize their growing role in the global economy,” IMF Managing Director Dominique Strauss-Kahn said after the Executive Board’s decision.
As part of the far-reaching reforms, the Executive Board proposes completion of the 14th General Review of Quotas with a doubling of quotas to approximately SDR 476.8 billion (about US$755.7 billion at current exchange rates) and a major realignment of quota shares among members. It will result in a shift of more than 6 percent of quota shares to dynamic emerging market and developing countries and more than 6 percent from over-represented to under-represented countries, while protecting the quota shares and voting power of the poorest members. The Board also endorsed proposals that would lead to a more representative, all-elected Executive Board.
The Executive Board, which oversees the Fund’s day-to-day operations, recommended the reform package to the Board of Governors, which represents all 187 members and must approve the proposed quota increases and a proposed amendment of the Articles of Agreement that would eliminate the category of appointed Executive Directors. Following the Board of Governors’ approval, the proposed quota increases and the amendment will have to be accepted by the membership, which in many cases involves parliamentary approval, and which members will make best efforts to complete by the Annual Meetings 2012.
“The doubling of quotas maintains the quota-based nature of the Fund, and ensures its ability to serve its membership in times of crisis. A fairer allocation of quota shares reflecting better our members’ economic importance, together with a more representative Executive Board, will enhance the credibility and effectiveness of the Fund’s ongoing efforts towards greater global financial stability,” Mr. Strauss-Kahn said.
“The reforms build on those initiated in 2008 and, combined with the earlier steps, the voting shares of emerging market and developing countries as a group will rise by well over 5 percentage points,” he added. “The package we have arrived at is a balanced one. The negotiations have not been easy, but our members have shown a willingness to compromise and to demonstrate the flexibility needed to reach an agreement for the greater common good. For that I thank each and every member country—all the various national authorities that have made great efforts in advancing these discussions, including Korea which played an important role in bringing together the G-20 two weeks ago. I look forward to the Board of Governors’ approval of these reforms.”
The quota shift would exceed the target set out in October 2009 by ministers and governors in the International Monetary and Financial Committee (IMFC)—the Fund’s policy-advisory body—of a shift in quota share to dynamic emerging market and developing countries of at least 5 percent from over-represented countries to under-represented countries, while the voting share of the poorest members is protected. The 10 largest members of the Fund will consist of the United States, Japan, the “BRICs” (Brazil, China, India, the Russian Federation), and the four largest European countries (France, Germany, Italy, the United Kingdom). The Executive Board endorsed a timeline that calls for the quota increase and realignments to take effect by the Annual Meetings of October 2012, and Executive Board reforms to be implemented no later than the subsequent Executive Board election, which is scheduled in late 2012, the IMF press service reported.
