Public Information Notice: IMF Executive Board Discusses Quota Formula Review

December 20, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

Public Information Notice (PIN) No. 12/145
December 20, 2012

On November 28, 2012, the Executive Board of the International Monetary Fund (IMF) held further discussions on the review of the quota formula. The background for the discussion was provided by a staff paper on Quota Formula Review—Further Considerations.


In September 2012, the Executive Board held its third formal discussion on the comprehensive review of the quota formula. At that meeting, Directors reaffirmed their commitment to complete the review by the January 2013 deadline in a spirit of cooperation and compromise, and reiterated that the current review should continue to be underpinned by the principles agreed as part of the 2008 reform. The discussion highlighted several areas where broad consensus is emerging as well as areas where views continue to diverge.

The November staff paper explores the scope for further narrowing differences ahead of the January deadline. It examines a number of issues and focuses on the implications of a range of possible reforms of the formula. The illustrative simulations include dropping variability from the formula and allocating the freed-up weight to GDP only, or to a combination of GDP and openness. The paper also explores the implications of changes in the composition of the GDP blend, a cap on openness, higher compression, and the inclusion of a measure of financial contributions in the quota formula. The simulations are intended to help advance the discussions and do not represent staff proposals.

Executive Board Assessment

Executive Directors welcomed the opportunity to continue discussions on the quota formula review. They took note of the simulations in the latest staff paper that sought to build on the previous discussion, as reflected in the summing up of the September meeting, with a view to narrowing the remaining differences. Directors reiterated their commitment to concluding the review by January 2013, and again underlined the importance of flexibility and compromise from all sides.

Today’s discussion has highlighted several areas of common ground. These include:

• that the review should continue to be underpinned by the principles agreed as part of the 2008 reform;

• that GDP should remain the most important variable in the formula—with most Directors supporting an increase in its weight, particularly if variability is dropped, while a number of others prefer to either keep the current weight or maintain it relative to that of openness;

• support from most Directors representing a majority of the Board for dropping variability from the formula, although some Directors condition their support on other elements of a package, including how the weight of variability will be reallocated. A number of other Directors see a continued role for variability;

• support from most Directors for retaining reserves with its current small weight, with a few favoring a higher weight;

• support from most Directors to keep compression, with many able to support a higher level, while a number of others stress that the previous difficult compromise on the level of compression should not be reopened; and

• protecting the voice and representation of the poorest members, with many Directors seeing this as an issue that can be addressed as part of the Fifteenth General Review of Quotas, and a few considering inclusion of a measure of population as a way to protect low-income countries. A few Directors see a role for an increase in the proportionate share of basic votes to protect the poorest members.

Beyond these elements of consensus, several differences remain. One such difference is over the composition of the GDP blend variable, where many Directors favor or could accept retaining the current blend, noting that it was a difficult compromise that should not be reopened, while many others support a higher weight for PPP GDP, which would increase the share of emerging market and developing countries.

Views on openness also diverge. Many Directors support keeping the variable as currently defined in the quota formula, with a number of them in favor of increasing the weight if variability is eliminated. A few of these Directors are willing to consider a cap on openness as a way to bridge differences, while a number of others cannot agree to capping openness. On the other hand, a few Directors remain of the view that openness should be eliminated from the formula, and a few others would consider keeping openness if it is capped or compressed. A number of Directors do not support retaining or increasing the weight of financial openness, while a few Directors prefer a higher weight.

Many Directors favor or are open to including a measure of financial contributions in the formula. However, many others oppose such a move, with a number of them being open to recognizing particularly generous contributions outside of the formula as part of the Fifteenth General Review of Quotas.

To conclude, it is clear from today’s discussion that progress is being made, but that positions have yet to converge on several key issues. Directors have reiterated their commitment to concluding the review by January 2013. In this context, a number of Directors have suggested that understandings related to the outcome of the Fifteenth General Review of Quotas may allow greater flexibility for some chairs and help to promote a compromise. At the same time, some Directors have noted that they could consider maintaining the current formula as a back-up option, while some others have emphasized the importance of substantial reform to the formula.

We will need to reflect further on prospects for narrowing the remaining differences. As called for by Directors, management and staff will actively engage with the Board on how best to move forward in concluding the review within the short remaining time available. In this context, Directors look forward to input from the meeting of IMFC Deputies planned for early January.


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