TheCable

The International Monetary Fund (IMF) has approved a proposal requesting a 50 percent increase in quotas for its members.

The approval, given by the executive board on Tuesday, seeks to “safeguard global financial stability and respond to members’ potential needs in an uncertain and shock-prone world”.

IMF quota determines the maximum amount of loans a member can obtain from the IMF under normal access.

Quotas determine a member’s share in a general allocation of special drawing rights (SDRs), conducted at least every five years.

It also determines the maximum amount of financial resources a member is obliged to provide to the IMF.

Speaking after the executive board’s decision, Kristalina Georgieva, IMF’s managing director, said the 16th review with a quota increase will help preserve a strong, quota-based, and adequately resourced IMF at the centre of the global financial safety net.

“The proposal is centered around an increase in quotas of 50 percent, allocated to members in proportion to their current quotas,” Georgieva said.

“The quota increase would enhance the IMF’s permanent resources and strengthen the quota-based nature of the fund by reducing the reliance on borrowing and thus ensuring the primary role of quotas in fund resources.

“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.”

Georgieva said that 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.

She said another critical element of the proposal was 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.

“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 17th Review,” IMF boss said.

“As the world grapples with rising fragmentation, today’s decision is a strong signal that the membership can still come together in support of cooperative solutions that instill confidence in the IMF’s ability to effectively support its membership and 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 percent majority of the total voting power.