Counting on the International Monetary Fund: Aligning the IMF Quota System with Global Need

In December 2023, the International Monetary Fund (IMF) is scheduled to conclude its 16^th General Review of Quotas, a process required by the IMF’s Articles of Agreement. The IMF’s quota system is vital because it determines the financial contribution of member countries, the distribution of voting power at the Fund and access to financing mechanisms and Special Drawing Rights (SDR) allocations, or the IMF’s international reserve asset. The 16^th General Review of Quotas comes at a pivotal time of polycrisis for the global financial system and presents the Fund with an opportunity to not only increase the size of the IMF’s quota-based resources to respond to global crisis but also reform and align its governance for more voice and representation for emerging market and developing economies (EMDEs). 

A new report by William N. Kring and Haihong Gao presents the key lessons that emerged from a December 2022 workshop on IMF quota reform hosted by the Boston University Global Development Policy Center. It outlines concrete steps for IMF shareholders to ensure that the IMF remains a legitimate, quota-based anchor of the Global Financial Safety Net (GFSN), the collection of global, regional and bilateral institutions designed to help provide short-term crisis finance.

Deliberations during the workshop resulted in four key principles that should guide IMF shareholders during the 16^th General Review of Quotas in order to ensure a stepwise increase in quota-based resources at the IMF and an increase in the voice and representation of EMDEs.

Findings and Synthesized Policy Recommendations:

• IMF shareholders must commit to consistently conducting General Reviews of Quotas in accordance with the IMF’s Articles of Agreement.
• The IMF’s quota-based resources should be scaled-up so that it is sufficiently resourced to serve as the anchor of the GFSN.
• The IMF needs to reform the composition of the IMF’s lending resources towards permanent, quota-based resources and away from temporary, borrowed sources of funding.
• Any increase in the IMF’s quota-based resources should be accompanied by a realignment of members’ quota shares to reflect the increased economic weight of dynamic EMDEs in the global economy. 

Workshop participants recognized that the reform process will be incredibly complex with shifting power balances, and change is also likely to be incremental. Nonetheless, these principles of reform must be advanced by IMF shareholders to reaffirm the IMF’s role at the center of the GFSN and reestablish its legitimacy.