A Challenging Imperative: IMF Reform, the 17th Quota Review and Increasing Voice and Representation for Developing Countries

Quotas are at the core of the International Monetary Fund (IMF)’s finances and governance. Beyond serving as the IMF’s primary funding source to support IMF lending and operations, quotas shape members’ access to financing, allocation of Special Drawing Rights (SDRs) and voting power. 

This year, the IMF stands at a crossroads as it is set to undergo its 17^th General Quota Review (GQR). Without an increase in quotas, the IMF will struggle to fulfill its mission of preventing and mitigating balance of payments crises and ensuring financial stability. However, applying the quota formula—agreed upon by major shareholders and the broader membership in 2008 (under the 14^th GQR)—appears politically unfeasible in the current environment.

As the 17^th GQR approaches, IMF members face a difficult proposition: how can they boost financial resources for crisis response while also reforming governance to maintain legitimacy and credibility? 

A new report by Maia Colodenco, Florencia Asef Horno and Marina Zucker-Marques explores ways to better align the 17^th GRQ with the growing economic importance of emerging market and developing economies (EMDEs), while also increasing their voice and representation in IMF governance. They examine the trade-offs between different options for achieving this. 

First, they assess “politically feasible” quota realignment, exploring whether utilizing the current IMF formula or implementing quota reform is the better option. Second, they analyze EMDEs’ voting power within the IMF, including scenarios that involve increasing IMF basic votes to restore their original levels. Finally, they explore additional IMF reforms aimed at enhancing legitimacy, amplifying EMDEs’ voice and compensating countries that may lose quotas shares from changes. 

The report shows that to find a balance between maximizing the representation of EMDEs as a group and pursuing a politically feasible proposal, it is necessary to modify the current quota formula. 

Key findings:

• The choice of variables (and their weight) in the IMF formula produces results biased toward advanced economies. Two examples are that the IMF formula relies on Market Exchange Rates (MER) rather than Purchasing Power Parity (PPP) as a measure for gross domestic product (GDP), further undervaluing EMDEs’ weight in the global economy. Second, the IMF’s Openness variable double counts cross-border flows producing biased results in favor of advanced economies.

• Typically, the quota formula applies to newly created quotas, not redistributing existing ones, but if the entire quota distribution were realigned strictly following the current IMF formula:

  • US voting power would drop to 13.99 percent, causing it to lose its veto power at the IMF. While there are legitimate claims that one country should not have so much control over an international organization, this option is a non-starter for current negotiations; 

  • China’s voting share would more than double from 6.08 percent to 13.84 percent and almost surpass the US. In order to maintain the legitimacy of the IMF, any new quota allocation must at least in part recognize China’s significant economic growth, but such a large increase for China could be equally politically unfeasible in the current environment; and 

  • Countries at the lower end of the income distribution would lose quota shares, rather than increase it. Emerging market and developing regions outside of Asia and Europe would also lose voting power. Countries in sub-Saharan Africa, Middle East and Central Asia, and Latin America and the Caribbean would be particularly vulnerable to losing shares due to their low growth trajectories. 

• Scenarios aimed at correcting asymmetries in the current IMF formula, through increase of basic votes alone, would benefit the vast majority of developing countries but penalize China, making it also likely politically unfeasible. 

Policy recommendations:

To increase the voice and representation of EMDEs, particularly of those at the bottom of the income distribution, the IMF membership should: 

• Simplify the IMF quota formula to serve as a clearer guide for future realignments.
• Complement the revised formula with mechanisms to compensate the poorest EMDEs that would end with lower quota shares. 
• Increase IMF basic votes, helping to mitigate voting power disparities and transforming the IMF in a more democratic organization. 
• Increasing IMF basic votes alone will not correct China’s quota misalignments; this must be combined with a quota adjustment that increases China’s weight, either through a new formula or an ad hoc quota increase. 
• Implement broader governance reforms, including strengthening Executive Board representation, reforming leadership selection, separating the multiple roles of quotas and leveraging multilateral forums for reform consensus.

Ultimately, the authors argue that without bold reforms that reflect the growing economic weight of EMDEs, the IMF risks losing legitimacy and becoming less effective in addressing global financial challenges. The 17^th GQR is not just an opportunity—it is a necessity to realign quotas, strengthen governance and ensure that the IMF remains fit for purpose in a rapidly changing global economy.