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IMF-II
(International Monetary Fund-II)
QUOTA
Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 1
International Monetary Fund
QUOTA
Quota subscriptions generate most of the IMF's financial
resources.
Each member country ...
On December 15, 2010, the Board of Governors, the Fund’s
highest decision-making body, approved a package of far-
reaching...
The 14th General Review of Quotas will:
• Double quotas from approximately SDR 238.4 billion to
approximately SDR 476.8 bi...
• The IMFC noted
that quota reform is
crucial for
increasing the
legitimacy and
effectiveness of the
Fund, and stressed
th...
Quotas play several key roles in the IMF
International Monetary Fund
QUOTA
Subscriptions (quota share). A member's quota s...
International Monetary Fund
QUOTA
Voting power (voting share). The quota largely determines a member's
voting power in IMF...
International Monetary Fund
QUOTA
Access to financing. The amount of financing a member can obtain
from the IMF (its acces...
How quota reviews work
•The IMF's Board of Governors
conducts general quota reviews at
regular intervals (usually every
fi...
General Quota Reviews
Quota Review
Date Resolution Adopted
Overall Quota Increase
(percent)
First Quinquennial No increase...
• When a country joins the IMF, it is assigned an
initial quota in the same range as the quotas of
existing members that a...
• The current quota formula is a weighted average of
GDP (weight 50 percent)
Openness (weight 30 percent)
Economic variabi...
Where CQS = calculated quota share
= (0.5*Y + 0.3*O + 0.15*V + 0.05*R ) k
International Monetary Fund
QUOTA
Y = a blend of...
k = a compression factor of 0.95. The compression factor is applied to the
uncompressed calculated quota shares which are ...
• Quotas are denominated in Special Drawing Rights (SDRs), the
IMF’s unit of account.
• The largest member of the IMF is t...
International Monetary Fund
QUOTA
 GDP (billion $, Current Prices)      Shaded cells indicate IMF staff estimates
Country
...
Asian Countries GDP billion US $ (Current Prices)
    GDP US $ (billion)  Asian Countries.  Shaded cells indicate IMF staf...
Developed Countries Per Capita GDP (US $ Current
Prices)
       Shaded cells indicate IMF staff estimates
Country   2008 2...
Asian Countries Per Capita GDP (US $ Current
Prices)
       Shaded cells indicate IMF staff estimates
Country 2008 2009 20...
Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 20
United States 17.670
Japan 6.556
Germany 6.110
France 4.505
United Kingdom 4.505
China 3.996
Italy 3.306
Saudi Arabia 2.93...
Mexico 1.521
Switzerland 1.451
Korea 1.412
Australia 1.358
Venezuela 1.115
Sweden 1.005
Argentina 0.888
Austria 0.887
Indo...
Casting Votes of
Votes by
Country
Total
Votes1
Percent
of Fund
Total2
United States 421,960 421,960 16.88
Japan 157,021 15...
How the IMF Makes Decisions
Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 24
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IMF-3
Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 25
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IMF-PART-II

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It describes the system of IMF's Quota subscriptions that generates the most of the IMF's financial resources.

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Transcript of "IMF-PART-II"

  1. 1. IMF-II (International Monetary Fund-II) QUOTA Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 1
  2. 2. International Monetary Fund QUOTA Quota subscriptions generate most of the IMF's financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy. A member country's quota determines its • maximum financial commitment to the IMF, • its voting power, • and has a bearing on its access to IMF financing. Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 2
  3. 3. On December 15, 2010, the Board of Governors, the Fund’s highest decision-making body, approved a package of far- reaching reforms of the Fund’s quotas and governance, completing the 14th General Review of Quotas. Once the reform package is approved by member countries and implemented, it will result in an unprecedented 100 percent increase in total quotas and a major realignment of quota shares to better reflect the changing relative weights of the IMF’s member countries in the global economy. International Monetary Fund QUOTA Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 3
  4. 4. The 14th General Review of Quotas will: • Double quotas from approximately SDR 238.4 billion to approximately SDR 476.8 billion. • Shift more than 6 percent of quota shares from over-represented to under-represented member countries. • Shift more than 6 percent of quota shares to dynamic emerging market and developing countries. (EMDCs ) • China will become the 3rd largest member country in the IMF, and there will be four EMDCs (Brazil, China, India, Russia) among the 10 largest shareholders in the fund • Preserve the quota and voting share of the poorest member countries. those eligible for the low-income poverty reduction and growth trust (PRGT) and whose per capita income fell below US$1,135 in 2008 (the threshold set by the IDA) International Monetary Fund QUOTA Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 4
  5. 5. • The IMFC noted that quota reform is crucial for increasing the legitimacy and effectiveness of the Fund, and stressed that the IMF is and should remain a quota-based institution. • A comprehensive review of the current quota formula will be completed by January 2013. • Completion of the 15th General Review of Quotas will be brought forward by about two years to January 2014. International Monetary Fund QUOTA Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 5
  6. 6. Quotas play several key roles in the IMF International Monetary Fund QUOTA Subscriptions (quota share). A member's quota subscription determines the maximum amount of financial resources the member is obliged to provide to the IMF. A member must pay its subscription in full upon joining the Fund: up to 25 percent must be paid in SDRs or widely accepted currencies (such as the U.S. dollar, the euro, the yen, or the pound sterling), while the rest is paid in the member's own currency. 1 Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 6
  7. 7. International Monetary Fund QUOTA Voting power (voting share). The quota largely determines a member's voting power in IMF decisions. Each IMF member’s votes are comprised of basic votes plus one additional vote for each SDR 100,000 of quota. The 2008 reform fixed the number of basic votes at 5.502 percent of total votes, which initially increased the number of basic votes from 250 to 677 votes per member. The number of basic votes will keep increasing as members that are eligible for ad hoc quota increases under the 2008 reform pay for their quota increases and will have almost tripled once all the quota increases under the 2008 reform become effective.   2 Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 7
  8. 8. International Monetary Fund QUOTA Access to financing. The amount of financing a member can obtain from the IMF (its access limit) is based on its quota. For example, under Stand-By and Extended Arrangements, a member can borrow up to 200 percent of its quota annually and 600 percent cumulatively. However, access may be higher in exceptional circumstances. 3 Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 8
  9. 9. How quota reviews work •The IMF's Board of Governors conducts general quota reviews at regular intervals (usually every five years). •Any changes in quotas must be approved by an 85 percent majority of the total voting power, and a member’s quota cannot be changed without its consent. •There are two main issues addressed in a general quota review: the size of an overall increase and the distribution of the increase among the members. •First, a general quota review allows the IMF to assess the adequacy of quotas both in terms of members’ balance of payments financing needs and in terms of its own ability to help meet those needs. •Second, a general review allows for increases in members’ quotas to reflect changes in their relative positions in the world economy. Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 9
  10. 10. General Quota Reviews Quota Review Date Resolution Adopted Overall Quota Increase (percent) First Quinquennial No increase proposed --- Second Quinquennial No increase proposed --- 1958/59 1 February and April 1959 60.7 Third Quinquennial No increase proposed --- Fourth Quinquennial March 1965 30.7 Fifth General February 1970 35.4 Sixth General March 1976 33.6 Seventh General December 1978 50.9 Eighth General March 1983 47.5 Ninth General June 1990 50.0 Tenth General No increase proposed --- Eleventh General January 1998 45.0 Twelfth General No increase proposed --- Thirteenth General No increase proposed --- Fourteenth General __ 100.0 Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 10
  11. 11. • When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members that are broadly comparable in economic size and characteristics. • The IMF uses a quota formula to guide the assessment of a member’s relative position. International Monetary Fund QUOTA Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 11
  12. 12. • The current quota formula is a weighted average of GDP (weight 50 percent) Openness (weight 30 percent) Economic variability (weight 15 percent) International reserves (weight 05 percent) For this purpose, GDP is measured as a blend of GDP based on market exchange rates (weight of 60 percent) + PPP exchange rates (40 percent). The formula also includes a “compression factor” that reduces the dispersion in calculated quota shares across members. International Monetary Fund QUOTA Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 12
  13. 13. Where CQS = calculated quota share = (0.5*Y + 0.3*O + 0.15*V + 0.05*R ) k International Monetary Fund QUOTA Y = a blend of GDP converted at market rates and PPP exchange rates averaged over a three year period. The weights of market-based and PPP GDP are 0.60 and 0.40, respectively; O = the annual average of the sum of current payments and current receipts (goods, services, income, and transfers) for a five year period; V = variability of current receipts and net capital flows (measured as a standard deviation from the centered three-year trend over a thirteen year period); Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 13
  14. 14. k = a compression factor of 0.95. The compression factor is applied to the uncompressed calculated quota shares which are then rescaled to sum to 100 International Monetary Fund QUOTA R = twelve month average over a year of official reserves (foreign exchange, SDR holdings, reserve position in the Fund, and monetary gold); Where CQS = calculated quota share = (0.5*Y + 0.3*O + 0.15*V + 0.05*R ) k Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 14
  15. 15. • Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account. • The largest member of the IMF is the United States, with a current quota of SDR 37.1 billion (about $58 billion), • the smallest member is Tuvalu, with a current quota of SDR 1.8 million (about $2.7 million). International Monetary Fund QUOTA Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 15
  16. 16. International Monetary Fund QUOTA  GDP (billion $, Current Prices)      Shaded cells indicate IMF staff estimates Country Units (billion) 2008 2009 2010 2011   United States U.S. $ 14,369.08 14,119.05 14,624.18 15,157.29   Japan U.S. $ 4,886.95 5,068.89 5,390.90 5,683.29   Germany U.S. $ 3,651.62 3,338.68 3,305.90 3,358.24   France U.S. $ 2,865.23 2,656.38 2,555.44 2,590.79   U K U.S. $ 2,679.01 2,178.86 2,258.57 2,395.48   Relative Economic Strength of Developed Countries Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 16
  17. 17. Asian Countries GDP billion US $ (Current Prices)     GDP US $ (billion)  Asian Countries.  Shaded cells indicate IMF staff estimates Country 2008 2009 2010 2011   China 4,519.95 4,984.73 5,745.13 6,422.28   India 1260.619 1,236.94 1,430.02 1,598.39   Indonesia 511.489 539.377 695.059 776.976   Thailand 272.429 263.979 312.605 334.026   Malaysia 222.272 192.955 218.95 236.555   Philippines 167.167 161.196 189.061 212.657   Pakistan 163.892 161.994 174.792 190.204   Bangladesh 84.462 94.602 105.402 115.222   Vietnam 90.274 93.164 101.987 113.627   Sri Lanka 39.597 42.203 48.241 52.552   Relative Economic Strength of Asian Countries Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 17
  18. 18. Developed Countries Per Capita GDP (US $ Current Prices)        Shaded cells indicate IMF staff estimates Country   2008 2009 2010 2011   United States   47,155.32 45,934.47 47,131.95 48,387.29   Japan   38,271.30 39,740.27 42,325.23 44,682.34   Germany   44,524.95 40,831.66 40,511.83 41,235.74   France   45,991.04 42,412.63 40,591.43 40,965.40   United Kingdom   43,651.55 35,257.45 36,298.39 38,239.51   Relative Economic Strength (per capita) of Developed Countries Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 18
  19. 19. Asian Countries Per Capita GDP (US $ Current Prices)        Shaded cells indicate IMF staff estimates Country 2008 2009 2010 2011   Malaysia     8,142.62 6,950.47 7,754.99 8,238.51   Thailand     4,107.79 3,940.97 4,620.71 4,888.46   China     3,403.53 3,734.61 4,282.89 4,763.87   Indonesia     2,237.72 2,329.45 2,963.28 3,270.01   Sri Lanka     1,971.49 2,084.87 2,364.62 2,558.45   India     1,066.46 1,031.59 1,176.06 1,296.68   Vietnam     1,047.54 1,068.26 1,155.57 1,272.18   Pakistan     1,018.15 989.13 1,049.31 1,122.94   Bangladesh     527.887 583.164 640.847 690.718   Relative Economic Strength (per capita) of Asian Countries Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 19
  20. 20. Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 20
  21. 21. United States 17.670 Japan 6.556 Germany 6.110 France 4.505 United Kingdom 4.505 China 3.996 Italy 3.306 Saudi Arabia 2.930 Canada 2.672 Russia 2.494 India 2.442 Netherlands 2.166 Belgium 1.932 Brazil 1.783 Spain 1.688 Distribution of Quotas by Member (percent) Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 21
  22. 22. Mexico 1.521 Switzerland 1.451 Korea 1.412 Australia 1.358 Venezuela 1.115 Sweden 1.005 Argentina 0.888 Austria 0.887 Indonesia 0.872 Denmark 0.793 Norway 0.790 South Africa 0.784 Malaysia 0.744 Nigeria 0.735 Poland 0.708 Distribution of Quotas by Member (percent) Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 22
  23. 23. Casting Votes of Votes by Country Total Votes1 Percent of Fund Total2 United States 421,960 421,960 16.88 Japan 157,021 157,021 6.28 Germany 146,391 146,391 5.86 France 108,121 108,121 4.32 United Kingdom 108,121 108,121 4.32 China 95,995 95,995 3.84 India 58,951 70,689 2.83 Russian Fed 60,190 60,190 2.41 Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 23
  24. 24. How the IMF Makes Decisions Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 24
  25. 25. NEXT IMF-3 Tuesday, April 29, 2014 PROF. AJIR KUMAR RAY 25
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