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In completing the Fourteenth General Review of Quotas (hereafter the “Fourteenth Review”) and approving the proposed Amendment on the Reform of the Executive Board (hereafter the “Board Reform Amendment”), the Board of Governors requested the Executive Board to bring forward the timetable for completion of the Fifteenth General Review of Quotas (hereafter the “Fifteenth Review”) to January 2014.
Following the guidance on the Board of Governors Resolution No. 72-1 (December 2016), on September 21, 2018, the Executive Board discussed and adopted its third semi-annual report on progress on the Fifteenth Review. The report covered additional issues relating to both the adequacy of Fund resources and the quota formula and realigning quota shares, discussed in an informal meeting on July 30, 2018.
Following the guidance on the Board of Governors Resolution No. 72-1 (December 2016), on October 4, 2017, the Executive Board discussed and adopted its first semi-annual report on progress on the Fifteenth Review. The report covered issues related to the quota formula and realigning quota shares as well as issues related to the adequacy of Fund resources, discussed in informal meetings on September 1 and on September 15, 2017, respectively.
On January 16, 2020, the Executive Board adopted a Report to the Board of Governors proposing that the Board of Governors adopt a Resolution concluding the Fifteenth General Review of Quotas with no increase in quotas and providing guidance for the Sixteenth General Review of Quotas in line with the IMFC guidance in the October 19, 2019 Communiqué. The Resolution was adopted by the Board of Governors, effective February 7, 2020, and was designated No. 75-1.
Following the guidance on the Board of Governors Resolution No. 72-1 (December 2016), on April 3, 2019, the Executive Board discussed and adopted its fourth semi-annual report on progress on the Fifteenth Review. The report described that it had become evident that it would not be possible to secure the required support for a quota increase under the Fifteenth Review.
This paper provides background for an initial discussion under the Fifteenth General Review of Quotas (15th Review) in line with the work plan agreed by the Executive Board. It discusses issues related to further reforms of the quota formula and realigning quota shares, based on updated quota data through 2015. A companion paper, to be discussed separately, will address issues related to the size of the Fund and mix of quota and borrowed resources. Both these papers seek to facilitate initial discussions on some of the key issues for the 15th Review. No proposals are made at this stage, recognizing that further deliberations will be needed before the issues under discussion can begin to be narrowed down.
This paper provides background for a further round of discussions on the Fifteenth General Review of Quotas (hereafter 15th Review). The paper builds on work presented in previous staff papers and Directors’ views expressed in three meetings of the Committee of the Whole in September 2017 and February 2018. No proposals are presented at this stage, pending further Board guidance on possible approaches to narrowing the current differences of views.
A strong, quota-based, and adequately resourced IMF at the center of the Global Financial Safety Net is essential to safeguard global financial stability in an uncertain and shock-prone world. Building on three years of Committee of the Whole meetings, Executive Directors’ feedback, and recent guidance from the International Monetary and Financial Committee (IMFC), this paper sets out for consideration of the Executive Board a proposal for the conclusion of the Sixteenth General Review of Quotas (16th Review) with a 50 percent quota increase allocated to members in proportion to their quotas (“equiproportional increase”). The paper includes for the Executive Board’s approval a Report by the Executive Board to the Board of Governors (BoG) on such an increase, including a draft BoG Resolution. The proposed increase in quotas, once in effect, would replace Bilateral Borrowing Agreements and be linked to a rollback in credit arrangements under the New Arrangements to Borrow, in order to maintain the Fund’s lending capacity. The proposed quota increase would strengthen the quota-based nature of the Fund by reducing its reliance on borrowing, thus ensuring the primary role of quotas in Fund resources. Transitional arrangements for borrowed resources may be needed to maintain the Fund’s lending capacity beyond 2024 until the quota increase becomes effective. Given significant differences in views among members about the quota formula and how to implement a realignment of quota shares, the proposed equiproportional distribution of the quota increase would leave quota shares of members unchanged at this time. However, the membership has signaled 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. Thus, the proposed BoG Resolution includes guidance, building on the recent IMFC discussions, namely to work to develop, by June 2025, possible approaches as a guide for further quota realignment, including through a new quota formula. This work would begin after conclusion of the 16th Review.
In completing the Fourteenth General Review of Quotas (hereafter the “Fourteenth Review”) and approving the Proposed Amendment on the Reform of the Executive Board (hereafter the “Board Reform Amendment”), the Board of Governors requested the Executive Board to bring forward the timetable for completion of the Fifteenth General Review of Quotas (hereafter the “Fifteenth Review”) to January 2014. The Executive Board was also requested to complete a comprehensive quota formula review by January 2013. These forward-looking elements were part of an agreed package of 2010 quota and governance reforms (hereafter the “2010 Reforms”). Each member committed to use its best efforts to complete the required steps for the effectiveness of the quota increases under the Fourteenth Review no later than the Annual Meetings in 2012.
The paper revisits the two-pillar framework for assessing the adequacy of Fund resources. Responding to Directors suggestions, the quantitative pillar is updated to include alternative assumptions and to provide a longer-term perspective on likely resource needs. While quantitative estimates are generally somewhat lower after factoring in the alternative assumptions, these reductions are more than outweighed when the analysis is extended through the middle of the next decade, recognizing that the outcome of the 15th Review will likely determine permanent Fund resources through at least the middle of the next decade. The updated qualitative pillar analysis highlights reforms since the global financial crisis and discusses uncertainties in the global environment. It also provides an assessment of the general impact of the various qualitative considerations. Taken together, the two pillars continue to make a case for at least maintaining existing Fund resources. Against this background, the simulations in the paper cover three illustrative sizes for quota increases (50, 75, and 100 percent), centered on broadly maintaining Fund resources, assuming the New Arrangements to Borrow (NAB) is maintained at its current level and Bilateral Borrowing Agreements (BBAs) expire.