IMF approves major quota, governance reforms

The Board of Governors of the International Monetary Fund (IMF) has approved a package of far-reaching reforms of the Fund’s quotas and governance.
When voting ended on Wednesday, Governors representing 95.32 per cent of the total voting power had cast votes in favor of a Resolution on Quota and Reform of the Executive Board, exceeding the 85 per cent required, according to the IMF press note.
Following the Board of Governors’ approval, the next step is for member countries to accept the proposed quota increases and the amendment to the Articles of Agreement. Members will make best efforts to complete this by the Annual Meeting of the Board of Governors in October 2012. In many cases this involves parliamentary approval.
“This vote demonstrates the widespread support of our membership for these landmark reforms,” IMF managing director Dominique Strauss-Kahn said, urging all its members to proceed rapidly with the steps required to implement this package within the agreed timeframe.
The Resolution, which had been recommended by the IMF's Executive Board to the IMF Board of Governors on November 5, is a package of reforms on quotas and governance in the IMF. These reforms will lead to a major overhaul of the Fund’s voice and governance, strengthening the Fund’s legitimacy and effectiveness.
With the adoption of the Resolution, the 14th General Review of Quotas has been completed with an unprecedented doubling of quotas to approximately SDR 476.8 billion (about $733.9 billion) and a major realignment of quota shares among members. Once in effect, it will result in a shift of more than six per cent of quota shares to dynamic emerging market and developing countries and more than six per cent from over-represented to under-represented countries, while protecting the quota shares and voting power of the poorest members.
The Board of Governors also supported an amendment to the Articles of Agreement that would facilitate a move to a more representative, all-elected Executive Board.
The reforms build on those initiated in 2008 and, combined with the earlier steps, the voting shares of emerging market and developing countries as a group will rise by over five percentage points. The 10 Fund members with the largest voting share will consist of the US, Japan, plus the so-called BRICs -- Brazil, China, India, the Russian Federation -- and the four largest European countries -- France, Germany, Italy, the UK).
The major realignment in the ranking of quota shares under this reform will result in a Fund that better reflects global realities.
The Board of Governors is the highest decision-making body of the IMF and consists of one governor appointed by each member country. The governor is usually the minister of finance or the governor of the central bank. Most powers of the IMF are vested in the Board of Governors. The Board of Governors has delegated to the Executive Board all except certain reserved powers. The Board of Governors normally meets once a year.
The Executive Board functions in continuous session and is responsible for conducting the business of the IMF. It is composed of 24 Directors, who are appointed (five) or elected by member countries or by groups of countries (19), and the managing director, who serves as its chairman. The Board usually meets several times each week. It carries out its work largely on the basis of papers prepared by IMF management and staff.
Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy. Quota subscriptions are the primary sources of the IMF's financial resources. A member’s quota determines its maximum financial commitment to the IMF and its voting power, and has a bearing on its access to IMF financing.