Table of Contents
- Formed in 1944 at the Bretton Woods Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes.
- India joined IMF in 1945.
WHAT IS IMF QUOTAS?
- When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members of broadly comparable economic size and characteristics.
- The IMF uses a quota formula to help assess a member’s relative position.
CURRENT QUOTA FORMULA
- A weighted average of GDP (weight of 50%), Openness (30%), Economic variability (15%), and International reserves (5%).
DENOMINATION OF QUOTAS?
- Quotas are denominated in Special Drawing Rights (SDRs), the IMF’s unit of account.
- Example The largest member of the IMF is the United States, with a current quota (as of March 2017) of SDR 82.99 billion (about US$118 billion).
- The smallest member is Tuvalu, with a quota of SDR2.5 million (about US$3.5 million).
ROLE OF QUOTAS?
- Countries are allowed to borrow 145% of their quota annually and 435% cumulatively.
WHEN THE IMF QUOTAS ARE CHANGED?
- The IMF’s Board of Governors conducts general quota reviews at regular intervals.
- Quotas are supposed to be reviewed every five years although these reviews can be delayed.
- Any changes in quotas must be approved by an 85% majority of the total voting power
- And a member’s own quota cannot be changed without its consent.
GENERAL QUOTA REVIEW
- 2 main issues addressed in a general quota review
- The size of an overall quota increase and The distribution of the increase among the members.
15TH GENERAL REVIEW OF QUOTAS
- India views “the lack of adequate support for a quota increase under the 15th GRQ (General Review of Quotas) as somewhat disappointing”,
- Union Finance Minister Nirmala Sitharaman said in her address to the annual meeting of the IMF in Washington.
WHY THE QUOTA HAS NOT INCREASED?
- Changes in quotas are not easy.
- India requires at least 85% votes in its favour to get a quota increase passed.
- That would certainly mean that New Delhi will need to have at least Washington in its corner.
DOES INDIA NEED IT?
- India last borrowed money from the IMF in 1993 and it repaid all its outstanding by 2000.
- However, India doesn’t just represent itself — it also represents Bangladesh, Bhutan and Sri Lanka.
- An increase in quota therefore will not just benefit India but also the other three countries.
- “We, however, consider this as a temporary setback.
- We hope that the discussions in the next [16th] Round of the GRQ would achieve success in terms of quota increase to take care of the Fund’s resource adequacy,”
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