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IMF Quota System
Why is it in the news ?
- The IMF members delay quota changes and agree to maintain funding.
- The deal is a compromise with U.S., the Fund’s largest shareholder, which has resisted changes to the voting structure
More in the news
- Unchanged Quota:
(1) The agreed package will leave IMF quotas, which determine voting shares, unchanged.
(2) Instead, these will be reviewed before the end of 2023.
(3) Quota is the primary source of IMF funds.
- Criteria for Quota: IMF quotas are distributed according to a four pronged formula that considers:
(1) Member country’s GDP.
(2) Economic openness.
(3) Economic variability.
(4) International reserves.
- India's Share:
(1) India’s quota is 2.76% and China’s is 6.41%, while the U.S.’s quota is 17.46 % (translates to a vote share of 16.52%).
(2) The large quota of US gives it a unique veto power over crucial decisions at the IMF, many of which require a supermajority of 85%.
- The Issue:
(1) Some IMF members have become frustrated with the pace of governance reforms.
(2) Quotas are supposed to be reviewed every five years although these reviews can be delayed.
(3) The balance of economic and geopolitical power has been shifting, especially with the emergence of China and India.
(4) The U.S. has resisted diluting its share, wary that it will benefit countries such as China.
- About IMF:
(1) The IMF, also known as the Fund, was conceived at a UN conference in Bretton Woods, United States, in July 1944.
Source
The Hindu.