To: IMF executive directors
With the conclusion of the 16th Quota Review, the undersigned organisations and individuals call upon the IMF to implement a meaningful quota reform by June 2025 and prioritise realignment of shares to reflect more accurately the changes in the global economy and address representation issues. This expectation was clearly articulated by Southern leaders throughout the 16th review, via BRICS group declarations, numerous ministerial statements, even by the IMF Managing Director.
The proposal presented by the IMF Executive Board recommends an equiproportional increase in IMF quotas by 50%, but reduces Bilateral Borrowing Agreements and New Arrangements to Borrow to the same amount, doing nothing to boost the IMF’s overall lending capacity at a time of a systemic fiscal squeeze in the Global South and projected increased liquidity needs. In addition, the proposal does nothing to realign vote shares during the 16th review breaking historical precedent to ensure a selective quota increase, relying only on an equiproportional increase. Moreover, the proposal actually undermines future realignment efforts, because selective increases distribute quota shares according to a weighted average of current and newly calculated quota shares based on the percentage point increase in total quotas, i.e. more quotas will need to be created in future to counteract the effect of this increase.
The Fund’s quota system as a single tool aimed to fulfil three different purposes – determine voting weight, set the potential for contribution to the Fund’s lending and define access limits to resources by borrowers – cannot effectively or efficiently fulfil all three of these goals, especially as it does not allow for equitable representation of the Fund’s membership, with the US and European countries holding 16.5 and 29.4 % respectively of the voting power, whereas the low- and middle-income countries, which are most likely to borrow from the IMF, have limited influence on the IMF’s decisions.
As a result, we call for the following reforms to improve the governance of the IMF:
- Increase IMF’s resource capacity and reform its governance to tackle the existing polycrises. The Fund’s total resources amount to approximately $1 trillion, or 1.67 % of global GDP. This may be enough to provide financing for one or several country crises, but it’s not sufficient to tackle the current polycrisis, where inflationary pressures, food insecurity triggered by the Russian war in Ukraine, stagnating economic growth and global warming all overlap and have compounding effects. The IMF requires a quota realignment that accurately reflects the changes in the global economy and an equiproportional increase in quotas by as much as 267 %, or US$1.16 trillion to cover the gross external financing needs of the most vulnerable countries through quota-based resources, while at the time reform its SDRs allocation to increase access to conditionality free finance and reform its governance to ensure countries have a more equal representation in the decision-making process.
- Increase the proportion of basic votes in calculating the voting shares for a more equal representation of countries. Voting rights at the IMF represent the sum of its basic votes (equally distributed among all members) and quota-based votes. Following the 2008 quota review the proportion of basic votes represents 5.5 % from the total voting share, a decrease compared to the initial proportion of 11.3 %. We call on the IMF to increase basic votes at least to the proportion of 20% following the model of the Asian Development Bank, to account for the lack of proportional increase over the past decades and move towards more democratic principles of governance and increase legitimacy of the IMF.
- Decouple Special Drawing Rights from Quotas. As long as Special Drawing Rights continue to be linked to the Quota system, they will be unequally distributed based on the relative size of countries’ economies instead of financing needs. The 2021 SDR allocation demonstrated that countries which needed the most financial support receiving the lowest SDR allocation – just 2.4 % going to least developed countries (LDCs) and 35.6 % going to middle-income countries (US$ 231.4 billion). The discrepancy between the SDR allocation and the financing needs of countries is further visible in the use of SDRs, with developing countries having a median utilisation rate of SDRs of 42 per cent. On the other hand, advanced economies have barely used their SDRs – a rate of only 5.9 per cent, due to their greater unlimited access to reserve currencies and greater fiscal space to respond to shocks such as the COVID-19 pandemic. While the G20 pledged to re-channel $100 billion SDRs for the benefit of vulnerable countries in Oct 2021, some contributions were delayed by domestic legal frameworks. Despite aiming to correct SDR allocation shortcomings, IMF’s re-channelling mechanisms create additional negative externalities by transforming SDRs into debt, creating access barriers and involving policy conditionality. In this context, we call on the IMF to support UNCTAD’s proposal to decouple SDRs from the quota system to ensure funding is released on a need basis in order to manage crises more effectively.
Sincerely, the undersigned:
Action Corps (USA)
Alternative Law Collective
Bretton Woods Project
Debt Justice Norway
MenaFemMovement for Economic, Development and Ecological Justice
Partners In Health
Red Latinoamericana por Justicia Económica y Social – LATINDADD
Tax and Fiscal Justice, Nepal
WEED – World Economy, Ecology & Development
Womanifesto 2019 Diaspora
Dr. Aderonke Adesanya
Mojubaolu Olufunke Okome