IMF Reforms: Issues for Congress
Rebecca M. Nelson
Analyst in International Trade and Finance
Martin A. Weiss
Specialist in International Trade and Finance
December 12, 2012
Congressional Research Service
7-5700
www.crs.gov
R42844
CRS Report for Congress
Pr
epared for Members and Committees of Congress
IMF Reforms: Issues for Congress
Summary
In December 2010, the International Monetary Fund (IMF, the Fund)’s Board of Governors, the
institution’s highest governing body, agreed to a reform package that addresses two major
concerns about the institution: (1) that the size of the IMF’s resources has not kept pace with
increased economic activity in the global economy; and (2) that the representation of emerging
and developing economies at the IMF does not reflect their growing importance in the global
economy. Key parts of the reform package cannot go into effect until a number of IMF countries
formally approve the reforms. If enacted, these reforms would increase the size of the IMF’s core
source of funding (IMF “quota”), and increase the representation of emerging market and
developing countries at the IMF to reflect more accurately their weight in the global economy.
Implementing the Reform Package, and the Role of Congress
IMF rules do not require formal approval of the reform package by all IMF member countries,
but the support of the United States, as the largest shareholder at the institution, is necessary.
Although many other IMF member countries have submitted their formal approvals for these
reforms, to date, the United States has not formally approved these reforms. Under U.S. law, the
Administration cannot do so without specific congressional authorization. Appropriations could
also be necessary. Although some speculated that the Administration would submit a request to
Congress for authorizing the reforms in 2012, no request has been made to date. Action on the
reforms could be taken in the lame duck session of the 112th Congress or in the 113th Congress.
Implications of the Reform Package
Arguments for Reforms: Proponents argue that the reform package is necessary for maintaining
the effectiveness and legitimacy of the IMF as the central institution for international
macroeconomic stability. The IMF’s core source of funding needs to be increased, they argue, in
order to give the IMF the resources that it needs to respond effectively to financial crises. They
also argue that the under-representation of emerging economies at the IMF is broadly perceived
as unfair and reduces the support of several member countries for IMF programs and initiatives.
Arguments against Reforms: Opponents argue that since the IMF has found other ways to
supplement its resources during economic crises, the IMF’s core funding source does not need to
be increased. Opponents are also skeptical that emerging economies support the existing norms
and values of international financial institutions, and that these countries may prefer financial and
trade strategies that are less aligned with those of the United States.
Potential Impact on the United States: Implementing the reforms would not increase total U.S.
financial commitments to the IMF and would have little impact on U.S. representation at the IMF.
The reforms would require transferring some U.S. financial commitments from a supplementary
fund at the IMF (the “New Arrangements to Borrow,” or NAB) to the IMF’s core source of
funding (quota). This transfer could require appropriations, depending on how the Congressional
Budget Office (CBO) scores the transfer of funds. The share of U.S. voting power at the IMF
would fall slightly, but the United States would still maintain its unique veto power over major
policy decisions.
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IMF Reforms: Issues for Congress
Contents
Introduction ...................................................................................................................................... 1
Proposed Reforms ............................................................................................................................ 2
Motivation for Reform .............................................................................................................. 2
Adequacy of IMF Resources ............................................................................................... 2
Representation of Emerging and Developing Countries ..................................................... 4
The 2010 Reform Package ........................................................................................................ 6
Potential Impact on the United States ................................................................................. 7
Arguments against Reforms ...................................................................................................... 8
Status of Reform .............................................................................................................................. 9
The Role of Congress .............................................................................................................. 10
Congressional Debate and Options for Congress .......................................................................... 11
Concluding Remarks ..................................................................................................................... 12
Figures
Figure 1. IMF Quota Relative to International Economic Activity ................................................. 3
Figure 2. IMF Quota and Share of GDP: Selected Emerging Markets and European
Countries Since 1989 .................................................................................................................... 5
Tables
Table 1. Nationality of IMF Executive Directors ............................................................................ 6
Table 2. IMF Quota and Board Reforms: Progress to Date ............................................................. 9
Table A-1. Top IMF Shareholders: Current and Proposed ............................................................. 13
Appendixes
Appendix. Current and Proposed IMF Quota Shares: Top Shareholders ...................................... 13
Contacts
Author Contact Information........................................................................................................... 14
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IMF Reforms: Issues for Congress
Introduction
In December 2010, the Board of Governors of the International Monetary Fund (IMF, the Fund),
the institution’s highest governing body, agreed to a wide-ranging set of institutional reforms. If
enacted, this reform package would increase the institution’s core source of funding and expand
the representation of dynamic emerging market and developing countries, such as Brazil, China,
and Mexico, within the institution. In order for key parts of the reform package to take effect,
IMF rules dictate that the reforms must be formally accepted by three-fifths of IMF members
(113) representing 85% of the total voting power. Under this formula, although unanimous
support is not required, approval by the United States, the IMF’s largest stakeholder with 16.75%
of the total voting power, is essential (see text box). To date, the United States has not formally
approved these reforms.
Congress plays a pivotal role in determining the U.S. position on the current IMF reform agenda.
Under U.S. law, specific congressional authorization is required for the United States to consent
to change the U.S. quota or “shares” in the Fund, which determine the U.S. of the total voting
power. Furthermore, depending on the budgetary treatment of any new authorized U.S.
contributions to the IMF, appropriations may also be required.
A majority of IMF member countries have approved these reforms, and with U.S. support, the
IMF would meet the thresholds necessary for the reforms to become effective. News reports
indicate that inaction by the United States on the reforms created tensions at the IMF-World Bank
Annual Meetings in October 2012.1 Some commentators have suggested that a lack of U.S. action
may be frustrating for other IMF member countries, since the U.S. Administration was
instrumental in advancing some of the reforms earlier in the process.2
This report provides information about the reforms, Congress’s role in the reform process, and
how the reforms could affect U.S. interests at the IMF. For additional background on the IMF, see
CRS Report R42019, International Monetary Fund: Background and Issues for Congress, by
Martin A. Weiss.
Brief Overview: The IMF
With its near universal membership of 188 countries, the IMF is the central multilateral organization for promoting
international macroeconomic stability. The IMF does this in three ways: (1) surveillance of financial and monetary
conditions in its member countries and in the global economy; (2) financial assistance to help countries overcome
major balance-of-payments problems; and (3) technical assistance and advisory services to member countries.
The primary source of IMF lending resources is the financial contributions or quota subscriptions of its member
nations. When a country joins the IMF, it is assigned a quota based on its relative weight in the global economy. The
distribution of quota is based on a formula incorporating several economic criteria: a member’s GDP; openness to
trade; volume of current account transactions; and level of official reserves. A country’s quota determines the amount
of financial resources each member is required to commit to the IMF. It also determines a country’s voting power at
the Fund and impacts the amount of financial assistance it may receive from the IMF.
There are two main decision-making bodies at the IMF. The Board of Governors is the highest authority in the IMF.
Al countries are represented on the Board of Governors, usual y at the level of the Finance Minister or Central Bank
1 For example, see Lesley Wroughton, “IMF Vote Reform Bogged Down by Delays, Deadlock,” Reuters, October 8,
2012, http://www.reuters.com/article/2012/10/08/us-imf-governance-idUSBRE8970B120121008.
2 See CRS Report RL33626, International Monetary Fund: Reforming Country Representation, by Martin A. Weiss.
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governor. The Board of Governors meets annually at the fall IMF-World Bank meetings and takes major decisions on,
for example, amendments to the IMF’s founding document (the Articles of Agreements), quota increases and general
reviews of quotas, and admittance of new members.
Although the Board of Governors has ultimate authority for running the IMF, it has delegated nearly al its powers to
a resident Board of Executive Directors, which handles the operational daily activity of the Fund. The Board has 24
members each representing a single country or a group of countries, and usual y meets three or more times a week
to oversee and supervise the activities of the IMF, such as the approval of lending programs.
Unlike the United Nations General Assembly, which relies on a one-country, one-vote governance system, the IMF
uses a weighted voting system based on a country’s quota. The United States, with 16.75% of the total vote, has the
largest single vote in the institution. The IMF uses a voting system in which the Executive Directors (EDs) can
represent either a single country or several countries grouped in mixed-state constituencies. This constituency
system produces a significant power asymmetry among members on the Board. Of the 24 Board members, the five
countries with the largest quotas (currently the United States, Japan, Germany, the UK, and France) appoint their
own executive director. The remaining 16 Executive Directors are elected. Some IMF members, including China,
Russia, and Saudi Arabia, have enough votes to elect their own Executive Directors. The other Executive Directors
are elected by groups of countries (or “constituencies”). Constituencies are flexible in their membership, and
countries have periodically switched constituencies, often to a new group that will allow them to have a bigger vote
or leadership role.
The IMF’s Articles of Agreement set the various thresholds required for IMF decisions. Unless specified, decisions
require a majority of votes cast. Votes requiring a 50% majority of the votes cast include, for example, decisions taken
by the Executive Board pertaining to the Fund’s daily function (such as approval of specific lending programs). Special
majorities of 70% or 85% of total voting power (as compared to the number of votes cast) are required for decisions
that fundamentally alter the IMF’s operational practices. The 70% threshold applies mainly to decisions taken by the
Executive Board on financial matters such as the design of IMF facilities, changes to the interest rate on IMF loans, the
budget of the IMF, etc. The 85% threshold applies mainly to Board of Governor decisions on the Fund’s governance
structure, such as amending the IMF’s Articles of Agreement and changing the number of Executive Directors.
Because the U.S. vote exceeds 15% of the total voting share, no major actions can go into effect without U.S. consent.
The same can be said for other major blocks of IMF member countries, principal y European countries.3
Proposed Reforms
Motivation for Reform
IMF member countries and staff have pursued reforms to address two problems facing the IMF:
(1) core IMF resources have substantially declined as a share of the global economy, while
anticipated needs have increased; and (2) the voice and vote of many emerging and developing
countries at the IMF increasingly under-represents their current contribution to the global
economy, a development which some analysts believe harms support and buy-in for IMF policies
and initiatives among critical constituencies.
Adequacy of IMF Resources
Focus on the adequacy of IMF resources has been on the IMF quota, the financial commitment
that countries make when they join the Fund. It has traditionally been the main source of funding
that the IMF uses for financial assistance packages. It also determines a member countries’ voting
3 For example, with a combined vote greater than 15%, Germany, France, and the UK could also block a vote requiring
85% of the voting power, if the countries voted together.
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power at the IMF.4 Figure 1 shows how IMF quota resources have changed over time relative to
different measures of international economic activity since 1975. In general, IMF quota has fallen
relative to global GDP, net capital inflows, trade, and reserves in recent decades. Some analysts
view this as evidence that IMF quota has not kept pace with increased economic integration and
that the IMF needs more financial resources in order to remain effective in responding to
economic crises, one of its three major functions.
Figure 1. IMF Quota Relative to International Economic Activity
Source: International Monetary Fund (IMF), International Financial Statistics; World Bank, World Development
Indicators.
Notes: Net capital inflows include portfolio investment and foreign direct investment (FDI). Reserves include
holdings of gold.
In recent years, the IMF has found ways to supplement its quota resources, which currently total
about $367 billion.5 In the wake of the global financial crisis of 2008-2009, the IMF greatly
4 An IMF member’s quota share and voting power are not equal since the number of a member’s votes includes a set
number of so-called “basic votes” provided to all members in addition to one vote for each 100,000 Special Drawing
Right of IMF quota.
5 IMF, “IMF Members’ Quotas and Voting Power, and IMF Board of Governors,”
http://www.imf.org/external/np/sec/memdir/members.aspx. The IMF denominates values in special drawing rights
(SDRs), a basket of international currencies. In this report, values denominated in SDRs are converted to U.S. dollars
using the exchange rate on October 15, 2012: 1 SDR = $1.54 (Source: IMF). However, dollar amounts should be
(continued...)
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expanded a supplemental fund of resources at the IMF called the “New Arrangements to Borrow”
(the NAB).6 Thirty-eight countries, including the United States, have committed about $570
billion to the NAB.7 In addition, during the ongoing Eurozone crisis, 37 countries have pledged a
total of $456 billion of bilateral loans to the IMF. The United States has not participated in these
new bilateral pledges.8
Some commentators argue that having the large supplemental fund (the NAB) and large bilateral
pledges are inadequate substitutes for increasing quota resources. They argue that such large
supplemental funds and bilateral borrowings undermine the legitimacy of the IMF as a quota-
based institution, where many crucial aspects of the organization, including access to finances
and voting power, are influenced by quota. Additionally, they argue that because NAB resources
are more difficult to use than quota resources, the IMF’s ability to move quickly during crises is
weakened.9 Bilateral commitments may also be temporary, and may not be a reliable source of
funds in the future.
Representation of Emerging and Developing Countries
In addition to concerns about the adequacy of IMF resources, some IMF members worry that the
voice and vote of emerging and developing countries are “under-represented” at the IMF. This
under-representation, critics argue, puts into question the evenhanded provision of IMF resources
among crisis-afflicted member countries. The ability of emerging economies to influence IMF
strategic policies may also be lower, potentially undermining the legitimacy of the IMF in the
views of some members.
Similar concerns prompted reforms at the IMF in 2006 and 2008; however these reforms were
largely seen as incremental and inadequate steps towards a meaningful solution.10 Successive
U.S. administrations have generally been supportive of increasing representation of emerging
markets at the IMF. A former U.S. Alternate Executive Director to the IMF argues that on
governance issues, the United States’ aim was to “gain political good will for taking the lead in
addressing an unfair structure that undermined the credibility and legitimacy of the IMF—an
institution that the United States rightly saw as a positive benefit to itself and the world.”11
(...continued)
viewed as approximations, as fluctuations in the exchange rate change the precise value in dollars.
6 For details about U.S. legislation that increased the U.S. financial commitment to the NAB, see CRS Report R40578,
The Global Financial Crisis: Increasing IMF Resources and the Role of Congress, by Jonathan E. Sanford and Martin
A. Weiss.
7 IMF, “IMF Standing Borrowing Arrangements,” http://www.imf.org/external/np/exr/facts/gabnab.htm.
8 IMF, “IMF Managing Director Christine Lagarde Welcomes Additional Pledges to Increase IMF Resources, Bringing
Total Commitments to US$456 Billion,” June 19, 2012, http://www.imf.org/external/np/sec/pr/2012/pr12231.htm.
9 Quota resources can be used to fund a new program with a simple majority vote on the Executive Board. In contrast,
NAB resources can only be used to fund programs when the NAB has been “activated,” for a period of up to 6 months.
The NAB can only be activated if a proposal by the IMF Managing Director to activate the NAB is accepted by
participants representing 85% of total NAB commitments and is then approved by a simple majority of the Executive
Board. Once the NAB has been “activated,” NAB resources are combined with quota resources, and use of the
resources to fund a new program requires a simple majority vote of the Executive Board.
10 For more on previous efforts to increase the vote and participation of emerging and developing countries, see CRS
Report RL33626, International Monetary Fund: Reforming Country Representation, by Martin A. Weiss.
11 Douglas Rediker, “Losing at the IMF,” Foreign Policy, October 10, 2012,
http://www.foreignpolicy.com/articles/2012/10/10/losing_at_the_imf.
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In theory, IMF voting shares are supposed to reflect a country’s relative weight in the global
economy, but voting shares have proved slow to change and do not fully reflect major changes in
recent decades. The increasing economic influence of Brazil, India, Russia, and China (the
BRICs), for example, illustrate the changing distribution of global growth and the diffusion of
economic power among a much wider group of countries than when the IMF was founded in
1944. Figure 2 compares the share of GDP and share of IMF quota (which affects IMF voting
shares) for the BRICs and a group of advanced European economies. The share of global GDP
produced by the BRICs started to increase in the mid-2000s, while the share of global GDP
produced by the group of advanced European economies has fallen in recent decades. However,
IMF quota share, and hence voting power, for both sets of countries has remained relatively flat.
Figure 2. IMF Quota and Share of GDP: Selected Emerging Markets and European
Countries Since 1989
Source: IMF, International Financial Statistics; World Bank, World Development Indicators.
Notes: Countries selected for il ustrative purposes only; other countries or groupings may be considered
under- or over-represented at the IMF. Selected European countries include Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom.
Concerns about dominance of European views and interests on the IMF Executive Board have
also been expressed.12 The IMF Executive Board, which meets several times a week, has 24
members (Executive Directors), and is normally chaired by the IMF Managing Director
(currently Christine Lagarde of France). Table 1 shows the nationality of Executive Directors of
the Executive Board in September 2012.13 Eight of the 24 Executive Directors were from
advanced European economies, and an additional two Executive Directors represented groups of
countries that included at least one advanced European economy. An overabundance of European
Executive Directors, critics argue, limits the ability of non-European Executive Directors to
represent adequately their constituencies’ interests and for IMF members to hold their Executive
12 “The Case for IMF Quota Reform,” Council on Foreign Relations Expert Roundup, October 11, 2012,
http://www.cfr.org/imf/case-imf-quota-reform/p29248.
13 A new Executive Board formed in November 2012, which is discussed in greater detail later in the report (see
“Status of Reform”).
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Director accountable. They have suggested that European voices on the Board should be
consolidated, allowing for more seats on the Board to be controlled by emerging and developing
countries. Several of the Executive Directors represent large constituencies of African and South
American countries, many of which are among the IMF’s poorest members who depend on the
IMF for lending.
Table 1. Nationality of IMF Executive Directors
September 2012
Executive
Executive Directors
Other Executive
Directors from
Representing
Directors
Advanced
Advanced European
European
Economies
Economies
1. Germany*
1. Canada (constituency
1. United States*
includes Ireland)1
2. France*
2. Japan*
2. Mexico (constituency
3. UK*
includes Spain)1
3. Singapore1
4. Belgium1
4. China
5. Netherlands1
5. Australia1
6. Italy1
6. Lesotho1
7. Denmark1
7. Egypt1
8. Switzerland1
8. India1
9. Brazil1
10. Saudi Arabia
11. Russia
12. Iran1
13. Argentina1
14. Togo1
Source: IMF, “IMF Executive Directors and Voting Powers,” Accessed September 2012,
http://www.imf.org/external/np/sec/memdir/eds.aspx.
Notes: * Appointed Executive Directors; al other Executive Directors are elected. 1Executive Directors
representing groups of countries (constituencies). Executive Directors do not have equal voting shares. A new
Executive Board was formed in November 2012, with major changes. See the discussion below in “Status of
Reform” for more details.
The 2010 Reform Package
In December 2010, the IMF’s Board of Governors approved a package of reforms to address
these concerns.14 Key components of the reform package include:15
14 IMF, “IMF Board of Governors Approves Major Quota and Governance Reforms,” December 16, 2010,
http://www.imf.org/external/np/sec/pr/2010/pr10477.htm; and IMF, “Selected Decisions and Selected Documents of
the IMF, Thirty-Fifth Issue – Fourteenth General Review of Quotas and Reform of the Executive Board,”
http://www.imf.org/external/pubs/ft/sd/index.asp?decision=66-2.
15 This report focuses on components of the reform package that require specific congressional action to implement, are
(continued...)
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• Doubling IMF quota and rollback of the NAB: The reform package calls for a
doubling of IMF quota, and a corresponding rollback of the NAB. Although IMF
quota has been periodically increased before, if adopted, this would be the largest
proportional quota increase in the history of the IMF.16
• Shifting IMF quota to emerging economies: The reform package also calls for
a 6% shift in quota share to emerging markets, which would increase their voting
power at the IMF, as well as their relative financial commitments to the
institution. If implemented, the negotiated changes in quota shares would result
in China becoming the third largest shareholder at the IMF, and India and Brazil
would also join China and Russia among the 10 largest shareholders.17 The
United States quota share would fall slightly, but the U.S. quota would still be
sufficient to ensure it had more than the 15% of the total voting power needed to
veto major IMF policy decisions. See Table A-1 for more details about how IMF
quota shares would change for major economies.
• Creating an all-elected IMF Executive Board: Rather than continuing the
practice of having the five largest shareholders at the IMF appoint Executive
Directors to the Board, the proposed reform would make all Executive Directors
on the Executive Board elected. This reform could pave the way for future
consolidation of European representation on the Executive Board.18
• Reducing representation of advanced European economies on the Executive
Board: Ten seats on the Executive Board represent advanced European
economies. The reform proposal reflects a commitment by the membership to
reduce the number of Executive Directors representing advanced European
economies by two, so emerging and developing countries have more
representation on the Board.
Potential Impact on the United States
If implemented, the quota reform would require shifting some of the U.S. financial commitments
to the IMF from the NAB to quota, and would not increase total U.S. commitments to the IMF.19
The shift could require appropriations depending on how much of the funds need to be shifted
and whether there are any changes to the budgetary treatment of U.S. IMF contributions (see
(...continued)
the most proximate, and/or have been the most controversial. Other components of the reform package relating to
quotas include a comprehensive review of the quota formula by January 2013 and another general review of quotas by
January 2014, which would further enhance the voice of emerging markets at the IMF. Other components of the reform
package relating to the Executive Board include allowing more Executive Directors to appoint a second alternate
Executive Director; maintaining the current 24 seats on the Executive Board (instead of the 20-seat Board originally
outlined in the IMF Articles, subject to increase or decrease by the Board of Governors); and reviewing the
composition of the Executive Board every eight years.
16 The second largest proportional increase in IMF quota was by 60.7% in 1958-1959. For all IMF quota increases, see
“General Quota Reviews” at IMF, “IMF Quotas,” http://www.imf.org/external/np/exr/facts/quotas.htm.
17 IMF, “IMF Quotas,” http://www.imf.org/external/np/exr/facts/quotas.htm.
18 Countries currently form groups voluntarily, typically on the basis of geographical or historical affinity. A few
countries—China, Russia, and Saudi Arabia—have enough votes to elect their own Executive Directors. For the
composition of the current Executive Board, see http://www.imf.org/external/np/sec/memdir/eds.aspx.
19 Currently, the United States has committed about $65 billion to IMF quota and about $106 billion to the NAB.
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discussion in the “The Role of Congress” below). Because the United States arguably has more
control over when NAB funds are used compared to quota resources, the shift could entail some
loss of U.S. control over the resources.20 However, quota commitments are still generally
considered very safe, and the United States has never lost money on its quota commitments (and
it earns a small amount of interest on these commitments).
With the realignment of IMF quota shares towards emerging markets, the U.S. quota share would
fall from 17.69% to 17.40%.21 This change does not have a meaningful impact and would
maintain the United States’ unique veto power over major policy decisions at the IMF, while
freeing up quota share to be shifted to emerging-market countries. The United States is actually
under-represented at the IMF, with a quota share (17.69%) smaller than its share of global GDP
(about 21.6% in 2011). The United States has allowed its quota share to fall over the years, partly
to make room for new members and partly to lower its financial obligation, while maintaining
enough voting power to be able to veto major policy decisions at the IMF that require an 85%
majority.
Since the IMF was founded, the United States has appointed its own representative to the
Executive Board. Under the reform, large shareholders like the United States could still represent
a constituency of one country (themselves), but other countries could in theory elect to join a
large member’s constituency. It is uncertain, however, if other members would want to join a
constituency led by the United States, rather than join a larger group of smaller economies where
they would likely have more influence.
Reducing the number of seats on the Executive Board representing advanced European
economies should not impact U.S. representation on the Board.
Arguments against Reforms
Opponents of the reform argue that the IMF has sufficient resources to address financial crises,
through the expansion of the NAB and through the IMF’s ability to coordinate bilateral
contributions during periods of intense market pressure. They also argue that the stricter process
for accessing NAB funds, relative to IMF quota, is appropriate for protecting taxpayer
commitments to the IMF. Moreover, some analysts reject the notion that the IMF needs more
funds to combat the Eurozone crisis, because Europe has the financial resources it needs to
respond to the crisis. They argue that if the IMF has any role to play in the Eurozone crisis, it
should be through non-financing functions, such as through technical assistance and surveillance
of economic policies and conditions.
Others are skeptical that emerging economies support the existing norms and values of
international financial institutions, and question whether they would be “responsible
stakeholders.” Emerging countries may also have significantly different views on economic
policies, such as on free markets and state-led development. There may be concerns among critics
of the reform package that increasing the voice and participation of emerging markets at the IMF
20 NAB resources can only be used to fund programs when the NAB has been “activated.” The United States can veto
activation of the NAB. By contrast, a simple majority of the Executive Board can approve using quota resources to
fund a program; the United States cannot veto use of quota resources.
21 IMF, “Executive Board Approves Major Overhaul of Quotas and Governance,” November 5, 2012,
http://www.imf.org/external/np/sec/pr/2010/pr10418.htm.
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could result in the support of economic policies that are less aligned with the preferred policies of
advanced economies.
Status of Reform
Although the IMF Board of Governors approved the reform package in 2010, some of the key
parts of the package require additional action to take effect. To create an all-elected Executive
Board, three-fifths of IMF member countries representing 85% of the voting share need to
formally approve an amendment to the IMF’s Articles of Agreement. For the quota reform
(doubling quota and shifting of quota to emerging markets) to take effect, the all-elected
Executive Board must be created, and IMF members representing at least 70% of total quotas
consent to the quota changes.
With the largest voting power at the IMF (16.75%), the reforms cannot go through without U.S.
support, even though a majority of IMF member countries have approved them. Table 2
summarizes the approval process for the Board amendment and the quota reform, and the number
of formal approvals received to date by the IMF.
Table 2. IMF Quota and Board Reforms: Progress to Date
Reform Threshold
of
Approvals as of
United
Approvals/Consents
November 27, 2012
States
Needed
submitted
formal
approval to
IMF?
Board Reform: Amend
Three-fifths of IMF members
125 members representing
No
the IMF Articles of
(113 countries out of the total
69.43% of the total voting
Agreement to create an all-
188 country membership)
power
elected Executive Board
representing 85% of the total
voting power must approve
amendment
Quota: Double IMF quota, Members representing 70% of
Members representing
No
and shift voting power to
total quotas must consent to
76.42% of the voting
emerging economies
quota increase, and the above
power
proposed board reform
amendment must have entered
Board Reform
into force
Amendment has not yet
entered into force
Source: IMF, “Acceptances of the Proposed Amendment of the Articles of Agreement on Reform of the
Executive Board and Consents to 2010 Quota Increase,” November 27, 2012,
http://www.imf.org/external/np/sec/misc/consents.htm.
By contrast, reducing the seats held by advanced European economies on the IMF Executive
Board is a more informal process. Countries voluntarily decide how to group themselves on the
Executive Board, and the consolidation will require coordination and proactive action among
IMF members. The initial reform package included the pledge to reduce the representation of
advanced European economies on the Executive Board by two seats following the
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implementation of the other reforms.22 However, the process for obtaining the required
acceptances for the Board amendment and consents to the quota reform has taken longer than
expected, and steps towards Board realignment were taken in November 2012. In particular, the
Belgium and Netherlands seats merged.23 Austria is currently serving as an Executive Director for
the seat vacated by Belgium, but reportedly will rotate its chair with Turkey, the Czech Republic,
and Hungary.24 It has also been reported that the grouping of Nordic countries will permit all the
Baltic members of the group to rotate serving as the Executive Director, and that the Switzerland
Executive Director will rotate with Poland in a few years.25
The Role of Congress
Congressional support is necessary for the United States to consent to the quota reform and
accept the amendment to create an all-elected Executive Board. The Bretton Woods Act, which
authorizes U.S. participation in the IMF, states that, among other things, the Administration
cannot consent to a change in U.S. quota at the IMF or accept an amendment to the IMF Articles
of Agreement, unless Congress authorizes such action by law.26 Therefore, congressional action
will determine the outcome of the U.S. position and, by extension, the success of the reform
effort.
In addition to the congressional role in authorizing the reforms, appropriations could be necessary
for the quota reform. For the United States, doubling quota at the IMF essentially entails shifting
U.S. financial commitments at the IMF from the NAB to quota; total U.S. financial commitment
to the IMF would not change. Any appropriations needed for the transfer would depend on the
scoring by the Congressional Budget Office (CBO). This determination would include factors
such as whether U.S. commitments to the NAB are more, less, or equally risky than U.S.
commitments to quota resources.
The last time the United States increased its financial commitments to the IMF, in 2009, there was
a debate over their budgetary treatment, which resulted in a change in the budgetary process that
had been in place since 1980.27 Since 1980, contributions to the IMF had been handled as an
exchange of assets, which required increases in budget authority but no outlays. In 2009, it was
decided that the new U.S. commitments to the IMF would be treated as lines of credit. Congress
had to appropriate funds as a potential loan-loss reserve, consistent with the treatment of federal
loans under the Federal Credit Reform Act of 1990 (P.L. 101-508), but also adjusted for market
risk. The Congressional Budget Office (CBO) determined that $5 billion needed to be
appropriated for the approximately $108 billion in new commitments to the IMF (P.L. 111-32).
22 IMF, “Selected Decisions and Selected Documents of the IMF, Thirty-Fifth Issue – Fourteenth General Review of
Quotas and Reform of the Executive Board,” http://www.imf.org/external/pubs/ft/sd/index.asp?decision=66-2.
23 For details about the Executive Board that formed on November 1, 2012, see
http://www.imf.org/external/np/sec/memdir/eds.aspx.
24 Sandrine Rastello, “IMF Board Sees Biggest Power Shift Reshuffle in Two Decades,” Bloomberg, October 14, 2012,
http://www.businessweek.com/news/2012-10-14/imf-board-sees-biggest-power-shift-reshuffle-in-two-decades.
25 Ibid.
26 22 U.S.C. 286c.
27 For more on the budgetary treatment of U.S. contributions to the IMF, see the Appendix in CRS Report R40578, The
Global Financial Crisis: Increasing IMF Resources and the Role of Congress, by Jonathan E. Sanford and Martin A.
Weiss. For more on the 2009 debate, see CBO, “Budget Implications of U.S. Contributions to the International
Monetary Fund,” CBO Blog post, May 19, 2009, http://www.cbo.gov/publication/24901.
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Congressional Debate and Options for Congress
Some analysts speculated that the Administration would submit a formal request to Congress for
authorizing the quota reform and amendment to the IMF Articles to create an all-elected
Executive Board in 2012, in order to help the IMF reach its goal of implementing the reforms by
the October 2012 Annual Meetings. That did not happen, and no request has been made to date.
There is speculation that Congress could act in the current lame duck session, or be taken up by
the 113th Congress.
Some analysts are also skeptical as to the interest among Members of Congress to move U.S.
contributions at the IMF from the NAB to quota. In the 112th Congress, continuing concerns
about the use of IMF resources in the Eurozone debt crisis contributed to the introduction of
legislation in the House and Senate (H.R. 2313, S.Amdt. 501, and S. 1276) that would rescind
U.S. financial commitments to the IMF approved by Congress in 2009, primarily through to the
NAB. Similar language was also included in a House draft of the FY2012 State and Foreign
Operations Appropriations bill.28
Congress has at least four options regarding the reform package. The authorizing committees for
the IMF are the Senate Committee on Foreign Relations and the House Committee on Financial
Services.
Option 1: Do not authorize U.S. participation in the reforms
Congress could choose not to authorize U.S. support for the reform package. Without U.S.
approval, the reforms could not take effect and the current IMF funding and governance
structures would not change. U.S. financial commitments at the NAB would not be transferred to
IMF quota, emerging markets would not gain a greater voice at the IMF, and the United States
would continue to appoint its own Executive Director. The United States could face backlash
from other IMF members for “blocking” reforms that have been approved by a majority of IMF
member countries. Congress could urge the Administration to use its “voice and vote” at the IMF
to pursue and negotiate a different set of reforms.
Option 2: Authorize the Administration to accept both reforms
Congress could authorize both parts of the reform package: the amendment to the Articles of
Agreement creating an all-elected Board and the quota reform, and pass whatever appropriations
may be needed for the quota reform. If the U.S. supports the reform package, U.S. financial
commitments would be transferred from the NAB to IMF quota, and the United States would start
electing its representative to the IMF, rather than appointing its representative. Emerging markets
would gain greater voting power at the IMF, and increase their relative financial commitments to
the IMF. The legislation could include a reporting requirement, such as having the Administration
report to Congress on how increased IMF quota resources are being used, or how increased
representation of emerging markets at the IMF is shaping IMF policies.
28 A copy of the draft bill is available on the House Appropriations website,
http://appropriations.house.gov/UploadedFiles/FY12-SFOPS-07-25_xml.pdf.
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Option 3: Authorize U.S. support for the Board reform, but not the quota reform
Congress could authorize the Administration to accept an amendment to the Articles of
Agreement to create an all-elected Board, but not authorize U.S. participation in the quota
increase. If the U.S. supports the Board amendment, the Executive Board would become an all-
elected body and the U.S. representative would be elected, not appointed. The quota reform
would also take effect, even without U.S. consent. Quota subscriptions by others could then
proceed, and the US quota share would decline as others implement their quota increases. Given
the size of the quota increase (doubling), the US quota share would be expected to fall below
15%. This would mean that the U.S. financial commitments to quota would fall relative to other
countries, but that the United States would also lose its veto power in supermajority decisions
requiring 85% of the voting share.
Option 4: Authorize U.S. support for the quota reform, but not the Board reform
Congress could authorize U.S. participation in the quota increase but not amend the Articles of
Agreement to create an all-elected Board. Because quota reform is conditional on the completion
of the Board reform, neither of the reforms would take effect.
Concluding Remarks
In response to concerns among IMF member nations that the institution was underfunded given
the potential global needs for crisis funding and that the developing and emerging economies
were underrepresented, member nations agreed in December 2010 an ambitious package of
reforms. If completed, these reforms would double the IMF’s quota resources and allow emerging
and developing countries to own a larger share of the institution.
In order for key parts of the reform package to take effect, IMF rules dictate that the reforms must
be formally accepted by three-fifths of IMF members (113 members out of 188 members)
representing 85% of the total voting power. Under this formula, although unanimous support is
not required, approval by the United States, the IMF’s largest stakeholder is essential. To date, no
action has been taken by Congress on the necessary legislation.
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Appendix. Current and Proposed IMF Quota Shares:
Top Shareholders
Table A-1. Top IMF Shareholders: Current and Proposed
Current Largest IMF
Proposed Largest IMF
Largest Economies
Quota Shareholders
Quota Shareholders
Country IMF Country IMF Country
% of 2011
Quota
Quota
Global
Share
Share
GDP
1
United States
17.69% United States
17.40% United States
21.57%
2 Japan
6.56 Japan
6.46 China
10.44
3 Germany
6.12 China
6.39 Japan
8.39
4 France
4.51 Germany
5.58 Germany
5.16
5 UK
4.51 France
4.23 France
3.97
6 China
4.00 UK
4.23 Brazil
3.57
7 Italy
3.31 Italy
3.16 UK
3.48
8
Saudi Arabia
2.93 India
2.75 Italy
3.15
9 Canada
2.67 Russia
2.71 Russia
2.65
10 Russia
2.50 Brazil
2.32 India
2.61
11 India
2.44 Canada
2.31 Canada
2.49
12 Netherlands
2.17 Saudi
Arabia
2.10 Australia
2.13
13 Belgium
1.93 Spain
2.00 Spain
2.12
14 Brazil
1.79 Mexico
1.87 Mexico
1.65
15 Spain
1.69 Netherlands
1.83 South
Korea
1.60
16 Mexico
1.52 Korea
1.80 Indonesia
1.21
17 Switzerland
1.45 Australia
1.38 Netherlands
1.20
18 South
Korea
1.41 Belgium
1.34 Turkey
1.11
19 Australia
1.36 Switzerland
1.21 Switzerland
0.95
20 Venezuela
1.12 Turkey
0.98 Saudi
Arabia
0.85
Source: Current IMF quota shares from IMF, “IMF Members’ Quota and Voting Power, and IMF Board of
Governors,” http://www.imf.org/external/np/sec/memdir/members.aspx; IMF quota share if reforms are
implemented from IMF, “Updated IMF Quota Data—August 2012,” August 8, 2012, Table A4: Distribution of
Quotas and Calculated Quotas—By Member, http://www.imf.org/external/np/fin/quotas/2012/0812.htm; Ranking
by GDP from IMF, World Economic Outlook, October 2012.
Notes: GDP does not adjust for differences in price levels across countries (purchasing power parity, PPP).
Using GDP adjusted for PPP would produce a different ranking, and countries disagree about which measure is
more appropriate. This list is for illustrative purposes only.
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Author Contact Information
Rebecca M. Nelson
Martin A. Weiss
Analyst in International Trade and Finance
Specialist in International Trade and Finance
rnelson@crs.loc.gov, 7-6819
mweiss@crs.loc.gov, 7-5407
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