English Hindi



Prelims bits

Prelims Capsule


Why India’s IMF Quota is not increased

Why India’s IMF Quota is not increased

Tag:GS3 || Economy || External Sector || International Monetary Fund

Why in news?

  • India expresses disappointment over lack of support for IMF quota increase.
  • India views “the lack of adequate support for a quota increase under the 15th GRQ (General Review of Quotas) as somewhat disappointing”.

About the International Monetary Fund (IMF):

  • The International Monetary Fund (IMF) is an organization of 189 countries.
  • Aim of IMF:
    • to foster global monetary cooperation,
    • secure financial stability,
    • facilitate international trade,
    • promote high employment and sustainable economic growth,
    • and reduce poverty around the world.
  • Founded: In 1945, the IMF is governed by and accountable to the 189 countries that make up its near-global membership.
  • The IMF’s primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. The Fund’s mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.

What are quotas?

  • Quotas play an essential part in the governance and functioning of the IMF. They fulfill three main functions:
    • Voting power: Quotas are used to establish the number of votes each member country has at its disposal in the IMF’s decision-making system.
    • Access to financing: They define the level of assistance member countries may resort to in case of need.
    • Subscription: They are used to establish the amount of resources each member needs to provide to the IMF.

 Current IMF quota:

  • A quota formula is used to help assess a member’s relative position in the world economy and it can play a role in guiding the distribution of quota increases. The current formula was agreed in 2008 and a new quota formula is being discussed in the context of the 15th General Review of quotas.

Denomination of quotas:

  • IMF Resources:
  • Most resources for IMF loans are provided by member countries, primarily through their payment of quotas.
  • Quota subscriptions are a central component of the IMF’s financial resources. Each member country of the IMF is assigned a quota, based broadly on its relative position in the world economy.
Special Drawing Rights (SDR):
  • The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
  • Gold remains an important asset in the reserve holdings of several countries, and the IMF is still one of the world’s largest official holders of gold.
Borrowing Arrangements:
  • While quota subscriptions of member countries are the IMF’s main source of financing, the Fund can supplement its quota resources through borrowing if it believes that they might fall short of members’ needs.

Role of quota:

When the IMF quota is changed?

  • IMF quotas, which are the primary source of IMF funds, determine voting shares.
  • Quotas are supposed to be reviewed every five years although these reviews can be delayed.
  • The IMF Articles of Agreement mandate the Board of Governors to undertake a general review of quotas every five years or on an ad hoc basis. Any changes to the quotas, due to their zero-sum nature, need to be:
    • a) supported by an 85% majority, and,
    • b) Consented by the member countries affected.

15th General review of quota:

  • The 15th quota review is likely to be no exception in this regard. Two key issues will arise-
    • Overall sufficiency of IMF resources and
    • Redistribution of quota shares, guided by the quota formula.

Benefits of IMF quota’s review:

  • The quota review, should also address the long-pending issue of under-representation of the Emerging Market and Developing Economies (EMDEs) and the dynamic economies in the IMF’s quota shareholding.
  • To ensure the stability of the international monetary and financial system, it is imperative that the IMF continues to remain at the center of the Global Financial Safety Net.
  • For this to happen, the IMF should be able to maintain its current lending capacity to meet the needs of its members.
  • Any adjustment in quota shares would be expected to result in increases in the quota shares of dynamic economies in line with their relative positions in the world economy and hence likely in the share of emerging markets and developing countries as a whole while protecting the voice and representation of the poorest member.

14th Quota review (2010):

  • In December 2010, the IMF Governing Board concluded the 14th general review of quotas after considerable deliberations.
    • Doubling the quotas: Firstly, overall quotas were doubled, which is unparalleled in the Fund’s history. This was, however, coupled with a slashing in half of the New Arrangement to Borrow (NAB).
    • Redistribution of quota: Secondly, the redistribution of quota shares brought large gains for emerging market and developing economies (about 6%).
    • The shift of quota shares shifted more than 6 percent of quota shares from over-represented to under-represented member countries; and more than 6 percent of quota shares to dynamic emerging market and developing countries.
    • Protection of the poorest: preserved the quota and voting shares of the poorest member countries.

Why the quota has not increased?

  • The deal is a compromise with the U.S., the Fund’s largest shareholder, which has resisted changes to the organization’s voting structure as well as increases in its permanent resource base.
  • India requires at least 85% votes in its favor for changing the quota in the IMF.

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.


  • India, however, considers this as a temporary setback. India hopes 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.