Abstract:

The governance of the IMF and the distribution of IMF quotas have come under much scrutiny in recent years, with a focus on the voting rights of member countries consistent with their relative size in, or contribution to, the world economy. Quota increases resulting from general quota reviews since the IMF came into being in 1945 have fallen far short of the amounts needed to maintain the relationship of total quotas to world GDP. At the same time, the distribution of quotas between the industrial and developing countries has been broadly maintained despite the enormous and disparate growth of the world economy over this period. On the basis of the formula that guides the IMF in deciding members' quotas in these reviews, giving prominence to GDP as the primary variable, the share of developing countries would be appreciably greater if GDP were to be converted by Purchasing Power Parities (PPPs), rather than at market exchange rates. For many purposes, inter-country comparisons of GDP converted by PPP are seen as the preferred approach, a view which has received increased support in light of the expected strengthening of the quality of PPP data compiled under the International Comparison Program. Market exchange rates, which continue to serve as the conversion factor for GDP in IMF quota calculations, are regarded by statisticians and analysts alike as unsuitable for many applications because of their short-term volatility.