Calls for reform did not stop after the 1970s. In 1983, the Group of Twenty-Four, composed of representatives of developing countries, issued a communiqué stating that the “Ministers…underscored the fact that current monetary and financial system suffers from many shortcomings and inequities, notably, the inadequate share of developing countries in decision-making….”59 The “International Conference on Financing for Development” convened by the UN in March 2002 adopted the Monterrey Consensus regarding development finance. The delegates to this conference stressed “the need to broaden and strengthen the participation of developing countries and countries with economies in transition in international economic decision-making and norm-setting,” and encouraged the IMF and World Bank to “enhance the effective participation of developing countries and countries with economies in transition in international dialogues and decision-making.”60 In the spring of 2003, the Development Committee repeated this recommendation. Still, no action had been taken to reform the allocation of voting power within both the IMF and the World Bank by the fall of 2004. In October 2004, the Ministers of the G24 declared that
“enhancing the representation of developing countries requires a new quota formula to reflect the relative size of developing countries’ economies.” The Chair of the Deputies of G24 also asked that the G24 Secretariat focus its research efforts over the coming months on governance issues.61 These are the background events leading up to the series of reform programs finally taken up by the IMF starting in 2006. These will be briefly discussed below.
The IMF governance reform kicked off in 2006 when the Executive Board recommended a package of reforms related to quotas and voice to the Board of Governors.62 This recommendation was adopted by the Board of Governors on September 18, 2006. Members representing 90.6% of total
58. Martinez-Diaz, supra note 51, at 20.
59. Joseph Gold, Public International Law in the International Monetary System, 38 SW.L.J.
799, 835 (1984).
60. International Conference on Financing for Development, Monterrey, Mexico, March 18-22, 2002, Monterrey Consensus of the International Conference on Financing for Development, ¶¶
62-63, U.N. Doc. A/CONF.198/11 (2003).
61. Gil S. Beltran, Governance in Bretton Woods Institutions 3-4, Paper presented at XX G24 Technical Group Meeting (Mar. 17-18, 2005), http://www.g24.org/ResearchPaps/GBeltran.pdf.
62. Press Release, IMF, IMF Executive Board Recommends Quota and Related Governance Reforms, IMF Press Release No. 06/189 (Sept. 1, 2006).
voting power voted in favor of Resolution 61-5,63 Resolution on Quota and Voice Reform (also called the Singapore Resolution).64 The reform program was designed to be an integrated two-year program including several changes.65 First, ad hoc quota increases for some of the most clearly underrepresented countries, namely China, South Korea, Mexico, and Turkey. These increases represented 1.8% of the total quota. Second, the Executive Board was asked to reach agreement on a new quota formula by 2007. The formula was to provide a simpler and more transparent means of capturing members’ relative positions in the world economy. Third, the Executive Board was also requested to propose an amendment to the IMF Agreement to provide for at least a doubling of the basic votes that each member possesses. This again was to ensure an adequate voice for low-income countries. In addition, the amendment was to also safeguard the proportion of basic votes in total voting power. Fourth, the Resolution called on the Executive Board to act expeditiously to increase the staffing resources available to those Executive Directors elected by a large number of mostly African members whose workload was particularly heavy. Furthermore, the Executive Board was to consider the merits of another amendment that would enable Executive Directors to appoint more than one Alternate Executive Director.
The first reform agenda could be implemented immediately as long as the four members that receive the ad hoc quota increases completed the legal requirement in Article III, Section 2(d) of the IMF Agreement. As for the third part of the reform agenda, the Executive Board approved an increase in staffing resources for the two African Executive Directors’ offices through the allocation of an additional advisor position in May 2007.66 The Executive Directors were requested to address all the other reform issues as a package deal by 2008.
After starting the first step of reform in Singapore, the Executive Board continued to implement the reform program as instructed by the Board of Governors. It should be noted that at the IMFC Meeting in September 2006, the U.S. announced that it would not request an increase in its voting share even if it is entitled to under the new quota formula. The U.S. also urged other industrial members to follow suit.67 The Executive Directors adopted
63. Press Release, IMF, IMF Board of Governors Approves Quota and Related Governance Reforms, IMF Press Release No. 06/205 (Sept. 18, 2006).
64. The text of Resolution 61-5 can be found in: Legal Dep’t & Quota & Voice Working Grp., Proposed Amendment of the Articles of Agreement Regarding Basic Votes-Preliminary Considerations, app. I (Dec. 22, 2006).
65. IMF, supra note 62; IMF, supra note 63.
66. IMF, REFORM OF QUOTA AND VOICE IN THE INTERNATIONAL MONETARY FUND—REPORT OF THE EXECUTIVE BOARD TO THE BOARD OF GOVERNORS 6 n.5 (Mar. 28, 2008), http://www.imf.org/external/np/pp/eng/2008/032108.pdf.
67. Richard N. Copper & Edwin M. Truman, The IMF Quota Formula: Linchpin of Fund
the reform package on quota and voice and recommended the program to the Board of Governors on March 28, 2008.68 On April 28, 2008, the Board of Governors, with 175 members representing 92.93% of total voting power voted for the package, adopted Resolution 63-2, Resolution on Reform of Quota and Voice in the International Monetary Fund.69 As the 2008 reform program required an amendment to the IMF Agreement, a double-majority was needed. That is, it requires the approval of three fifths of the members representing 85% of the total voting power. After almost three years, the 2008 reform package finally came into force on March 3, 2011 after 117 members representing more than 85% of total voting power had accepted the amendment proposal.
The 2008 reforms included the following main elements.70 First, a new quota formula was adopted, and the second round of ad hoc quota increases was set to be allocated on the basis that members underrepresented under the new quota formula would be eligible for increases. This second round of ad hoc quota increases was to account for approximately 9.55% of the total quota in order to enhance representation for dynamic economies. Several underrepresented industrial members (Germany, Ireland, Italy, Japan, Luxembourg, and the U.S.) agreed to forgo part of the quota increase for which they were eligible. Furthermore, underrepresented emerging markets and developing economies, whose combined share in global PPP GDP was over 75% greater than their actual pre-Singapore quota share, could receive a minimum nominal quota increase of 40% over their pre-Singapore levels. In addition, because the four members that received quota increases in the first round of ad hoc increases in 2006 remain substantially underrepresented, they will receive a minimum nominal second round increase of 15%.
Second, the Resolution approved the proposed amendment to the IMF Agreement to triple the number of basic votes—the first such increase since the establishment of the Fund in 1944. The amended Article XII, Section 5(a)(i) provides that “the basic votes of each member shall be the number of votes that results from the equal distribution among all the members of 5.502 percent of the aggregate sum of the total voting power of all the members, provided that there shall be no fractional basic votes.” This was the first time that basic votes would be determined by a fixed proportion to the total votes, so that basic votes for members receiving fewer quotas would not have their basic votes “diluted” in the future round of regular or ad hoc quota increases.
Reform, POL’Y BRIEFS INT’L ECON., Feb. 2007, at 7, 10.
68. Press Release, IMF, IMF Executive Board Recommends Reforms to Overhaul Quota and Voice, IMF Press Release No. 08/64 (Mar. 28, 2008).
69. Press Release, IMF, IMF Board of Governors Adopts Quota and Voice Reforms by Large Margin, IMF Press Release No. 08/93 (Apr. 29, 2008).
70. IMF, supra note 68; Resolution 63-2.
Third, the Resolution recommended that Executive Directors representing constituencies with more than nineteen members be entitled to appoint another Alternative Director in addition to the single position granted to all Executive Directors. This would enhance the capacity of the two Executive Directors’ offices representing African constituencies. In sum, fifty-four members will see their quota shares increase from pre-Singapore levels by between 12 and 106%.71 The aggregate shift in quota shares for these fifty-four members amounts to 4.9 percentage points. If the increase in basic votes is included, a total of 135 members have seen their voting shares increase. Although these 2008 reforms have provided for a fixed proportion of basic votes to the total voting power, that percentage is less than 6%, far below the 11.26% when the IMF was established in 1944.72
The communiqué of the IMFC issued on October 4, 2009 states that the IMF is and should remain a quota-based institution. It also emphasized that quota reform is crucial for increasing the legitimacy and effectiveness of the Fund, and expressed support for a transfer in quota share of at least 5% from over-represented countries to under-represented developing countries and dynamic emerging markets.73
Accordingly, the Executive Directors adopted a third reform program on quotas and governance on November 5, 2010, and recommended it to the Board of Governors.74 Governors representing 95.32% of total voting power voted in favor of this recommendation, adopting the Resolution on Quota and Reform of the Executive Board on December 16, 2010.75 Under this 2010 reform program, the 14th General Review of Quotas was proposed with an unprecedented doubling of quotas and a major realignment of quota shares among members. This will result in a shift of more than 6% of quota shares to dynamic emerging markets and developing countries, as well as more than 6% from over-represented to under-represented members.76 Half of this is to be transferred from advanced economies, and one third comes from oil producers. 110 of the current 185 members, including 102 emerging
71. For example, Korea will see its quota increase by 106%, Singapore by 63%, Turkey by 51%, China by 50%, and India, Brazil and Mexico all by 40%. See IMF Staff, Reform of IMF Quotas and Voice: Responding to Changes in the Global Economy, IMF (Apr., 2008),
http://www.imf.org/external/np/exr/ib/2008/040108.htm.
72. For example, G4 has suggested that the percentage of basic votes to the total voting power should be fixed at the level of 1944 when the IMF was established. Beltran, supra note 61, at 21.
73. Press Release, IMF, Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund, IMF Press Release No. 09/347 (Oct. 4, 2009).
74. Press Release, IMF, IMF Executive Board Approves Major Overhaul of Quotas and Governance, IMF Press Release No. 10/418 (Nov. 5, 2010).
75. Press Release, IMF, IMF Board of Governors Approves Major Quota and Governance Reforms, IMF Press Release No. 10/477 (Dec. 16, 2010).
76. Id.
or developing members, will see their quota share increased or maintained.77 The changes will also protect the quota shares and voting power of the poorest members, that is members eligible to borrow from the low-income Poverty Reduction and Growth Trust. Members whose per capita income falls below the IDA threshold (US$1,135 in 2008) will have their voting shares preserved.78 Furthermore, the Board also agreed that a new quota formula should be decided on by January 2013, and that the next quota review should be completed by January 2014, two years ahead of schedule.79 In addition to these reforms to the quota system, the 2010 reform program also proposed another amendment to the IMF Agreement in order to change the system of Executive Directors. The number of Executive Directors will remain at the current twenty-four, but the Executive Directors will consist only of elected Executive Directors, doing away with the category of appointed Directors. This means that there will be further leeway for appointing second Alternate Executive Directors to enhance the representation of multi-country constituencies.80 These reforms to the system of Executive Directors were made possible when the EU agreed to give up two seats.81 Furthermore, the composition of the Board will be reviewed every eight years, starting when the quota reform takes effect.82
For this third reform package to take effect, two procedures must be completed. First, the amendment to the IMF Agreement regarding the composition of the Executive Directors must be accepted by at least three fifths of the members, representing 85% of total voting power. Second, the 14th general quota review must be accepted by members representing at least 70% of the total quota number on November 5, 2010 with members giving their consent in writing to their quota increases.83 When both the 2008 and 2010 reform packages take effect, the top ten shareholders of the IMF will represent the top ten countries in the world, namely the U.S., Japan, the four main European countries, and the four BRICs—Brazil, Russia, India, and China.84
77. IMFSurvey Online, IMF Board Approves Far-reaching Governance Reforms, IMF (Nov. 5, 2010), http://www.imf.org/external/pubs/ft/survey/so/2010/new110510b.htm.
78. IMF, supra note 74.
79. IMF Survey Online, supra note 77.
80. IMF, supra note 74.
81. IMFSurvey Online, Important Milestone Reached to Reinforce IMF Legitimacy, IMF (Mar.
3, 2011), http://www.imf.org/external/pubs/ft/survey/so/2011/new030411a.htm.
82. IMF Survey Online, supra note 77.
83. IMF Quota and Governance Publications: June 2006-March 2011, IMF (Sept. 30, 2011), http://www.imf.org/external/np/fin/quotas/pubs/index.htm.
84. IMFSurvey Online, supra note 81.
IV.LESSONS LEARNED