Now that the international community has decided to give a massive increase in the financial resources of the IMF, there will be new efforts to change the relative voting shares within the institution. Included in the G20 deal is the creation of $250 bn of the IMF’s currency called SDRs. This is significant since the IMF could not agree for a very long time to create SDRs (the last creation was in 1981).
Within the IMF, there is a tension between two forms of equality among its country members. The UN General Assembly has a one-country one-vote rule, while the IMF allocates voting power according to the financial contribution paid by its members.
There is no market for “membership shares” in the IMF in the same sense of a market for shares of stock in a corporation. The IMF is more like a club whose important decisions are made by super-majority vote (the most important ones requiring 85 percent of total votes). The allocation of voting power is one of these decisions. Accordingly, countries or regions who feel that their “clout” within the IMF is too meager have to persuade the rest of the membership that they deserve an improvement of relative position in the voting totem pole.
In 2000, a group of experts (called the Cooper group) reported on what they thought could be done about the IMF’s voting structure. The report is here.
Since then, after some eight years, the IMF agreed on a new quota formula that gives greater weight to GDP and openness of a member’s economy. In other words, the more productive and the more globally engaged a country, the greater should be its “voice” in IMF decisions.
Richard Cooper has expressed a view that the IMF’s new formula is flawed because of double-counting and data problems. I worked with Prof. Cooper on the 2000 experts’ report and I agree with him.
But it seems that those countries that favored the inclusion of the “openness” variable were “possibly motivated by a desire to preserve the status quo.” As the French often say, “The more things change, the more they remain the same!”
The new quota formula is here.