Context:
- The executive board of the International Monetary Fund (IMF) has approved a proposal to make a 50 percent increase in the SDR quota allocated to members in proportion to their current quotas.
IMF Proposes SDR Quota Increase: A Step towards Strengthening Global Financial Stability
- The proposal follows the guidance from the International Monetary and Financial Committee at the 2023 annual meetings. It will now be considered and made effective by the board of governors as part of concluding the 16th general review of quotas.
International Monetary Fund (IMF):
- The IMF is a global organization that works to achieve sustainable growth and prosperity for all of its 190 member countries.
- It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being.
- The IMF is governed by and accountable to its member countries.
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- The IMF’s board of governors conducts general SDR quota reviews at least every five years. Any quota changes require approval by 85 percent of the total voting power, and a member’s own quota cannot be changed without its consent.
Benefit of Move:
- The quota increase would enhance the IMF’s permanent resources and strengthen the quota-based nature of the Fund by reducing the reliance on borrowing and thus ensuring the primary role of quotas in fund resources.
Understanding IMF SDR Quotas: Cornerstones of Global Financial Governance
SDR Quotas are the building blocks of the IMF’s financial and governance structure.
- An individual member country’s quota broadly reflects its relative position in the world economy.
- SDR Quotas are denominated in SDRs, the IMF’s unit of account.
- The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
- These determine the maximum amount of financial resources a member is obliged to provide to the IMF.
- They are also key determinants of voting power besides the maximum amount of loan a member can avail of.
- SDR Quota formula includes GDP (50%), openness (30%), economic variability (15%), and international reserves (5%).
India’s SDR Quota:
- Currently, India has a quota of special drawing rights (SDR) of 13,114.4 million, which denotes a share of 2.75 percent, making it the eighth-largest quota-holding country in the IMF.
- Based on the quota, India has 132,063 votes, which denotes a share of 2.63 percent.
Source: Business Standard
November 9, 2023