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India, Brazil, Argentina, and Egypt vociferously objected to International Monetary Fund’s (IMF) “quota calculation formula” as it “is opaque and flawed” and “reforms are possible only if” the “final outcome” is defined “followed by genuine consultations.” The countries say that they want “to bring representation in the Fund more in line with the evolution of the global economy” at the same time increase “the share of developing countries as a group in the quotas and voting power.”
The IMF says that a member's quota is broadly determined by its economic position relative to other members where various economic factors are considered in determining changes in quotas, including Gross Domestic Product (GDP), current account transactions, and official reserves. When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members considered by the IMF to be broadly comparable in economic size and characteristics. The IMF uses a set of quota formulas to guide the assessment of a member's relative position.
While supporting the IMF’s proposal to increase “quota for the four countries who are the present beneficiaries of the ad hoc quota increase,” the four nations challenge these quota formulas as they are not really transparent. While the method used to determine members' quotas has been periodically updated, the basic formula has remained virtually unchanged since the early 1950s. Consequently, a number of economies--most notably many rapidly expanding Asian economies--have quotas that are under-represented with their importance to the global economy. Since the US , Germany , and Japan contribute most of the hard currency contributions, they have a higher say in the IMF policies while Asia , with the most rapidly growing economies, accounts for only 10% of the votes and Africa has only 5.7%.
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In 2000, the IMF sponsored a Quota Formula Review Group (QFRG) external committee chaired by US economist Richard Cooper which proposed a formula based on a country's GDP growth and its level of volatility. However, the proposal did not get enough support from developing countries because the focus tends to favor on larger economies and penalizing smaller ones. In one calculation, focus on GDP would result in Asia gaining up to 24% while bringing African influence to 3.8%.
The 4 countries that benefited from an ad hoc review and under-representation are China , Korea , Mexico , and Turkey .
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