The application will be considered first by the IMF’s Executive Board. After its consideration, the Executive Board will submit a report to the Board of Governors of the IMF with recommendations in the form of a “Membership Resolution”. These recommendations cover the amount of quota in the IMF, the form of payment of the subscription, and other customary terms and conditions of membership. After the Board of Governors has adopted the “Membership Resolution,” the applicant state needs to take the legal steps required under its own law to enable it to sign the IMF’s Articles of Agreement and to fulfill the obligations of IMF membership.
Similarly, any member country can withdraw from the Fund, although that is rare. For example, in April 2007, the president of Ecuador, Rafael Correa announced the expulsion of the World Bank representative in the country. A few days later, at the end of April, Venezuelan president Hugo Chavez announced that the country would withdraw from the IMF and the World Bank. Chavez dubbed both organizations as “the tools of the empire” that “serve the interests of the North”. As of June 2009, both countries remain as members of both organizations. Venezuela was forced to back down because a withdrawal would have triggered default clauses in the country’s sovereign bonds.
A member’s quota in the IMF determines the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of Special Drawing Rights (SDRs). A member state cannot unilaterally increase its quota—increases must be approved by the Executive Board of IMF and are linked to formulas that include many variables such as the size of a country in the world economy. For example, in 2001, the People’s Republic of China was prevented from increasing its quota as high as it wished, ensuring it remained at the level of the smallest G7 economy (Canada).
In September 2005, the IMF’s member countries agreed to the first round of ad hoc quota increases for four countries, including China. On March 28, 2008, the IMF’s Executive Board ended a period of extensive discussion and negotiation over a major package of reforms to enhance the institution’s governance that would shift quota and voting shares from advanced to emerging markets and developing countries. Under existing arrangements, the industrialised countries(including Mexico) hold 57 per cent of the IMF votes. But the financial crisis has tilted control away from heavily indebted mature economies, such as the United States and the United Kingdom, in favour of the fast-growing, cash-rich, so-called “BRIC” economies of Brazil, Russia, India and China.
Since the United States has by far the largest share of votes (approx. 17%) amongst IMF members (see table below), it has little to lose relative to European nations. At the 2009 G-20 Pittsburgh summit, the US raised the possibility that some European countries would reduce their votes in favour of increasing the votes for emerging economies. However, both France and Britain were particularly reluctant as an increase in China’s votes would mean China now has more votes than the UK and France. At a subsequent IMF meeting in Istanbul, the same month as the Pittsburgh Summit, IMF managing director Jean Claude Trichet then highlighted that “If we don’t correct them, we’ll have the recipe for the next major crisis.” Citing the seriousness of the issue to be tackled.
Members’ quotas and voting power, and board of governors
Major decisions require an 85% supermajority. The United States has always been the only country able to block a supermajority on its own. The following table shows the top 20 member countries in terms of voting power (2,220,817 votes in total). The 27 member states of the European Union have a combined vote of 710,786 (32.07%).
On October 23, 2010, the Ministers of Finance of G-20, governing most of the IMF member quotas, agreed to reform IMF and shift about 6% of the voting shares to major developing nations and countries with emerging markets.
Members’ quotas and voting power, and board of governors
|Members' quotas and voting power, and board of governors|
|IMF member country||Quota: millions of SDRs||Quota: percentage of total||Governor||Alternate Governor||Votes: number||Votes: percentage of total|
|United States||37,149.3||17.09||Timothy F. Geithner||Ben Bernanke||371,743||16.74|
|Japan||13,312.8||6.12||Yoshihiko Noda||Masaaki Shirakawa||133,378||6.01|
|Germany||13,008.2||5.98||Axel A. Weber||Wolfgang Schäuble||130,332||5.87|
|United Kingdom||10,738.5||4.94||George Osborne||Mervyn King||107,635||4.85|
|France||10,738.5||4.94||Christine Lagarde||Christian Noyer||107,635||4.85|
|China||8,090.1||3.72||Zhou Xiaochuan||Yi Gang||81,151||3.65|
|Italy||7,055.5||3.24||Giulio Tremonti||Mario Draghi||70,805||3.19|
|Saudi Arabia||6,985.5||3.21||Ibrahim A. Al-Assaf||Hamad Al-Sayari||70,105||3.16|
|Canada||6,369.2||2.93||Jim Flaherty||Mark Carney||63,942||2.88|
|Russia||5,945.4||2.73||Aleksei Kudrin||Sergey Ignatyev||59,704||2.69|
|Netherlands||5,162.4||2.37||Nout Wellink||L.B.J. van Geest||51,874||2.34|
|Belgium||4,605.2||2.12||Guy Quaden||Jean-Pierre Arnoldi||46,302||2.08|
|India||4,158.2||1.91||Pranab Mukherjee||Duvvuri Subbarao||41,832||1.88|
|Switzerland||3,458.5||1.59||Jean-Pierre Roth||Hans-Rudolf Merz||34,835||1.57|
|Australia||3,236.4||1.49||Wayne Swan||Ken Henry||32,614||1.47|
|Mexico||3,152.8||1.45||Agustín Carstens||Guillermo Ortiz||31,778||1.43|
|Spain||3,048.9||1.40||Elena Salgado||Miguel Fernández Ordóñez||30,739||1.38|
|Brazil||3,036.1||1.40||Guido Mantega||Henrique Meirelles||30,611||1.38|
|South Korea||2,927.3||1.35||Okyu Kwon||Seong Tae Lee||29,523||1.33|
|Venezuela||2,659.1||1.22||Gastón Parra Luzardo||Rodrigo Cabeza Morales||26,841||1.21|
|remaining 166 countries||62,593.8||28.79||respective||respective||667,438||30.05|
Assistance and reforms
The primary mission of the IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution’s 187 member countries. Member states with balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including to cover the cost of importing basic goods and services. In return, countries are usually required to launch certain reforms, which have often been dubbed the “Washington Consensus”. These reforms are thought to be beneficial to countries with fixed exchange rate policies that may engage in fiscal, monetary, and political practices which may lead to the crisis itself. For example, nations with severe budget deficits, rampant inflation, strict price controls, or significantly over-valued or under-valued currencies run the risk of facing balance of payment crises. Thus, the structural adjustment programs are at least ostensibly intended to ensure that the IMF is actually helping to prevent financial crises rather than merely funding financial recklessness.