How countries are represented is key to the IMF's legitimacy as an international organization representing the interests of its 186 member countries. Upon joining the IMF, each country is allocated a quota based approximately on the relative size of its economy. The quota determines the country's financial contribution to the IMF, its voting power, and ability to access IMF financing.

Because of rapid changes in the global economy in recent years, the IMF's members agreed that the existing quota allocations had become somewhat misaligned and needed to be adjusted. However, any changes in quotas require approval by an 85 percent majority. A broad-based consensus was therefore needed before any changes could be implemented.

Two-year program

In 2006, the IMF launched a two-year program to reform the system of quota shares. First-round changes included ad hoc quota increases for the four most underrepresented countries: China, Korea, Mexico, and Turkey (see chart). Agreement to further increase the voting share of emerging market and developing economies was reached in March 2008. This shift will be based on a new quota formula, replacing the old, complex system of five formulas.

Under the reform, 135 countries will see increases in their voting power, with an aggregate shift of 5.4 percentage points. A total of 54 countries will see increases in their nominal quotas ranging from 12 to 106 percent, with aggregate quota shares for these countries increasing by 4.9 percentage points (see chart). Consistent with the objectives of the reform, some of the largest increases will go to dynamic emerging market countries.

The Board of Governors also encouraged the Executive Board to recommend further realignments as a means to raise the shares of underrepresented members in future general quota reviews (conducted every five years). Such realignments would recognize that member country representation should continue to adjust to changes in the global economy.

Protecting voice of low-income countries

Enhancing the voice of low-income countries was another central element of the reform package. A key mechanism for achieving this goal is through an increase in basic votes. Basic votes reflect the principle of equality of states and give the smallest members of the IMF (many of which are low-income countries), a greater voice in the organization's deliberations.

The agreement reached endorsed a tripling of basic votes, the first such increase since the IMF was established in 1945. This boost is crucial as it will more than compensate many low-income countries that would have otherwise seem their voting shares diminished (see chart). Additionally, the Articles of Agreement will be amended so that the share of basic votes in total voting power does not decline in the event of future quota increases.

To further enhance the participation of low-income countries, the amendment will also enable the two Executive Directors representing African constituencies to appoint a second Alternate Executive Director. 

Watch a video on governance reform.

Read more about quota and voice reform.

Listen to a podcast with Leo van Houtven, former Secretary of the IMF.