"Quotas are the building blocks of the IMF's financial and governance structure. An individual member country's quota broadly ref…

Question

"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". In the above context, which of the following parameters are used to calculate quota?

i. GDP of the country

ii. Degree of Openness

iii. Demographic dividend

iv. Economic variability

v. International Reserves

Choose the correct answer based on the code given below:

1. A. ii, iii and v
2. B. i, ii, iv and v only (Correct answer)
3. C. i, iii and v only
4. D. i, ii, iii and v only

Correct Answer

Option B — i, ii, iv and v only

Detailed Solution & Explanation

The correct answer is i, ii, iv and v only.

Key Points

• The IMF quota formula is a weighted average of four variables:

• Demographic dividend (iii) is not a parameter. Population does not enter the quota formula at all — one of the standing criticisms made by large developing economies.
• The correct combination is therefore i, ii, iv and v.

Additional Information

• A member's quota determines four things: its subscription to the Fund, its voting power, its access to IMF financing, and its share in SDR allocations.
• Quotas are denominated in Special Drawing Rights (SDRs), the IMF's unit of account. A member pays 25% of its quota in SDRs or widely accepted currencies — the *reserve tranche* — and the remaining 75% in its own currency.
• Voting power is the sum of basic votes, equal for all members, and one vote per SDR 100,000 of quota — so it is overwhelmingly quota-driven. The United States holds the largest quota and, with about 16-17% of the votes, an effective veto over decisions requiring an 85% majority.
• India's quota is about 2.75%, giving roughly 2.63% of the votes, and India is among the top ten shareholders. The 2010 quota reforms, which took effect in 2016, shifted more than 6% of quota shares to dynamic emerging markets and doubled total quotas.
• The IMF was created at the Bretton Woods Conference (July 1944) along with the World Bank (IBRD), and began operations in 1945. It has 190 member countries and is headquartered in Washington, D.C.
• Its flagship publications are the World Economic Outlook, the Global Financial Stability Report and the Fiscal Monitor. Annual surveillance of each member's economy is conducted under Article IV consultations.