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Unit 12: International Monetary Fund

12.1.4 Financing of the IMF Notes

The IMF's resources come mainly from the quota (or capital) subscriptions that countries pay
when they join the IMF, or following periodic reviews in which quotas are increased. Countries
pay 25 % of their quota subscriptions in Special Drawing Rights (SDRs) or major currencies, such
as U.S. dollars or Japanese yen; the IMF can call on the remainder, payable in the member's own
currency, to be made available for lending as needed. Quotas determine not only a country's
subscription payments, but also the amount of financing that it can receive from the IMF, and its
share in SDR allocations. Quotas also are the main determinant of countries' voting power in the
IMF.

Quotas are intended broadly to reflect members' relative size in the world economy: the larger
a country's economy in terms of output, and the larger and more variable its trade, the higher its
quota tends to be.

Example: The United States of America, the world's largest economy, contributes most
to the IMF, 17.5 % of total quotas; Palau, the world's smallest, contributes 0.001 %. If necessary,
the IMF may borrow to supplement the resources available from its quotas.

Determination of Member Country's Quota

A member quota is broadly determined by its economic position relative to other members.
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. Quotas are denominated in Special Drawing Rights (SDRs).

Functions of Quotas

A member's quota delineates basic aspects of its financial and organizational relationship with
the IMF, including:

1. Subscriptions: A member's quota subscription determines the maximum amount of
financial resources the member is obliged to provide to the IMF. A member must pay its
subscription in full upon joining the Fund: up to 25 % must be paid in SDRs or widely
accepted currencies (such as the US dollar, the euro, the yen, or the pound sterling), while
the rest is paid in the member's own currency.
2. Voting power: The quota largely determines a member's voting power in IMF decisions.
Each IMF member has 250 basic votes plus one additional vote for each SDR 100,000 of
quota.

Example: Accordingly, the United States has 371,743 votes (17.1 percent % of the total),
and Palau has 281 votes (0.013 % of the total).
3. Access to financing: The amount of financing a member can obtain from the IMF (its access
limit) is based on its quota.
4. SDR allocations: A members' share of general SDR allocations is established in proportion
to its quota.

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