The International Monetary Fund’s Executive Board has approved a 50 per cent increase in quota in proportion to existing numbers, while another review in June 2025 is expected to change country allocations.
“The proposal is centered around an increase in quotas of 50 per cent, allocated to members in proportion to their current quotas,” the statement said.
“The quota increase would enhance the IMF’s permanent resources and strengthen the quota-based nature of the Fund by reducing the reliance on borrowing and thus ensuring the primary role of quotas in Fund resources.”
An additional allocation of IMF special drawing rights to Sri Lanka during the Covid pandemic was busted up to mis-target interest rates, putting the central bank deeper into debt and endangering monetary stability.
IMF countries artificially manipulate interest rates by printing money under cover of high inflation targets as well as due to a belief that state reserves of a monetary authority which are directly tied to reserve money through operational frameworks can be used for private sector imports.
The belief, defying classical economic principles has gained widespread currency in the last century leading to chronic balance of payments troubles and monetary debasement, particularly after member county central bank were left without a credible monetary anchor after the IMF’s ‘Second Amendment’ to its articles in the late 1970s, analysts say.
After running out of reserves, IMF members with high inflation targets go for bailouts.
“The membership has also acknowledged the urgency and importance of quota share realignment to better reflect members’ relative positions in the world economy while protecting the quota shares of the poorest members,” the statement said.
“Hence, another critical element of today’s proposal is a call on the Executive Board to work to develop, by June 2025, possible approaches as a guide for further quota realignment, including through a new quota formula.”
Source: Economynext
