IMF Greenlights Proposal for 50% Increase in Members' Loan Quotas, Potential Boost for Pakistan's Financial Assistance
The IMF's Executive Board has approved a proposal for a 50% increase in member states' loan quotas, potentially opening avenues for increased financial assistance to countries like Pakistan. The decision comes amid Pakistan's ongoing $3 billion stand-by arrangement, with an initial tranche already disbursed. The success of the ongoing IMF review in Islamabad could result in a $710 million second tranche in December. The proposal, set for a vote by December 15, 2023, aims to enhance the IMF's permanent resources, reducing reliance on borrowing and reinforcing global financial stability.
Karobar
The Executive Board of the International Monetary Fund (IMF) has given the nod to a proposal aiming to amplify the quotas allocated to member states by 50%, a development that holds the promise of greater financial support for countries like Pakistan in the future.
Currently engaged in a $3 billion stand-by arrangement with the IMF, Pakistan faces an arrangement expiration on March 31, 2024. Having already secured the first tranche soon after formalizing the deal, an IMF team is presently in Islamabad conducting the initial review. The successful outcome of this review is crucial, as it paves the way for the disbursement of the second tranche amounting to $710 million, scheduled for December.
Looking ahead, the third tranche is earmarked for March of the following year, following a second and final review set for February. This concludes the nine-month agreement that took effect on July 1 earlier this year. The IMF Executive Board has proposed a vote on this measure by December 15, 2023, necessitating an 85% majority of the total voting power.
Georgieva stated:
"In the spirit of international cooperation, I am hopeful this proposal will garner the broadest possible support from the membership, and that we will then make progress on a quota realignment under the 17th Review."
The IMF quota plays a pivotal role in determining the maximum loan amount a member can secure from the Washington-based organization. Additionally, it influences a member's share in the general allocation of special drawing rights (SDRs), conducted at least once every five years. Managing Director Kristalina Georgieva emphasized the importance of concluding the 16th Review with a quota increase to maintain a robust, quota-based IMF at the core of the Global Financial Safety Net.
The quota augmentation is designed to fortify the IMF's permanent resources, reducing reliance on borrowing. This ensures the primary role of quotas in the Fund's resources, aligning with the goal of preserving global financial stability and responding to members' potential needs in an uncertain and shock-prone world.
