Concept 1 · free preview
International Monetary Fund (IMF): quotas, SDRs and lending
Understand
The IMF was conceived at the Bretton Woods Conference in July 1944, attended by 44 countries, to prevent a repeat of the 1930s, when countries devalued competitively and choked world trade. Its Articles of Agreement came into force in December 1945 and it began operations in March 1947, headquartered in Washington, D.C. Its job is the stability of the international monetary system: exchange rates and payments between countries. It does three things. Surveillance: it monitors the world economy and each member, mainly through annual 'Article IV consultations', and publishes the World Economic Outlook, Global Financial Stability Report and Fiscal Monitor (each April and October). Lending: it lends to members facing balance of payments problems — for example through Stand-By Arrangements, the Extended Fund Facility, the Rapid Financing Instrument and, for low-income countries, the concessional Poverty Reduction and Growth Trust — usually with policy conditions. Capacity development: technical assistance and training. Quotas are the heart of the Fund. Each member's quota, expressed in SDRs and broadly based on its weight in the world economy, sets how much it pays in (subscription), how much it can borrow (access), its share of SDR allocations, and its voting power. Major decisions need an 85% majority, so the United States, with more than 15% of the votes, has an effective veto. Quotas are reviewed at least every five years; the 14th review (agreed 2010) took effect in 2016, and in December 2023 the Board of Governors approved a 50% quota increase under the 16th review, which takes effect only after members consent. The Special Drawing Right (SDR), created in 1969, is an international reserve asset, not a currency. Its value comes from a basket of five currencies, and holders can exchange SDRs for usable currencies. The largest allocation, about SDR 456 billion (about US$650 billion), was made in 2021 to help countries through the pandemic. India is a founding member.
Rule
Bretton Woods, July 1944 (44 countries); Articles in force December 1945; operations from March 1947; HQ Washington, D.C.
Functions: surveillance (Article IV), lending for BoP problems, capacity development.
Quota decides subscription, borrowing access, SDR allocation and votes; major decisions need 85%.
SDR created 1969; ISO code XDR; not a currency; SDR interest rate set weekly from 3-month rates of basket currencies.
SDR basket weights from 1 August 2022: US dollar 43.38%, euro 29.31%, Chinese renminbi 12.28%, Japanese yen 7.59%, pound sterling 7.44%.
Flagship reports: World Economic Outlook, Global Financial Stability Report, Fiscal Monitor.
Largest SDR allocation: about SDR 456 billion (about US$650 billion) in 2021.
Current position
Kristalina Georgieva is the IMF Managing Director (since 1 October 2019); her second term began on 1 October 2024 (IMF bio page, checked 11 October 2026).
Effective: 1 Oct 2024Source (opens in a new tab)
Current position
The IMF has 191 member countries (IMF at a Glance, last updated April 2025).
Effective: Apr 2025Source (opens in a new tab)
Current position
India's IMF quota is SDR 13,114.4 million, effective 18 February 2016 (IMF members' financial data page, checked 11 October 2026).
Effective: 18 Feb 2016Source (opens in a new tab)
Current position
The next SDR valuation review is due to conclude before the end of July 2027.
Effective: 14 May 2022Source (opens in a new tab)
Example
Suppose a country's oil import bill doubles and its reserves can cover only a few weeks of imports. It approaches the IMF, which lends under a Stand-By Arrangement in tranches, each released only if agreed steps (say, cutting the fiscal deficit) are met. India did this in 1991. Today India's own reserves include SDR holdings worth about USD 18.656 billion and a reserve tranche position of USD 4.789 billion (RBI data for 2 October 2026).
Common mistake
The SDR is NOT a currency and not a claim on the IMF's gold; it is a reserve asset exchangeable for currencies.
The renminbi joined the SDR basket in 2016; the basket has five currencies, not four — and the Indian rupee is not in it.
Quota determines voting power — the IMF is not 'one country, one vote'.
IMF lends for balance of payments needs; long-term project loans are the World Bank's job.