Q. Which of the following parameters are consists of International Monetary Fund (IMF) Quota Formula?
1. Weighted average of GDP.
2. Openness.
3. Contribution to IMF.
4. Economic Variability.
5. International reserves.
Select the correct answer using the code given below:

[A] 1, 2, 3, 4 and 5

[B] 1, 2 and 5 only

[C] 1, 2, 4 and 5 only

[D] 1, 2, 3 and 4 only

Answer: C

When a country joins the IMF, it is assigned an initial quota in the same range as the quotas of existing members of broadly comparable economic size and characteristics. The IMF uses a quota formula to help assess a member’s relative position. 

  • The current quota formula is a weighted average of GDP (weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent). 
  • For this purpose, GDP is measured through a blend of GDP—based on market exchange rates (weight of 60 percent) and on PPP exchange rates (40 percent).  
  • The formula also includes a “compression factor” that reduces the dispersion in calculated quota shares across members.