Finance

Background

Who pays for the Fund and the Bank?

5 April 2017 | FAQ

Money. Credit: 401kcalculator.org

Money. Credit: 401kcalculator.org

The IMF and the World Bank’s financial resource base is mainly made up of member states’ contributions. These resources allow them to make initial loans and draw income through two main streams. The first derives from their lending operations, while the latter comes from the income on investments in financial markets.

International Monetary Fund (IMF)

As of October 2016, the IMF has approximately $964 billion of of capital, which it can make available to its 189 member countries. The principal purpose of IMF lending is to assist countries with balance of payment problems so that these do not threaten global financial stability. This crisis resolution role is at the heart of IMF lending. The IMF can also support countries to cope with adverse shocks, such as those that resulted from the 2008 financial crisis.

Approximately 46 per cent of IMF resources come from contributions of its member countries, through the payment of quotas. The current quota formula is a weighted average of GDP (weight of 50 per cent); openness (30 per cent); economic variability (15 per cent); and international reserves (5 per cent). The IMF’s resources are denominated in Special Drawing Rights (SDRs), an international reserve asset created under the Bretton Woods fixed exchange system to supplement the member countries’ official reserves (see Observer  Winter 2016, Update 65).

Apart from determining the country’s contribution to the Fund, the quota system also defines the voting power and the maximum amount of resources a country can borrow in normal circumstances. The 2010 reform of the quota system, which was approved in 2016, resulted in a doubling of the Fund’s financial resources from $330 billion to $660 billion and a slight increase of the quota shares of emerging countries (with minor decrease of US shares). China was the major beneficiary of the quota revision, becoming the third largest member country in the Fund. As of October 2016, quota resources added up to $447 billion (see Observer Winter 2016). Two other credit lines exist to augment the financial position of the IMF in case of exceptional situations that pose a threat to the stability of the monetary system.

The New Arrangements to Borrow (NAB), which was proposed after the 1994 Mexican crisis, entered into force in 1998 and was expanded in 2010 in order to supplement the Fund’s quota resources. Following the increase in quotas resulting from the 14th quota review in February 2016, the NAB has been halved from about $500 billion in a move from NAB to quota resources. NAB amounted to $250 billion coming from 38 countries in October 2016. In November 2016 the IMF executive board approved the renewal of NAB for a five-year period beginning November 2017.

Following the 2008 financial crisis, in response to concerns about the IMF’s response capacity arising from a lack of quota increase during the past decade, a line of borrowing was created with bilateral borrowing arrangements established in 2012 to ensure the IMF could meet its lending requirements. These arrangements totalled up to $360 billion in October 2016.

In 2016, the IMF’s forward commitment capacity (FCC), the resources immediately available for new, non-concessional lending, amounted to $283.3 billion. The FCC is determined by the Fund’s usable resources, including NAB and loan repayments over the next twelve months, minus resources already committed and a prudential balance.

Concessional lending to low-income countries is not financed through quota subscriptions, but through contributions from member countries and the IMF itself. The Fund provides low-interest loans under the Poverty Reduction and Growth Trust (PRGT). Debt relief is provided under the Heavily Indebted Poor Countries (HIPC) Initiative, the Catastrophe Containment and Relief (CCR) Trust and the Multilateral Debt Relief Initiative (MDRI).

International Bank for Reconstruction and Development (IBRD)

IBRD is owned by the governments of its 189 shareholder countries and lends to middle income countries. IBRD is the one of the largest Multilateral Development Banks (MDB) in the world and is one of the five institutions of the World Bank Group. IBRD’s main assets are its loans to member countries. As of December 2016, IBRD’s net loans outstanding amounted to $171.1 billion. Approximately 22 per cent of IBRD’s net loans are financed through equity, while the remaining portion is funded by proceeds of borrowings from capital markets. Thanks to its consistent triple-A rating since 1959, IBRD can borrow at low interest rates and offer access to capital to creditworthy middle and low income countries on favourable terms.

Funds raised through capital markets that are not deployed for lending are kept in the investment portfolio to ensure a prudential level of liquidity for its operations. As of December 2016, the liquid asset portfolio amounted to $57.1 billion, while the borrowing portfolio totalled $190.2 billion, made up of debt securities in a variety of currencies.

IBRD’s business model is not based on profit maximisation, but on prudent management in order to generate enough revenue for its operations; for balance sheet consolidation (through accumulation of reserves); and to provide income transfers to the International Development Association (IDA), the World Bank’s low-income country arm.

International Development Association (IDA)

IDA complements the work of the IBRD by providing loans, called “credits”, and grants to the world’s poorest countries when they are not eligible to borrow from IBRD. Eligibility for IDA support depends on the country’s relative poverty measured and updated annually in terms of Gross National Income per capita, with the threshold for fiscal 2016 set at $1,215, as well as its creditworthiness and ability to borrow on market terms. IDA also supports some countries that are above the threshold but lack the creditworthiness to borrow from the IBRD. Additionally, “blend countries”, such as Vietnam, are eligible for IDA support based on income levels but are also sufficiently creditworthy for some IBRD borrowing.

IDA lends money on highly concessional terms, with interest rates as of 1 January 2017 varying from 3.125 to 6.7 per cent on loans. Countries at high risk of debt distress (“red light” countries) receive 100 per cent of their support in grants. Together with the IMF and the African Development Fund (ADF), IDA also provides debt relief though the HIPC initiative and MDRI. In March 2016 the board of directors approved the establishment of an IDA Scale-up Facility (IDA17 SUF) to provide additional support to IDA countries for the remainder of the IDA 17 period. The SUF finances IDA operations approved before the end of FY17. The SUF credits are offered at non-concessional lending terms to eligible clients – those at low or medium risk of debt distress – to ensure consistency with the Non-Concessional Borrowing Policy (NCBP) and the IMF Debt Limits Policy.

Unlike the IBRD, IDA raises most of its funds through contributions by its 173 shareholder countries. Contributions to IDA are also used to calculate voting shares at both IBRD and IDA. Replenishment rounds take place every three years.

IDA 17 funding featured member state contributions of $31 billion, internal resources/carry-overs of $19 billion, member loans of $4 billion and WBG transfers of $3 billion. The last IDA replenishment round (IDA 18) was finalised in December 2016, and expects IDA to use its triple-A credit rating to raise a third of the committed $75 billion through capital markets. Another third will come from the Bank’s own resources, with transfers from IBRD’s net income and grants from the IFC.

Other forms of income include borrowers’ repayments of earlier IDA credits, service charges and investment income. IDA’s fixed service charge has been set at 0.75 per cent and covers administrative expenses. Additional revenues for administrative expenses derive from a commitment charge that ranges between 0 and 0.5 per cent. IDA 18 also includes a plan to create a new $2.5 billion Private Sector Window (PSW) managed together with the IFC and the Multilateral Investment Guarantee Agency (MIGA, the World Bank’s political risk insurance arm) (see Observer Winter 2017).

International Finance Corporation (IFC)

The IFC is one of the world’s largest development institutions primarily focused on the private sector and is owned by 184 member countries. Apart from the contributions from member states, the IFC relies for its resources on capital markets and retained earnings from previous operations. As the World Bank’s private sector lending arm, it raises virtually all its funds by issuing debt obligations in international capital markets. For this reason, maintaining a high credit rating is important in order to keep borrowing costs low. During FY 2016, the IFC borrowed in 18 currencies. In 2016, out of a total capital of $22,766 billion the IFC held $20,475 billion in undesignated retained earnings and $2.58 billion in authorised capital (contributions from member states). In addition, the IFC maintains a small borrowing window with IBRD, although it rarely uses this facility.

During the past 60 years, the IFC has used the capital from member states to generate about $245 billion in financing for its activities. In FY 2016, the IFC invested nearly $18.8 billion, including $7.7 billion in funds mobilised from other investors. The highest portion of long-term commitments, 45 per cent ($5 billion), comprised investments in financial markets and funds. Latin America and the Caribbean was the region with the highest level of IFC investment, amounting to $2.7 billion, or 24 per cent of long-term commitments. While in 2016 the IFC had income before grants to IDA of $296 million, it made grants to IDA totalling $330 million, leaving it with a net loss of $33 million.


This article has been adapted since publishing to reflect input by the IFC and the World Bank.

More background on this issue

Finance

Analysis

2 March 2022 | Annual report (BWP)

Our World in 2021

While the Bank stressed the need for a recovery based on Green, Resilient and Inclusive Development and the IMF highlighted its concerns about the divergent paths of the global recovery in 2021, both continued to support largely unreformed policies.

IFI governance

Background

6 October 2021 | Minutes

IMF surcharges: A necessary tool or counter-productive obstacle to a just and green recovery?

Notes from the Civil Society Policy Forum session on 6 October on the governance and resourcing implications of IMF's surcharges.

Finance

Background

9 December 2021 | Inside the institutions

What are Special Drawing Rights (SDRs)?

This Inside the Institutions looks at the IMF’s Special Drawing Rights, including their history and usage, with a focus on the latest allocation, which accounts for 69 per cent of the SDRs ever disbursed.

Finance

Background

18 April 2016 | Minutes

Global Infrastructure Forum: Perspectives from new development finance institutions

Notes from a side event at the inaugural Global Infrastructure Forum, during the World Bank/IMF 2016 spring meetings, discussing the role of the new development finance institutions, the Asian Infrastructure Investment Bank and the New Development Bank.

IFI governance

Background

4 October 2021 | Minutes

Making the Most of Special Drawing Rights: Approaches to maximise impact and create a sustainable and just recovery

Notes from the Civil Society Policy Forum session on 4 October on the ways to maximise the impacts of the recent allocation of $650 billion Special Drawing Rights.

Finance

Background

5 April 2017 | FAQ

Who pays for the Fund and the Bank?

This Inside the Institutions looks at the funds available to the IMF and the World Bank, including the origins of IBRD and IFC resources and an overview of the most recent changes in the IMF and IDA’s funding streams and mechanisms.

Finance

Background

14 April 2016 | Minutes

Political economy of structural reforms

Notes from an official event at the IMF/World Bank 2016 spring meetings on the political economy of structural reforms.

Finance

Background

17 June 2015 | Minutes

DFID Financing for Development and infrastructure meeting

Minutes from a meeting with UK NGOs and DFID on Financing for Development and infrastructure.

IFI governance

Background

16 March 2015 | Minutes

UK civil society meeting with UK World Bank Executive Director Gwen Hines

Notes of a meeting with UK World Bank Executive Director Gwen Hines 25 February 2015.

IFI governance

Background

9 October 2014

Financing for development: What actions are needed on debt and illicit capital flows?

Notes of a meeting on financing for development at the World Bank-IMF annual meetings 2014

Finance

Background

30 May 2013 | Minutes

Notes of a meeting with World Bank Managing Director Caroline Anstey

Notes of a meeting with World Bank Managing Director Caroline Anstey

IFI governance

Background

30 May 2013 | Minutes

Civil society meeting with Steve Field, UK IMF Executive Director

Minutes of CSO meeting with Steve Field UK IMF Executive Director, 9 April 2013

IFI governance

Background

24 April 2013 | Minutes

IMF reform in developing country perspective

Notes from IMF 2013 Spring meetings civil society forum event

IFI governance

Background

22 April 2013 | Minutes

From the Arab revolutions to global austerity trends

This session examined issues thrown up by the Arab revolutions, including the fiscal, monetary, tax and investment policies being considered by governments facilitating, or hindering countries in the Arab and other regions in building an inclusive economy and supporting socioeconomic recovery, the impact on public expenditure for the strengthening of education, health, and other social sectors as well as the management of chronic and high unemployment and high food and fuel prices.

Social services

Background

19 April 2013 | Minutes

Leveraging private finance with public money: Positive Innovation? Corporate Welfare?

This event explored how modalities to "leverage" the private sector are beginning to appear in different ways in the World Bank and donors' agenda, and the challenges they pose.

Environment

Background

18 April 2013 | Minutes

CSO meeting with Ms. Ksenia Yudaeva, G20 sherpa, Russian Federation

This event featured a discussion between CSOs and the Russian Federation G20 sherpa covering topics including food & nutrition security, jobs and the post-2015 development agenda.

IFI governance

Background

18 April 2013 | Minutes

After recent court decisions: how can sovereign debt workouts become fair, comprehensive and account

This session examines the challenges which recent court decisions pose to sovereign debt workouts that allow for burden-sharing and take into account the social development needs of debtor countries.

Private Sector

Background

18 April 2013 | Minutes

Discussion on IMF jobs and growth policies

Center for Economic and Policy Research (CEPR) sponsored discussion on macroeconomic policy in the Eurozone, and the challenges to restoring employment and growth.

Private Sector

Background

18 April 2013 | Minutes

What next for the eurozone? Macroeconomic policy and the recession

Center for Economic and Policy Research (CEPR) sponsored discussion on macroeconomic policy in the Eurozone, and the challenges to restoring employment and growth.

Accountability

Background

18 February 2013 | Minutes

UK Civil Society Meeting with Minister of State Rt Hon Alan Duncan MP

This was a meeting on 1 October 2012, between the Minister of State of the UK's Department for International Development (DFID) and civil society representatives, focusing on the World Bank.

IFI governance

Background

13 October 2012 | Minutes

World Bank Inspection Panel at 19: Some Lessons for Safeguard Policy

This panel discussion centered on the possible policy lessons for the Safeguard Review of learning from the emblematic or most frequently registered cases of non-compliance with Bank safeguard policies, particularly project supervision, environmental assessment, and involuntary resettlement.

IFI governance

Background

12 October 2012 | Minutes

Citizen-Led Accountability at the World Bank Group: experiences of independent recourse mechanisms

This session aimed to gather CSO views, suggestions, and concerns on how to improve the current guidelines, including IMF consultation processes on policies, strategies, and Art. IV consultations.

IFI governance

Background

12 October 2012 | Minutes

Facilitating international adjustment through timely debt resolution

This session highlighted the perspectives of finance ministers, policy makers, and academics on the need to ensure timely, effective international adjustment in a manner consistent with sustained global growth and continued adherence to the system of open, dynamic international trade and payments constructed over the past 65 years.

Rights

Background

12 October 2012 | Minutes

World Bank safeguard review and CSOs approaches in their engagement

Interaction between the Bank and CSOs on the approach paper through this panel provided an opportunity for the Bank and CSOs to highlight areas of importance and provide input about the direction of the safeguard review.

Accountability

Background

11 October 2012 | Minutes

Global financial regulations and their Impact on major campaigns

This event was a collegial information-sharing and strategy session to explore the linkages between financial regulations and grass roots campaigns.

IFI governance

Background

11 October 2012 | Minutes

From country systems to DPLs: understanding the World Bank's approach to social and environmental ri

This session will discuss the strengths and weaknesses of the Bank’s approaches with respect to different financial instruments and evaluate the challenges of ensuring coherence in environmental and social sustainability outcomes across instruments.

Environment

Background

9 October 2012 | Minutes

CSO Roundtable with World Bank executive directors

This was a roundtable discussion between IMF and WBG Executive Directors (EDs) with accredited civil society representatives to promote an exchange of views and discussion on key issues of the 2012 Annual Meeting agenda: global economy, disaster resilience, social and environmental safeguards, and global health.

Finance

Background

20 April 2012 | Minutes

Regulating Global Capital Flows for Development

Seminar at the Brookings Institution on capital flows regulations - 19 April

Accountability

Background

18 April 2012 | Minutes

UK civil society meeting UK IMF Executive Director Alex Gibbs

Notes of a meeting with UK executive director to the IMF Alex Gibbs in April 2012

Accountability

Background

12 October 2011 | Minutes

UK civil society meeting with HM Treasury and UK IMF Executive Director

Notes meeting Alex Gibbs September 2011

Infrastructure

Background

23 September 2011 | Minutes

Scaling up Climate Finance

Notes of meeting, Washington DC, September 22, 2011

IFI governance

Background

23 September 2011 | Minutes

Financial Transaction Tax implementation

Notes of a meeting, Washington DC, 22 September 2011

Finance

Background

13 June 2011 | Inside the institutions

The IFC's approach to international trade finance

Trade finance refers to financing arrangements that support international trade transactions. It is one of the central parts of a new ten-year strategy paper on international trade currently being developed by the World Bank for the period between 2011 and 2021.

Accountability

Background

18 April 2011 | Minutes

IFC and Financial Intermediary Lending

Notes of meeting, Washington DC, April 15, 2011

Environment

Background

15 April 2011 | Minutes

The Green Climate Fund: discussion of principles and design

Notes of meeting, Washington DC, April 15, 2011

Infrastructure

Background

30 November 2010 | Minutes

Private sector investment in energy lending and climate finance

Meeting notes of 'Private sector investment in energy lending and climate finance'

IFI governance

Background

12 October 2010 | Minutes

Held in reserve: can a new approach to monetary policy transform the global economic outlook?

Minutes of an experts seminar held on the sidelines of the 2010 Annual Meetings of the IMF, 7 October 2010

Knowledge

Background

11 October 2010 | Minutes

Post MDG Summit

Notes of the seminar of annual meetings 2010

IFI governance

Background

11 October 2010 | Minutes

Future of the global financial and monetary system

Notes of the seminar of annual meetings 2010

IFI governance

Background

11 October 2010 | Minutes

Global economic governance

Notes of the seminar of annual meetings 2010

Accountability

Background

4 October 2010 | Minutes

Meeting on the World Bank between DFID and UK NGOs

Notes of a meeting between UK civil society and DFID staff.

Accountability

Background

6 April 2010 | Minutes

Meeting between UK civil society and Susanna Moorehead, UK Executive Director to the World Bank

Minutes of a meeting between UK civil society, UK World Bank Executive Director Susanna Moorehead, and DFID staff

Accountability

Background

30 March 2010 | Minutes

Meeting between UK civil society and Alex Gibbs, UK IMF Executive Director

Minutes of a meeting between UK civil society, UK IMF Executive Director Alex Gibbs, and UK Treasury staff

Finance

Background

15 February 2010 | Inside the institutions

IDA replenishment

This year, donor countries will decide on their financial contributions to the World Bank's International Development Association (IDA) for 2011-2014.

IFI governance

Background

5 October 2009 | Minutes

Future of the Global Financial System

Notes of part of a panel debate chaired by Martin Wolf of the Financial Times, Istanbul, 4 October 2009.

IFI governance

Background

4 October 2009 | Minutes

The UN conference and the G20 summit

Minutes from The UN conference and the G20 summit, civil society policy forum discussion on 3 October 2009. Istanbul, Turkey

IFI governance

Background

4 October 2009 | Minutes

Critical debate on the World Bank and IMF

Summary of a presentation made by Professor Anwar Shaikh, the New School for Social Research, on "Monetary Policy and the Global Crisis"

IFI governance

Background

4 October 2009 | Minutes

Global economic governance roundtable

Summary of a discussion with German government representatives, Jomo KS of the UN and civil society organisations.

IFI governance

Background

23 April 2009 | Minutes

G20 Summit and impacts on developing countries

Summary of IMF and World Bank presentations and the discussion afterwards

IFI governance

Background

1 April 2009 | Inside the institutions

The IMF's special drawing rights (SDRs)

The special drawing right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.

Finance

Background

16 February 2009 | Inside the institutions

Who pays for the Fund and the Bank?

The IMF and the World Bank derive their income mainly from their lending operations, charging borrowing countries, and from their investments in financial markets.

Environment

Background

27 November 2008 | Inside the institutions

International financial architecture

National and international financial bodies frequently overlap both in function and membership. Below are some of the main regulatory or influential bodies within the financial system. In most, the IMF is a participant, and in some, a central player.

Conditionality

Background

10 November 2008 | Minutes

Minutes from Video conference of UK NGOs with UK Executive Director to the IMF

Meeting exploring the IMF

Conditionality

Background

11 October 2008 | Minutes

Combating tax flight: ending evasion and reducing avoidance

Norway, Germany, IMF, WOrld Bank and experts discuss tackling tax evasion and capital flight.

IFI governance

Background

1 February 2008 | Inside the institutions

The IFIs and Islamic finance

The World Bank Group and the IMF have become more involved in assistance to and oversight of Islamic financial institutions.

Finance

Background

4 December 2007 | Inside the institutions

The IMF and financial sector reform

While the World Bank has done a lot of work on financial sector reform, the IMF is also a key actor. Since facing criticism over its lack of understanding of financial markets in the wake of the 1997 Asian financial crisis, the IMF has significantly increased its capacity for analysis of the financial sector.

IFI governance

Background

27 April 2007 | Minutes

European CSO meeting with European IMF EDs

Incomplete minutes of European CSO meeting with European IMF EDs, 13 April 2007

Latest articles on this issue

Finance

Analysis

UN Financing for Development: The best chance to democratise global economic governance?

As Bretton Woods Institutions fail to deliver transformative, systematic reform of deeply unequal global architecture, countries should embrace a more democratic space: the United Nations Financing for Development process

19 July 2023 | Guest analysis

Finance

Analysis

World Bank Group Evolution: Technical fixes or urgently needed reform?

World Bank Evolution Roadmap’s proposed superficial technical patches favouring the ‘logic’ of the market will likely fail to deliver the structural changes needed to support borrowing countries amidst global crises.

19 July 2023 | At Issue

Finance

News

African finance ministers join growing calls for more equitable SDR allocations

New calls for SDR reform reveal acute need of financing for low- and middle-income countries to achieve the Sustainable Development Goals.

19 July 2023

Finance

News

A different ‘evolution roadmap’: Havana conference calls for changes in world order hierarchy

As IMF and World Bank tinker at margins, 50 policymakers, diplomats and academics from over 26 countries issue Havana Declaration calling for an assertion of Southern power and the building of a new "planetary bloc".

5 April 2023

Finance

Analysis

Civil Society calls for rethink of World Bank’s ‘evolution roadmap’ as part of wider reforms to highly unequal global financial architecture

Joint civil society briefing paper highlights concerns with the World Bank’s Evolution Roadmap, and provides a series of recommendations for a Roadmap that prioritises people, participation and the planet over profit and economic growth.

3 July 2023 | Briefings

Finance

Analysis

G20 review calls for increased MDB lending as World Bank ignores urgent need for policy changes

G20 independent review calls for increased lending by multilateral development banks to address multiple crises, but lack of reform in World Bank crises response framework raises concerns about how it would use additional resources.

4 October 2022

Finance

Commentary

Quota reform needed at IMF in order to address 21st century challenges

As economic conditions worsen and the Fund's legitimacy comes under increasing pressure, IMF leaders gathering for the Annual Meetings must make progress on ongoing review of IMF quotas and agree a more equitable formula and distribution of voting power.

4 October 2022 | Guest comment

Finance

Analysis

A new Bretton Woods for whom? Civil society calls for democratisation of global governance

As geopolitical tensions rise amidst worsening global economic conditions, civil society demands the democratisation of a world economic order away from the established Global North and elite capitalist hegemony.

21 July 2022

IFI governance

Analysis

Spring Meetings 2022 Preamble: War in Ukraine risks deepening divergent recovery as World Bank and IMF prepare for Spring Meetings

War in Ukraine will have significant spillover effects as Global South continues to carry the burden of vaccine inequity. Debt, austerity and evolving food crisis key talking points of Meetings while unequal recovery, gender, RST and surcharges key issues at CSPF.

14 April 2022

Finance

News

IMF capital control review: A missed opportunity to support a just recovery and stability

IMF review of institutional view on capital controls disappoints as it largely maintains the policy framework of its predecessor

6 April 2022