Estonia to boost its stake in International Monetary Fund by 175 million euros
Riigikogu approved the 175-million-euro increase in Estonia’s participation in the International Monetary Fund (IMF) today. The Riigikogu also ratified the proposals for amendment of the IMF’s Articles of Agreement, aimed at enhancing the flexibility of the IMF’s management framework and increasing the voting power of developing countries.
The Estonian participation or quota will be raised by nearly 150 million SDRs or 175 million euros to a total of 244 million SDRs or approximately 285 million euros, i.e. 0.051% of the total volume of IMF quotas.
The SDR (Special Drawing Right) is used by the International Monetary Fund as an accounting unit which is based on the basket of currencies comprising the US dollar, the euro, Japanese yen and the British pound sterling.
Under the decision of the Riigikogu, Estonia is represented in the International Monetary Fund by Eesti Pank. Eesti Pank will make the downpayment for the increase of the Estonian quota, paying 25% or approximately 44 million euros in SDRs or other foreign currency, and 75% or approximately 131 million euros in the local currency (i.e. the euro). The quota payment will not affect the state budget.
In order for the quota increase to take effect, the increase must be approved by the countries whose participation amounts to 70% of the total volume of IMF quotas. Furthermore, the amendments to the IMF’s Articles of Agreement must have taken effect in 60% of the member states representing 85% of the total voting power in order for the quota increase to be implemented. To participate in the quota increase, the member states must submit to the IMF their consent to the quota increase by 30 June 2012 at the latest.
The decision of the Riigikogu allows Estonia to grant consent to the increase of the Estonian quota and amendment of the IMF’s Articles of Agreement. The new Estonian quota will take effect upon fulfilment of the above conditions and the effecting of the downpayment by Estonia.
The total volume of IMF quotas will be raised twice, from 238 billion SDRs to 477 billion SDRs. The IMF’s proposal to raise the quotas was prompted, above all, by the need to double the IMF’s resources in the conditions of a global financial crisis, by considering the changed position of quickly developing member states (including Estonia) in the global economy. The IMF reviews the quotas of its member states on a regular basis - at least once every five years.
The quota determines the maximum participation of the member state in the IMF. The size of the quota is calculated based on the established formula by taking account of the GDP, trade openness, economic volatility (capital flows, current account) and the currency reserves. The quota also determines the member state’s chances to apply for an IMF loan, with access to the IMF’s credit lines usually linked to the country’s participation.
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