Fourteenth General Review of Quotas—Realigning Quota Shares: Further Considerations
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Borrowing Agreement with the Bank of Slovenia

Abstract

Borrowing Agreement with the Bank of Slovenia

Illustrative Quota Simulations – Technical Aspects

This Appendix discusses technical aspects of the quota simulations presented in Fourteenth General Review of Quotas—Realigning Quota Shares: Further Considerations (Fourteenth General Review of Quotas—Realigning Quota Shares: Further Considerations, 6/22,10). In addition, the attached Tables A1A7 provide simulation results for individual countries.

Table A1.

Illustrative Scenarios: Ad hoc Increase to Dynamic EMDCs; Full Protection -- by Member 1/

(In percent)

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Source: Finance Department.

The simulations assume a 50, 100, and 150 percent increase of post second round quotas. The ad hoc increase is distributed to dynamic EMDCs as defined in footnote 5. Eligible under-represented EMDCs receive a uniform reduction in out-of-lineness or the minimum percentage increase above their post-selective nominal quota, whichever is higher. Eligible over-represented EMDCs receive the minimum percentage increase above their post-selective nominal quota. Under-represented advanced countries maintain their post-selective quota share. Over-represented countries which would become under-represented as a result of the overall quota increase are capped at their calculated quota share. PRGT-eligible countries receive at least their post second round actual quota share.

Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo which became a member on June 29, 2009 and Tuvalu in anticipation of its forthcoming membership. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.

The overall increase is distributed to members on an equiproportional, selective and ad hoc basis in the proportion of x/y/z, respectively.

Includes China, P.R., Hong Kong SAR, and Macao SAR.

Includes all under-represented EMDCs plus other dynamic EMDCs defined as those whose PPP GDP share divided by post second round quota share is greater than 1 and who are not over-represented by more than 25 percent.

Table A7.

Illustrative Scenarios: Ad hoc Increase Allocated Based on Either the Formula or the GDP Blend; Alternative Protection Mechanisms for Poorest Members -- by Member 1/

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Data set

Simulation results are presented for the quota data set which covers the period through 2008 as presented in Fourteenth General Review of Quotas—Updated Data Set and Quota Calculations (6/3/10), based primarily on data from the International Financial Statistics (IFS).

Size of the overall quota increase

For illustrative purposes, the size of the overall quota increase is assumed to be 50, 100 and 150 percent. The overall increase is the sum of the equiproportional, selective, and ad hoc increase. The equiproportional increase is distributed to all members in proportion to their post second round quota share (i.e., a member’s quota share after the 2008 Quota and Voice reforms become effective). The selective increase is distributed to all members in proportion to their calculated quota share, as presented in Fourteenth General Review of Quotas—Updated Data Set and Quota Calculations (6/3/10). The ad hoc increase is distributed to eligible members as described below.

Ad hoc increase—eligibility

The three sets of illustrative simulations presented in the main paper use different eligibility criteria.

  • Set 1: the ad hoc increase is allocated to dynamic EMDCs. Dynamic EMDCs include all EMDCs that are under-represented with respect to the quota formula (i.e., whose ratio of calculated to post second round quota share is greater than 1) plus other EMDCs whose share in global PPP GDP is greater than their post second round quota share, and who are not over-represented by more than 25 percent (i.e. whose ratio of calculated quota share to post second round quota share is greater than 0.8, see Box 1 in Fourteenth General Review of Quotas – Realigning Quota Shares – Further Considerations (6/22/2010).

  • Set 2: Countries are eligible for an ad hoc increase if they are under-represented either with respect to the quota formula or with respect to the GDP blend variable.1 A country is under-represented with respect to the GDP blend if its post selective quota share2 is smaller than its share in the GDP blend variable.

  • Set 3: Countries are eligible for ad hoc increases if they are under-represented with respect to the GDP blend variable.

In all simulations, part of the ad hoc increase is set aside for the protection of the poorest and full or partial protection for over-represented countries against becoming under-represented. In addition, there is protection for countries that are under-represented with respect to the quota formula but not eligible for an ad hoc increase in Sets 1 and 3 (see below).

Ad hoc increase—implementation

The allocation of the ad hoc increase is primarily based on a uniform reduction in out-of- lineness. A uniform reduction in out-of-lineness means that the difference between a country’s calculated quota share and its post selective quota share or the difference between a country’s share in the GDP blend variable and its post selective quota share is reduced proportionately by a uniform reduction factor (URF).3 The former is called the uniform reduction in out-of-lineness with respect to the quota formula and the latter is called the uniform reduction in out-of-lineness with respect to the GDP blend variable. Set 1 also employs a fixed percentage increase over the post selective nominal quota in order to allocate quota increases to eligible over-represented EMDCs. Specifically,

  • Set 1 (Tables 3A and 3B and Tables A1 and A2):

    • Eligible over-represented EMDCs receive a given fixed percentage increase over their post selective nominal quota – the “minimum ad hoc increase to dynamic EMDCs” as shown in Tables 3A and 3B. The size of the fixed nominal increase is determined with a view to allowing a substantial decrease in out-of-lineness for under-represented EMDCs and an adequate increase in quota share for eligible over-represented EMDCs.

    • Eligible under-represented EMDCs receive the uniform reduction of out-of-lineness as described above or the minimum ad hoc increase allocated to dynamic EMDCs, whichever is greater. This approach seeks to ensure that no over-represented EMDC under the quota formula receives a larger increase than under-represented EMDCs.

  • Set 2 (Tables 4A and 4B and Tables A3 and A4):

    • EMDCs that are under-represented under the quota formula only, receive a uniform reduction in out-of-lineness with respect to the quota formula.

    • EMDCs that are under-represented under the GDP blend only, receive a uniform reduction in out-of-lineness with respect to the GDP blend variable.

    • EMDCs that are under-represented with respect to the quota formula as well as with respect to the GDP blend variable, receive the greater of the two uniform reductions.

    • Advanced countries that are under-represented under the GDP blend only, are capped at their post second round quota share.

    • Advanced countries that are under-represented under the quota formula only or under both criteria are capped at their post selective quota share.

  • Set 3 (Tables 5A and 5B and Tables A5 and A6):

    • Eligible EMDCs receive a uniform reduction in out-of-lineness with respect to the GDP blend variable.

    • Eligible advanced countries that are over-represented with respect to the quota formula are capped at their post second round quota share.

    • Eligible advanced countries that are under-represented with respect to the quota formula are capped at their post selective quota share.

Table A2.

Illustrative Scenarios: Ad hoc Increase to Dynamic EMDCs; 95 Percent Protection -- by Member 1/

(In percent)

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Source: Finance Department.

The simulations assume a 50, 100, and 150 percent increase of post second round quotas. The ad hoc increase is distributed to dynamic EMDCs as defined in footnote 5. Eligible under-represented EMDCs receive a uniform reduction in out-of-lineness or the minimum percentage increase above their post-selective nominal quota, whichever is higher. Eligible over-represented EMDCs receive the minimum percentage increase above their post-selective nominal quota. Under-represented advanced countries maintain their post-selective quota share. Over-represented countries which would become under-represented as a result of the overall quota increase are capped at 95 percent of their calculated quota share. PRGT-eligible countries receive at least their post second round actual quota share.

Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo which became a member on June 29, 2009 and Tuvalu in anticipation of its forthcoming membership. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.

The overall increase is distributed to members on an equiproportional, selective and ad hoc basis in the proportion of x/y/z, respectively.

Includes China, P.R., Hong Kong SAR, and Macao SAR.

Includes all under-represented EMDCs plus other dynamic EMDCs defined as those whose PPP GDP share divided by post second round quota share is greater than 1 and who are not over-represented by more than 25 percent.

Table A3.

Illustrative Scenarios: Ad hoc Increase Allocated Based on Either the Formula or the GDP Blend; Full Protection -- by Member 1/

(In percent)

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Source: Finance Department.

The simulations assume a 50, 100, and 150 percent increase of post second round quotas. The ad hoc increase is distributed to all countries that are under-represented with respect to the formula or with respect to the GDP blend (see footnote 3). Eligible EMDCs receive a uniform reduction in out-of-lineness based on the formula (for those EMDCs under-represented under the formula only), or the GDP-blend (for those EMDCs under-represented under the GDP blend only), or the greater of the two (for those EMDCs that qualify under both criteria). Eligible advanced countries are capped at their post second round or post-selective quota share, whichever is greater. Over-represented countries which would become under-represented as a result of the overall quota increase are capped at their calculated quota share. PRGT-eligible countries receive at least their post second round actual quota share.

Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo which became a member on June 29, 2009 and Tuvalu in anticipation of its forthcoming membership. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.

GDP blended using 60 percent market and 40 percent PPP exchange rates, compressed using a factor of 0.95.

The overall increase is distributed to members on an equiproportional, selective and ad hoc basis in the proportion of x/y/z, respectively.

Includes China, P.R., Hong Kong SAR, and Macao SAR.

Table A4.

Illustrative Scenarios: Ad hoc Increase Allocated Based on Either the Formula or the GDP Blend; 95 Percent Protection -- by Member 1/

(In percent)

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Source: Finance Department.

The simulations assume a 50, 100, and 150 percent increase of post second round quotas. The ad hoc increase is distributed to all countries that are under-represented with respect to the formula or with respect to the GDP blend (see footnote 3). Eligible EMDCs receive a uniform reduction in out-of-lineness based on the formula (for those EMDCs under-represented under the formula only), or the GDP-blend (for those EMDCs under-represented under the GDP blend only), or the greater of the two (for those EMDCs that qualify under both criteria). Eligible advanced countries are capped at their post second round or post-selective quota share, whichever is greater. Over-represented countries which would become under-represented as a result of the overall quota increase are capped at 95 percent of their calculated quota share. PRGT-eligible countries receive at least their post second round actual quota share.

Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo which became a member on June 29, 2009 and Tuvalu in anticipation of its forthcoming membership. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.

GDP blended using 60 percent market and 40 percent PPP exchange rates, compressed using a factor of 0.95.

The overall increase is distributed to members on an equiproportional, selective and ad hoc basis in the proportion of x/y/z, respectively.

Includes China, P.R., Hong Kong SAR, and Macao SAR.

Table A5.

Illustrative Scenarios: Ad hoc Increase Allocated Based on the GDP Blend; Full Protection -- by Member 1/

(In percent)

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Source: Finance Department.

The simulations assume a 50, 100, and 150 percent increase of post second round quotas. The ad hoc increase is distributed to all countries that are under-represented with respect to the GDP blend (see footnote 3). Eligible EMDCs receive a uniform reduction in out-of-lineness based on the GDP blend. Eligible advanced countries are capped at their post second round or post-selective quota share, whichever is greater. Over-represented countries that would become under-represented as a result of the overall quota increase are capped at their calculated quota share. PRGT-eligible countries receive at least their post second round actual quota share. The quota shares of EMDCs and advanced economies that are under-represented under the formula but not eligible for the ad hoc are protected at their post-selective quota share.

Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo which became a member on June 29, 2009 and Tuvalu in anticipation of its forthcoming membership. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.

GDP blended using 60 percent market and 40 percent PPP exchange rates, compressed using a factor of 0.95.

The overall increase is distributed to members on an equiproportional, selective and ad hoc basis in the proportion of x/y/z, respectively.

Includes China, P.R., Hong Kong SAR, and Macao SAR.

Table A6.

Illustrative Scenarios: Ad hoc Increase Allocated Based on the GDP Blend; 95 Percent Protection -- by Member 1/

(In percent)

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Source: Finance Department.

The simulations assume a 50, 100, and 150 percent increase of post second round quotas. The ad hoc increase is distributed to all countries that are under-represented with respect to the GDP blend (see footnote 3). Eligible EMDCs receive a uniform reduction in out-of-lineness based on the GDP blend. Eligible advanced countries are capped at their post second round or post-selective quota share, whichever is greater. Over-represented countries that would become under-represented as a result of the overall quota increase are capped at 95 percent of their calculated quota share. PRGT-eligible countries receive at least their post second round actual quota share. The quota shares of EMDCs and advanced economies that are under-represented under the formula but not eligible for the ad hoc are protected at their post-selective quota share.

Includes ad hoc increases for 54 eligible members that are not yet effective; also includes Kosovo which became a member on June 29, 2009 and Tuvalu in anticipation of its forthcoming membership. For the two countries that have not yet consented to, and paid for, their quota increases, 11th Review proposed quotas are used.

GDP blended using 60 percent market and 40 percent PPP exchange rates, compressed using a factor of 0.95.

The overall increase is distributed to members on an equiproportional, selective and ad hoc basis in the proportion of x/y/z, respectively.

Includes China, P.R., Hong Kong SAR, and Macao SAR.

Protection for countries under-represented with respect to the quota formula

  • In Set 1, advanced countries that are under-represented under the quota formula are protected at their post selective quota share.

  • In Set 3, countries that are under-represented with respect to the quota formula but not with respect to the GDP blend are protected at their post selective quota share.

Protection of over-represented countries from becoming under-represented

Countries that are over-represented with respect to the quota formula are either fully or partially protected against becoming under-represented. With full protection, (Tables 3A, 4A and 5A and Tables A1, A3 and A5), the simulated quota share of an over-represented country cannot fall below its calculated quota share. With partial protection (Tables 3B, 4B and 5B and Tables A2, A4 and A6), the simulated quota share of an over-represented country cannot fall below 95 percent of its calculated quota share.

Protection of the poorest members

All scenarios allocate part of the ad hoc increase to the “poorest” members.

  • In Tables 3A - 5B each PRGT-eligible country maintains at least its post second round actual quota share. Some PRGT-eligible countries see their quota share increase based on the allocations mechanisms described above (selective and ad hoc) and these countries see no further gain in their quota share from the protection. PRGT-eligible countries that would see their quota share decrease below the post second round quota share based on the allocations mechanisms described above retain their post second round quota share.

  • In Tables 6 and A7, two alternative protection mechanisms are presented—group protection for PRGT-eligible countries and individual protection for those countries meeting the proposed Post-Catastrophe Debt Relief (PCDR) eligibility criteria.4

    • The group protection for PRGT-eligible countries is implemented by increasing by a common factor the quota share that each PRGT-eligible member would receive based on the allocation mechanisms described above. The common factor is chosen in such a way that the quota (and voting) share of the group of PRGT-eligible members remains at its post second round level.

    • Individual protection for the proposed PCDR-eligible countries works in the same way as individual protection of PRGT-eligible countries, i.e., each individual country included under the proposed PCDR eligibility criteria retains at least its post second round quota share.

1

Consistent with the quota formula, the GDP blend variable is a weighted average of GDP at market prices (60 percent) and PPP GDP (40 percent), compressed by a factor of 0.95.

2

A country’s post selective quota share is the simulated quota share that would result if only the equiproportional and selective increases were implemented.

3

The uniform reduction in out-of-lineness was also used in the 2008 reform for allocating ad hoc increases.

4

See Proposal for a Post-Catastrophe Debt Relief Trust Fund (4/22/10).

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