by Aaron Ranck, Senior Fellow, and Tenley Smith, Senior Program Associate

What is quota reform?
The Trump administration’s FY26 Budget Request includes a proposal agreed to in 2023 to approve an IMF quota increase—one that would shift but keep unchanged the overall balance of the Fund’s lending resources (see graphic below). This agreement has significant implications for the IMF but due to the nature of the change in commitment, comes with only a modest impact on the US budget.

How does the IMF lend?

The International Monetary Fund (IMF) lends to countries in crisis by drawing on three main sources of financing: country quotas, a multilateral credit arrangement known as the New Arrangements to Borrow (NAB), and bilateral borrowing agreements.

• Quotas: The bedrock of IMF funding, quotas are permanent financial contributions that member countries make based primarily on their relative size in the global economy. Quotas determine a country’s voting power and access to IMF resources.
• New Arrangements to Borrow (NAB): A credit line agreed to by a subset of IMF members that supplements quotas during times of crisis. The NAB can be activated when the IMF needs additional resources.
• Bilateral Borrowing Agreements: Temporary arrangements between the IMF and individual countries to provide supplementary financing. These are typically renewed in periods of high demand for Fund lending, such as during the global financial crisis or COVID-19 pandemic.

What’s in the President’s Budget Request?

The FY26 President’s Budget Request calls on Congress to approve the 16th General Review of Quotas, a negotiated IMF reform package that:

• Doubles the size of overall quota resources, increasing the IMF’s permanent capital base, with a corresponding reduction in the US commitment to the NAB.
• Keeps the current distribution of voting shares unchanged, meaning that U.S. retains its veto power and leadership role within the Fund and no other countries gain more power relative to others.
• Reduces reliance on temporary funding, such as bilateral borrowing.

The proposed reform is the first major increase in IMF quotas since 2010, an agreement which took an unusually long time to go into effect, in large part because the Executive and Legislative branches of the US government struggled for five years to reach an agreement on the package and associated reforms. Nevertheless, when the 2010 reforms went into effect in 2016, they reflected consensus among IMF members that the Fund must be equipped to respond to mounting global financial risks without over-reliance on ad hoc or short-term borrowing mechanisms.

What does this new agreement mean for the U.S.?

• Maintains US influence: Because the proposal does not alter the US voting share, it ensures continued American leadership and veto power in key IMF decisions.
• Cost-effective global engagement: Approving the quota increase does not require significant new budget outlays, as the U.S. Treasury treats IMF quotas as interest-bearing international reserve assets.
• Reinforces global stability: Strengthening the IMF’s core capital helps prevent crises in emerging markets from spreading and protects US economic interests abroad.

What does this mean for the IMF?

• A more sustainable funding model: Quotas are the IMF’s most stable and predictable source of funding. Shifting more of the Fund’s lending capacity toward permanent resources enhances its ability to respond quickly to crises.
• Avoids future uncertainty: As existing bilateral arrangements begin to expire in 2025, a stronger quota base reduces the IMF’s dependence on short-term stopgaps and complicated borrowing networks.

What happens next?

The Congressional Budget Office, the Office of Management and Budget, and the U.S. Treasury have different views on how to appropriately “score” the cost of US participation in the IMF (see CBO’s views here, and OMB/Treasury’s view here). This divergence of views could complicate Congressional passage of the president’s request for quota reform because it has a material impact on Congress’ ability to appropriate all of the president’s budget requests within Congressional budget caps. However, this is not a new challenge; Congress has overcome this challenge in 2015 and 2020, and is likely to find a way to do so again. Furthermore, as with past precedent, Congress is likely to seek to attach conditions which safeguard Congress’ oversight of US participation in the IMF.

Featured authors: 

Aaron Ranck, Senior Fellow, Bretton Woods Committee

Tenley Smith, Senior Program Associate, Bretton Woods Committee