The IMF’s Pakistan loan spotlights the case for voting power reform

This, barely months after the Pulwama attack that claimed the lives of 40 Indian troops (an action linked to Pakistan-based Jaish-e-Mohammad). India insisted on affixing responsibility for the carnage, while the global financial system swung the other way, giving balance-of-payments measurements priority over the blood-stained reality of Pakistan’s links with terror operations.

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History has repeated itself. India’s rare public abstention on last week’s $2.4 billion IMF loan to Pakistan is part of a concerning trend whereby geopolitical convenience trumps moral clarity. It highlights a fundamental institutional flaw: the IMF continues to operate in accordance with the power hierarchy that emerged after World War II, with the result that legitimate Global South voices are frequently ignored and its conditionalities seem too selective. The Fund must alter its quotas and board seats and change its moral compass if it is to remain relevant in a multipolar age.

India’s abstention, reportedly driven by concerns over Pakistan’s misuse of IMF resources to potentially fund hostile activities, signals a loss of faith in the institution’s ability to reflect the interests of those most affected by its decisions. But this is not just about India and Pakistan. It is about how the IMF continues to be governed by rules and quotas that reflect a post-World War II economic order.

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A recent report by Colodenco, Asef Horno, and Zucker-Marques (2025), published by the Boston University Global Development Policy Center, makes the case forcefully. As it documents, emerging markets and developing economies (EMDEs) now account for nearly 60% of global GDP, yet hold only 40% of the IMF’s voting power. 

Meanwhile, advanced economies, particularly the US and European bloc, continue to wield disproportionate influence. The US alone holds enough voting share (about 16.5%) to effectively veto any structural reform, given that major IMF decisions require an 85% super majority.

This power imbalance has real consequences. As the report explains, the IMF’s quota system is deeply flawed. It favours advanced economies through biased metrics such as market exchange rate-based GDP (instead of GDP adjusted by purchasing power parity) and outdated measures of economic ‘openness’ that double-count the cross-border flows of rich economies. 

The result is a formula that underestimates the true economic weight of countries like India, Indonesia and Brazil, and grossly over-represents Europe and Japan.

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The IMF likes to portray itself as a rules-based institution. But behind its formal architecture lies a web of politically driven negotiations, particularly when it comes to quotas, the foundation of the Fund’s financial structure and voting power allotments. IMF rules state that each country’s Calculated Quota Share (CQS) should reflect its relative position in the global economy, based on variables like GDP, trade openness, reserves and variability. 

However, the actual quota share (AQS), which determines a country’s financial contribution and voting power, is the result of political bargaining, not strict adherence to economic indicators.

The disconnect doesn’t stop there. IMF voting power is calculated not solely on the AQS, but by adding basic votes (a flat number granted equally to all members) to a country’s quota-based votes. This structure was originally intended to mitigate quota-based disparities, but as the number of IMF members increased and quotas expanded disproportionately in favour of large economies, the share of basic votes shrank, reducing its balancing effect. 

Although recent reforms have marginally increased basic votes (now about 5.5% of total votes), the gap remains stark: advanced economies have too much authority.

This is a serious problem that must not be left unaddressed. For most EMDEs, the CQS exceeds the AQS, which translates to lower voting power on key decisions. India’s voting share, for instance, is far lower than what its current economic standing would suggest. The report estimates that India should gain nearly 0.9 percentage points in voting power if quotas were realigned fairly, a significant shift that could allow it to play a more consequential role. 

As of now, we face a situation where a veto wielded by a single nation constrains the power of emerging economies.

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Unfortunately, the 16th General Quota Review of the IMF in 2023 failed to deliver any such realignment, opting instead for a proportional increase in quotas that preserved the status quo in terms of relative strength. The upcoming 17th Review, due in 2025, offers the Fund another chance in the near-term to correct course. 

A reformed formula, one that gives greater weight to purchasing power parity in its economic calculations, eliminates biased variables and increases the representation of the world’s poorest countries could help restore the legitimacy and effectiveness of an increasingly contested institution.

India, as both an emerging economic power and a responsible voice in multilateral forums, is uniquely positioned to lead this conversation. Some would argue that any vote re-allotment would give China more power and may not change outcomes for a country like India when it comes to decisions like Pakistan’s loan. But the right thing must be done irrespective of specific outcomes.

The question is not whether Pakistan deserves IMF support. Rather, it is who decides and under what rules? Whose voice matters? Unless the IMF rebalances its governance structure to reflect today’s global economic realities, it risks losing the trust of the very countries it is meant to serve.

These are the authors’ personal views.

The authors are, respectively, assistant professor of economics at the Faculty of Management Studies, University of Delhi, and a public policy professional.