Diriyah Meets Washington: The IMF’s Institutional Reform Dilemma

Amid uncertainty over the continuation of the war in the Middle East, the International Monetary Fund (IMF) held its spring meetings from 13 to 18 April 2026 in Washington, D.C. As expected, the economic turbulences created by the conflict dominated the proceedings. The IMF promised to step up its support for struggling countries. In the shadow of these more immediate concerns, member states adopted a set of guiding principles for the future governance of the Fund: the Diriyah Principles (named after the Saudi Arabian city in which they were first discussed). The chairman of the International Monetary and Finance Committee called the principles “the fairest […] reforms in over 15 years.” However, as I argue in this blogpost, the principles fall short of constituting a tangible reform. Most importantly, they do not address the fundamental institutional dilemma facing the IMF: the quota-based veto power held by the United States. After briefly presenting the Diriyah Principles and outlining the IMF’s institutional reform dilemma, I present scenarios for reform.

The Diriyah Principles

The “Diriyah Guiding Principles on IMF Quota and Governance Reforms” reflect long-standing debates over institutional reform at the Fund. Adopted on 17 April 2026, they reaffirm core principles of the IMF such as the quota-based nature of the organization, and the obligation of member states to implement agreed reforms domestically. In addition, the principles’ stated purpose is to guide future discussions on institutional reform. The principles are hortatory and do not create new obligations for member states. Nevertheless, they indicate where views in the membership are converging. For instance, according to one principle, “[t]he selection process of the Managing Director should uphold an open, inclusive, merit-based, and transparent procedure.” Historically, the position of IMF Managing Director has always been occupied by a European. The tradition is based on an informal understanding between European countries and the United States, according to which the IMF is led by a European and the World Bank by an American. The Diriyah Principles may mark the beginning of the end of this tradition.

In other areas, the language used in the Diriyah Principles points to persistent divisions within IMF membership. The main bone of contention is the distribution of quotas between member states, which directly determines voting power. Apart from stating that “reforms should support the IMF’s legitimacy, representativeness, and effectiveness, financial and operational soundness, and ability to promote consensus and cooperation among the membership while ensuring efficient deliberations and decision-making processes”, the principles offer little concrete guidance. Any meaningful institutional reform at the IMF will have to address the distribution of quotas and, by extension, the distribution of voting rights.

The IMF’s Institutional Reform Dilemma

The IMF takes decisions under a system of weighted voting. While a small number of votes is distributed evenly among member states (basic votes), the majority of voting rights are quota-based votes. Quotas are allocated according to a complex formula which broadly reflects a member state’s weight in the global economy. They are expressed in special drawing rights (SDR), which are owed by member states and function as the Fund’s capital. Under the constituent treaty of the IMF, the Articles of Agreement (hereinafter: the Articles), many decisions require special majorities. The highest voting threshold lies at 85 percent. Of relevance for our purposes, it applies to changes of quotas and amendments to the Articles. The United States currently holds 16.49 percent of total voting rights and thus effectively wields veto power over institutional reform at the Fund. EU countries (more relevant in this context: Euro countries) could technically wield a combined voting power of over 15 percent as well. However, unlike in other international organizations (such as the WTO), they do not vote as a bloc, with individual EU members dispersed across different IMF constituencies.

The Articles mandate quinquennial reviews of member states’ quotas. The IMF is currently conducting its 17^th General Quota Review. As noted, a change in quotas is subject to an 85 percent majority. If quotas were to be adjusted under the current formula, US voting power would drop below 15 percent, and the country would lose its veto power (see Colodenco et al. 2025). By agreeing to quota reform, the US would therefore be consenting to its own disempowerment. As a result of this institutional dilemma, quotas at the IMF have not been realigned since 2010 (a 2023 general increase of quotas by 50 percent did not affect the relative distribution of voting rights). Consequently, voting power at the Fund has increasingly become disconnected from economic reality.

On the losing side of the IMF’s institutional reform dilemma are economies which have grown rapidly since 2010. They demand quota reform with increasing insistence (see, for instance, the 2025 BRICS joint statement), while remaining acutely aware that any reform will require US support. The Diriyah Principles reflect this tension. On the one hand, they state that adjustments to quota shares should “better reflect members’ relative positions in the world economy”. On the other hand, adjustments should “be conducted in a regular and timely manner while avoiding excessive change—whether increases or decreases—in individual members’ quota shares in any single review.”

Three Scenarios for Reform

Assuming that the United States will not relinquish its veto power—a reasonable assumption, particularly with a US administration that has shown little interest in building international coalitions—three scenarios for institutional reform at the IMF can be identified: first, an adjustment of the quota formula; second, an amendment of voting majorities under the Articles; third, compensatory reforms.

An adjustment of the quota formula could redistribute voting rights in a way that better reflects the global economy while preserving US veto power. The current formula, agreed upon as part of a comprehensive reform in a 2008, consists of four factors: GDP, openness, variability and reserves. Adjustments to these factors and their weighting could increase the voting share of emerging economies while holding US voting power just above 15 percent (see for instance the proposal by Colodenco et al. 2025). The Diriyah Principles envisage an adjustment of the quota formula but note that views in the membership differ regarding the formula’s precise design.

The second scenario for reform is an amendment of the Articles of Agreement. The situation faced by the IMF is not unprecedented. When the Fund was established at Bretton Woods in 1944, the highest required voting majority was 80 percent. At that time, the United States held over 30 percent of total voting rights and thus comfortably held veto power. Over time, due to the expansion of IMF membership and global economic shifts, the relative weight of the US economy at the IMF declined. When US voting power threatened to fall below the veto threshold of 20 percent, the US conditioned its approval of quota reform on an amendment of the Articles. In 1976, US voting power dropped below 20 percent, but the majority required for important decisions under the Articles was simultaneously raised from 80 to 85 percent, thus preserving the country’s veto power (see Gold 1976). Whether a similar reform would be accepted by the rest of the membership today is unclear. Moreover, the US faces an additional problem: if quotas were adjusted according to the current formula, China’s voting power would be almost as high as US voting power (13.84 vs 13.99 percent; see the models by Colodenco et al. 2025). Raising the required majority for quota changes and amendments of the Articles (e.g., to 90 percent) would preserve US veto power, but it would also grant veto power to China.

The third scenario is compensatory reforms. By compensatory reforms I refer to institutional reforms which are not related to voting rights. One example of a compensatory reform contemplated by the Diriyah Principles is the abandonment of the tradition according to which the IMF is always led by a European (see above). Opening up the position of Managing Director and submitting it to a geographical rotation (similar to the position of UN Secretary-General) is one step towards better representation of emerging economies. Whether such compensatory reforms will satisfy them is to be doubted.

A Zero-Sum Game

Going forward, institutional reform at the IMF is likely to combine elements of the first scenario (adjustment of the quota formula) and the third scenario (compensatory reforms). To protect the poorest members—another Diriyah principle—member states may also agree to a modest increase in the number of basic votes. The second scenario (amendment of the Articles), by contrast, appears unlikely given the geopolitical stakes.

If the countries that have traditionally dominated the IMF want to avoid the rest of the world turning away from the institution (see the Asian Infrastructure Investment Bank, established by China in 2015 in light of Western dominance in the Bretton Woods institutions), they must agree to substantial reforms. Realistically, such reforms will not touch US veto power. Within this constraint, a panoply of institutional adjustments is possible. What is certain is that the redistribution of voting rights at the IMF is a zero-sum game. If emerging economies are to gain, and the veto power of the US is not touched, the losers of this game are already known: European countries, Canada, Japan, and potentially the poorest member states. The Diriyah Principles illustrate that the bargaining over the exact distribution of gains and losses has only just begun.