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PPPs for policy making: a visual guide to using data from the ICP - Chapter 11: Administrative uses

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The European Commission, International Monetary Fund (IMF), and World Bank all employ PPP-based indicators for administrative purposes. The European Commission Cohesion Fund is aimed at European Union (EU) member states whose PPP-based GNI per inhabitant is less than 90 percent of the EU average. It seeks to reduce economic and social disparities and to promote sustainable development (map 11.1).

The IMF’s permanent financial resources come mostly from quota subscriptions. Quotas determine the maximum financial resources that member countries are obliged to provide the IMF, the amount of financing that members can obtain from the IMF, and their voting power in IMF decisions. Each member country is assigned a quota, measured in special drawing rights, based broadly on its relative size in the world economy (figure 11.1). A blended GDP measure contributes a weight of 50 percent to the quota formula, with PPP-based GDP making up 40 percent of this blended measure, and thus contributing 20 percent overall.

Similarly, the World Bank Group incorporates PPPs into its dynamic formula which provides the necessary anchor and a data-driven analysis for shareholding discussions reflecting the evolution of the global economy and countries’ contributions to the World Bank Group mission. The shareholding rights of the International Bank for Reconstruction and Development member countries are largely based on economic weight at the global level of which PPP-based GDP contributes 40 percent and market exchange rate-based GDP 60 percent.