IMF to sell 403 tonnes of gold to boost lending
The International Monetary Fund said its executive board on Friday
endorsed the sale of 403 tonnes of gold, worth an estimated 13 billion
dollars, to boost its lending capacity, particularly to poor countries.
The IMF said in a statement the sales would be “in a volume strictly
limited to 403.3 metric tonnes, with these sales to be conducted under
modalities that safeguard against disruption of the gold market.” The
186-nation institution said the decision was a core element of a new
income model to make it less dependent on its lending revenue to cover
expenses, such as surveillance of members’ economic and financial
policies, that the board had approved in April 2008.
The Group of 20 key developed and developing countries, at their
April summit in London, agreed the gold sales should allow the IMF to
offer favourable conditions on loans to the poorest countries.The IMF
decision comes ahead of a two-day G20 summit in Pittsburgh,
Pennsylvania, that opens next Thursday. Hosted by US President Barack
Obama, the leaders are to discuss efforts to recover from the worst
global recession in six decades and financial regulatory reform.“The new
income model is designed to provide the fund with more diverse income
sources that are better aligned with the variety of functions performed
by the fund, with a central component being the funding of an endowment
with the profits from these limited gold sales,” the 186-nation
institution said.The IMF said the sales “will also increase the fund’s
resources for lending to low-income countries,” a strategy that won
board backing in July.
“I am delighted that the executive board has given its overwhelming
backing to a strictly limited sale of fund gold to put the financing of
the IMF on a sound long-term footing, and enable us to step up
much-needed concessional lending to the poorest countries,” IMF managing
director Dominique Strauss-Kahn said in the statement.
“These sales will be conducted in a responsible and transparent
manner that avoids disruption of the gold market,” he said.
The amount of gold to be sold is one-eighth of the 3,217 tonnes of
gold currently held by the Washington-based IMF, the third-largest
official holder of gold after the United States and Germany.Board
approval required an 85 percent majority of the total IMF voting power.
The United States, by far the largest stakeholder, gave its green light
after Congress passed legislation authorizing the sale and President
Barack Obama signed it into law on June 24.
The fund is required by its founding document to conduct all gold
sales at market prices.The IMF did not state the value of the gold to be
sold but based on the current bullish near-record market price for the
metal, it is estimated the sale would fetch 13 billion dollars.Under the
approved plan, the IMF would offer to sell gold directly to central
banks “or other official sector holders if there were to be interest
from such holders.”
The IMF said such transactions would redistribute official gold
holdings without changing total official holdings.If official demand is
insufficient, the IMF said it could conduct the gold sales “on-market in
a phased manner over time,” in line with an approach already followed by
central banks.The IMF would be constrained by the overall ceilings
agreed by the central banks, which currently is 400 tonnes annually for
the next five years, starting on September 27.
The IMF said it “will inform markets before any on-market sales
commence” and “report regularly to the public on the progress with the
gold sales.” In July, the IMF announced it would increase its lending to
poor countries, mostly in Africa, to 17 billion dollars by 2014,
including 8.0 billion over the next two years.That compares with an
annual average of one billion dollars in the 2006-2008 period to poor
countries, and three billion dollars in the first half of 2009.
-AFP
|