JOIN USIMF will sell some of its gold to shore up finances
The purchase of the gold will also help these countries to increase their role in IMF operations as they have complained the IMF is dominated by the United States, its largest shareholder, and European nations.
The fund’s executive board said it decided to sell “a volume strictly limited to 403.3 metric tons,” 1/8th of its holdings in a way that does not disrupt the sale of gold in commodity markets, which already were expecting and discounted the IMF decision.
The IMF, a 186-nation Washington-based lending organisation, is the third largest official holder of gold in the world with 3,217 metric tons after the United States and Germany.
The board said the IMF could sell its gold directly to its members’ central banks if any were interested or it could put the gold on the open market in phases.If the gold is sold on the open market, the IMF said it would inform these markets before any sale begins and report regularly to the public on the progress of gold sales.
Sale co-ordination
The IMF said it also would co-ordinate its sales with major central banks, who agreed last month on ceilings of gold sales amounting to 400 tons annually and 2,000 tons in total over five years.
The sale of the gold was authorised by the G-20 countries at their summit in London in April as part of efforts to provide up to US$6 billion in easy-term loans to low-income countries. The IMF decision comes in advance of next week’s G-20 summit in Pittsburgh, which will review IMF lending, and the fund’s annual meeting early next month in Istanbul, Turkey.
The G-20 countries decided at their April summit in London to approve the gold sales as part of efforts to provide up to US$6 billion in concessional loans to low-income countries.In recent years, some countries with thriving economies managed to pay off their IMF loans ahead of time, reducing income the IMF derived from loan interest and putting a strain on its finances. The IMF is expected to be running a deficit of US$400 million in 2010.
As the global financial crisis hit and a severe recession and credit crisis set in, the IMF has come roaring back, providing emergency loans to a dozen countries ranging from Iceland to Pakistan.