IMF to use unexpected profits from gold sales to fund loans to poorest countries

PUBLISHED : Friday, 11 October, 2013, 11:00am
UPDATED : Friday, 11 October, 2013, 11:36am


The International Monetary Fund announced on Thursday it has harnessed windfall gold profits from member countries to fund loans to the world’s poorest countries in the coming years.

“We have just reached the threshold of enough approvals from our membership to transfer the existing gold profit to meet the financing needs of our low-income countries,” IMF managing director Christine Lagarde said.

Calling it “the good news of this week”, Lagarde, speaking at a news conference as IMF and World Bank annual meetings got under way in Washington, noted it had been the fund’s goal for years to put its Poverty Reduction and Growth Trust on a sustainable basis.

The IMF said 151 of its 188 member countries had pledged more than 90 per cent of the roughly US$2.7 billion in windfall profits remaining from a gold sale to the trust.

The fund had sought to use members’ resources linked to the gold sales to partially fund the trust, which offers lending under flexible conditions – at a zero interest rate at present – to low-income countries.

We now have secured critical resources to provide adequate levels of financial support to the poorest countries for years to come
IMF managing director Christine Lagarde

The trust now has funding to support more than US$3.4 billion in concessional lending, allowing it to lend almost US$2 billion annually, in line with the IMF’s estimate for demand from poor countries.

“We now have secured critical resources to provide adequate levels of financial support to the poorest countries for years to come,” Lagarde said in a statement.

“That so many countries, at different levels of development and from all of the world’s regions, have supported this process shows the strong and universal commitment of our membership to help the world’s poorest countries.”

The IMF sold 403.3 tonnes of gold in 2009-2010 as part of a plan to ensure the long-term financing of its day-to-day operations through the creation of an endowment, using anticipated profits of some US$6.8 billion.

But with world gold prices high at the time as the global economy struggled to recover from the 2008 global financial crisis, the sales fetched more than the IMF predicted, generating windfall profits of US$3.8 billion.

“We applaud the IMF for using windfall gold sale profits to benefit poor countries,” said Eric LeCompte, executive director of Jubilee USA Network, a faith-based antipoverty organisation. “Zero per cent interest loans means real relief for millions of the world’s most vulnerable people.”