How Much Gold Does the IMF Have?
IMF gold holdings currently possess an internal “book value” well below market prices, meaning selling even small portions could reap substantial dividends for local economies and their citizens while strengthening IMF’s role in global financial stability.
Most of the IMF’s gold was recorded prior to 1978, and its Articles strictly restrict how profits from sales can be utilized.
The IMF’s Gold Holdings
IMF holds approximately 90.5 million ounces of gold at designated depository locations in New York, London, Shanghai and Paris. At its founding in 1944, members paid 25 percent of their initial quota and any subsequent increases in gold to fund its operation and pay back borrowed loans to other members; this practice ended upon the abandonment of gold standard in 1973.
Sovereign nations typically hold gold as a reserve asset to demonstrate financial strength; however, the International Monetary Fund doesn’t rely on gold for fulfilling its mission of helping struggling nations escape poverty through growth.
IMF Executive Board approved selling small amounts of its gold to finance its endowment pledged in April 2008, though any resources from these sales may also help strengthen its ability to provide concessional lending to LICs, benefitting both LICs and U.S. national interests simultaneously.
The IMF’s Gold Sales
As the Fund has transitioned towards a less dependent income model that relies on lending to member countries, gold sales have become an important source of revenue. However, due to restrictions from its Executive Board regarding sales of its holdings of gold.
On-market sales of IMF gold have been phased in gradually to avoid disrupting global markets, following an approach successfully employed by central banks participating in IMF’s Central Bank Gold Agreement.
In 1999-2000, the International Monetary Fund sold one quarter of its gold holdings to finance debt relief for Heavily Indebted Poor Countries. Proceeds were placed into its Special Disbursement Account with strict requirements that they only be used for operations or transactions consistent with IMF purposes.
The IMF’s Gold Purchases
Gold demand can be linked to geopolitical tensions as well as its own intrinsic factors; more specifically, countries’ demand for gold has also been tied to factors like global financial crises, slow economic growth, volatile traditional reserve currencies, and uncertainty regarding international monetary policy (Figure 4). Furthermore, correlations exist between measures of both policy uncertainty and political risks and central bank reserves holding gold (and their holdings of it).
In 2009, the Fund’s Executive Board authorized on-market gold sales that would strictly adhere to an annual maximum limit of 400 tons over five years; sales began later that same year and the proceeds were used for lending programs targeted towards low-income countries.
Under IMF Articles of Agreement Amendment 2, they could sell gold at market prices and take it back immediately as loan repayments from members, provided 85% of its voting power approve. This would not adversely impact global gold markets and could raise new funds for IMF lending to low-income countries.
The IMF’s Gold Reserves
The IMF’s gold reserves form an essential element of its balance sheet, enabling it to lend securely and at low-cost to its members. Furthermore, their windfall profits have enabled it to distribute large sums of reserves among its poorest member nations through PRGT programs.
The Fund stores its gold at five designated depository locations: New York, London, Paris, Shanghai and Bombay. These were chosen when it launched in 1946 because these cities are home to some of its larger quota holders who had to nominate a place where their gold would be stored.
Calls have been made for the IMF to revalue its gold holdings at market prices; this proposal, however, has met with considerable resistance – from some of its largest borrowers and from sub-Saharan African nations and LICs themselves – albeit modest sales might bolster its global role while simultaneously serving U.S. national interests.
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