How Much Gold Does the IMF Have?
The IMF’s gold holdings provide it with substantial financial strength and are used as a protective hedge against creditors’ claims against it. Therefore, any sales from IMF accounts conducted correctly would likely have minimal effects on global gold markets.
The United States should enlist international support to finance modest IMF gold sales to Africa and other low-income countries (LICs), strengthening its role and contributing to American economic and national security interests.
The IMF’s Gold Holdings
The IMF holds an extensive stockpile of gold that strengthens its financial strength and provides protection for creditors’ claims. Modest IMF sales to raise subsidy resources would not cause disruptions in global gold markets; for instance, 13 million ounces were sold under its “new income model” over 10 years ago without any noticeable effect on prices.
The Fund has gold depositories in New York, London, Shanghai and Paris. At its establishment in 1944, members paid 25 percent of their initial quota subscriptions in gold as payment of initial subscription and later used it to pay interest on credit extended by the Fund.
Profits from IMF gold sales have traditionally been used to provide debt relief to poor countries. Given Congress’ inability to access subsidy resources, the United States should lead a global effort to sell modest quantities of IMF gold at market prices in order to assist LICs recover from coronavirus infection and recover.
The IMF’s Quotas
The IMF’s quota system determines voting power and borrowing capacity among members, creating friction over governance issues as member economies expand.
But the Fund’s quotas have fallen behind global GDP or trade; an adequate IMF resources base is key to maintaining its credibility and effectiveness during crises.
Yet the IMF’s 2008 quota reform, which doubled quotas, has stalled politically due to resistance by its largest shareholder – the United States. As a result, other sources of financing such as New Arrangements to Borrow (NAB) or bilateral lending agreements become depleted, leaving less support available from the Fund than anticipated when facing balance of payments crises – this poses a threat that we all share; Boston University Global Development Policy Center released a paper which explores this topic further.
The IMF’s Gold Sales
Over time, the IMF has sold some gold for profit; proceeds from such sales contribute towards its concessional balance-of-payments lending program to low-income countries and are recorded as “gold income”.
Between 1946 and the late 1970s, the IMF accumulated its gold reserves through initial subscriptions, increases, repayments of loans extended by the Fund to Member countries, transfers from Member countries and other sources such as transfers. Under its Articles of Agreement, any profits from selling IMF gold could only be used to further IMF purposes or operations or transactions that complied with them.
IMF gold has been safely stored in depositories in New York, London, Shanghai and Paris since its introduction. When a Member pays their subscription for IMF gold subscription, their metal will be deposited at one of these five designated depository locations which have each been given an IMF country code for storage.
The IMF’s Use of Gold
IMF gold hasn’t been sold since 1976, yet the Fund currently owns about one-third of global stocks. Selling some would generate windfall profits that could help finance an ambitious initiative to alleviate debt pressure on poor countries.
Profits could be used to finance a significant share of the Fund’s Medium-Term Debt Relief Initiative (MDRI), an effort aimed at relieving debts owed by poor countries to multilateral institutions, private creditors and other countries.
But there are important limitations. First, the IMF Articles require any on-market sale of gold to be “conclusive and irreversible”, in order to minimize disruption of global gold markets. Furthermore, any move must be approved by three-fifths of Fund membership (representing 85 percent voting power) prior to any amendment being passed – something which could take months or even years!
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