Does the IMF Have Gold Reserves?
IMF gold deposits can be found in New York, London, Shanghai and Paris; before its formation it sent a letter inviting prospective members to deposit their initial quota subscriptions with one of these depository banks.
Gold sales by the Fund are strictly controlled and require approval by an overwhelming 85 percent of its Executive Board in order to be sold off. Relaxation of these limits would likely prove challenging.
What is the IMF?
The IMF is an international organization that serves as both a watchdog and lender to countries in financial distress, while providing technical assistance and training programs to help countries manage their economies more effectively.
At its founding in 1944, member countries paid 25 percent of initial quota subscriptions and various increases in gold. Furthermore, interest payments on IMF credits were made using gold as well. Furthermore, members could transfer or sell their gold directly to the Fund to offset repayment obligations.
In April 1978, the IMF implemented its Second Amendment to its Articles of Agreement which modernized its rules and regulations, including revising Rule F-1 on gold depositories. Before that change was made, a different version of this Rule had referred only to designated depositories in New York, London, Paris and Shanghai whereas deposits had to be kept where each member had its principal office location.
Who owns the IMF’s gold?
IMF gold is owned legally by the Fund, according to its Articles of Agreement. Any profits from sales of IMF gold go into its Special Disbursement Account (SDA), where they may be used as financial assistance for heavily indebted low-income countries in Africa, particularly when their debt levels become unsustainable.
SDA regulations of the IMF are stringent, prohibiting it from using proceeds of these sales for activities other than those specified in its Articles. Even modest gold sales would leave behind considerable reserves that provide balance sheet strength and protect creditors’ claims.
The IMF has designated five depositories for its gold: New York, London, Shanghai, Paris and Bombay. Early drafts of IMF rules and regulations included Moscow as one of these deposits despite not yet being a member country; Gijsbert Bruins from South Africa and Netherlands proposed at an Executive Board meeting that adopted Fund’s First Amendment on 4 September 1946 that one be located between their countries; his suggestion later made its way into Rule F-1.
Why does the IMF hold gold?
Gold holdings at the IMF provide an essential foundation to its balance sheet and help low-income countries benefit from its concessional lending program.
However, the IMF’s gold has significantly outshone its cost on its books; according to its Articles of Agreement it costs approximately SDR 35 an ounce (roughly $50 per ounce). Any difference between book price and market price is recorded as profit when selling gold back into circulation by the Fund.
IMF Executive Board approved sales strictly limited to gold taken onto its books before 1975. Proceeds from these sales will be used to support lending to low-income countries (LICs). They will either be transferred directly into central banks of member countries, or reflect in new subsidy contributions to Poverty Reduction and Growth Trust (PRGT), providing low-income countries with support without disrupting global markets.
How much gold does the IMF hold?
The International Monetary Fund’s gold is kept in five depository locations – New York, London, Shanghai, Paris and Bombay – chosen as these were homes to five of its five highest quota holders when operations started in 1946. Article XIII Section 2, Rule F-1 of its Rules and Regulations provides more detail.
IMF gold was acquired prior to the Second Amendment to its Articles of Agreement in 1978, with profits from sales used to support low-income country lending.
Gold was accrued through various methods; these included initial subscription payments from members, subsequent quota increases, debt repayment payments in gold, sales of IMF holdings to member countries or central banks and sales from their vaults during the 1970s.