Does the IMF Have Gold Reserves?
The International Monetary Fund is the third-largest official holder of gold worldwide, holding approximately 2,814 metric tons or 100 million ounces in various deposits throughout the globe.
IMF gold can only be sold in order to prevent market disturbance or use as collateral; such sales must receive approval by 85 percent of IMF’s Executive Board.
What is the IMF?
The IMF has become known as the lender of last resort due to its role as an economic safety net during economic crises in various nations around the globe.
Established in 1944, the IMF’s purpose is to promote global monetary cooperation, ensure financial stability and facilitate international trade while simultaneously promoting high employment rates and sustainable economic development as a means to reduce global poverty. Activities undertaken include surveillance, lending and technical assistance.
Gold has long been considered an attractive reserve asset, due to its longstanding status as money, its low transaction costs and relative returns, and its resilience against political/economic uncertainties and volatility in traditional reserve currencies.
At one point, the IMF held more than 2 million metric tons of gold at various depositories. Between 2009 and 2010, however, to diversify its income sources and strengthen its capacity to lend to low-income countries, some of this gold was sold off and its proceeds distributed among members as special drawing rights (SDRs) or added onto existing PRGT allocations.
Why does the IMF have gold?
Gold has played a much lesser role in international monetary systems since previous centuries when currency rates were linked to gold prices. Yet it remains an essential reserve asset and IMF holds 90.5 million ounces at designated depositories worldwide.
Since 1944 when the IMF first opened its doors, its holdings have been amassed through Members’ initial subscriptions and subsequent increases, as well as through some Members selling gold to it directly. Gold deposits for IMF holdings are spread around the globe.
Oxfam is appealing to the IMF to use some of its windfall profits from gold sales to expand debt relief for poor countries that spend more on external debt payments than public health budgets, thus helping prevent catastrophic loss of life due to diseases like AIDS and malaria, which are compounded by high healthcare costs.
What is the IMF’s gold policy?
Gold is an international reserve asset and serves many important functions, including as a risk-mitigating backstop to the Fund’s unique financing mechanism and contributing to global stability.
Gold held by the IMF was amassed from 1946 through the late 1970s through Member subscriptions and increases, as well as other methods like gold restitutions or sales to Members. Members also paid interest on their IMF credit in gold or used it to settle financial obligations owed to it at this time.
In 2009, the IMF Executive Board approved a plan to sell part of its gold. Proceeds from these sales will be used to strengthen IMF capacity to provide low-income country concessional lending (see Press Release No. 09/268). Gold sales will be conducted under strict limits designed to minimise disruptions to the gold market; sales are conducted according to terms outlined by an amendment of Rule F-1 (formerly Rule E-1) of IMF Articles and Rules, specifically amended specifically for this sale (See Press Release No 09/268).
What are the IMF’s gold depositories?
IMF gold holdings are held in storage locations worldwide. Members have designated storage sites according to an amendment in April 1978 that was known as Rule F-1 at that time (previously it was Rule E-1).
The IMF may sell its gold at market prices or accept it in fulfillment of Member obligations under its borrowing agreements, subject to Executive Board approval (at least 85 percent of voting power). Other gold transactions such as leasing, loans, swaps or using it as collateral cannot take place within its membership and no outright purchases of gold can occur either.
Considerations when holding international reserves may include concerns over slowdowns in global economic growth, political uncertainty, instability in traditional reserve currencies and their prices being volatile. A recent OECD paper shows that gold’s share in international reserves correlates positively with measures of geopolitical risk and global economic policy uncertainty – two elements associated with an increased demand for the metal as a store of value.