Gold Reserves at the International Monetary Fund
IMF rules stipulate that part of each member’s quota payment be sent directly to one of five gold depository locations–New York, London, Shanghai, Paris or Bombay–tying gold to geopolitical events and possibly helping explain why increases in gold reserves usually accompany sanctions or legal restrictions on particular states.
Small sales of IMF gold would bring great benefit to African nations and low-income countries while reinforcing its role as an international leader.
What is the IMF?
IMF policies aim to foster economic growth and employment by maintaining exchange rate stability, supporting international financial cooperation and supervising member countries’ economic policies. Furthermore, the IMF monitors member policies for compliance with its Articles of Agreement including their obligation to cooperate with other members as well as non-members to promote global monetary stability.
IMF members’ quotas and voting power are determined by their economic size and position in the world economy, with wealthier countries receiving larger quotas and voting powers.
IMF resources come from members’ quota subscriptions and borrowing under its Special Drawing Rights (SDR) facility. Additionally, concessional loans may also be administered to low-income countries facing persistent balance of payments issues.
How do countries become members of the IMF?
Joining the IMF provides member countries with an initial quota that corresponds with their economic size, which contributes to an international pool from which other members may borrow. They also gain access to economic records of other member countries, technical assistance on fiscal matters and increased trade and investment opportunities.
Additionally, a central bank can purchase gold from the IMF at market prices as an important hedge against financial crises.
In 2009, the IMF Executive Board authorized limited sales of gold held by the Fund in order to put its financing on a sustainable long-term foundation and expand its capacity to offer concessional lending to low-income countries. Sales were made without disrupting markets or impacting other gold holders, with resources going directly towards loans for poor nations. Depositories for IMF gold are established pursuant to Rule F-1 of its Rules and Regulations which is linked with Article XIII Section 2 of its Articles of Agreement.
What kind of research does the IMF do?
The IMF conducts various studies to assist policy makers in making sound economic and financial decisions. A cornerstone of its work involves monitoring economies and providing advice through surveillance; these findings are then published via press releases called Surveillance In Focus.
IMF Executive Board approved limited sales of gold held by the Fund in order to establish stable long-term financing and increase capacity to offer concessional loans to low income countries. Profits from such sales will go into the Special Disbursement Account where they will be used as balance of payments support for members.
In the past, countries seeking IMF funding were expected to sign on to policies or “conditions,” in exchange for loans from the Fund. These conditions were intended to ensure borrowed funds were spent wisely and helped prevent future crises; evidence shows that country’s willingness to accept IMF conditionality correlates to its share of gold reserve growth.
What is the Managing Director of the IMF?
IMF’s Managing Director serves as Chair of its Executive Board and Head of staff. They are assisted by First Deputy Managing Directors and three Deputy Managing Directors; Kristalina Georgieva has held this role since October 2019 before acting President at World Bank (an institution similar to IMF).
The Fund receives its money through contributions based on each country’s economy – with the United States as its primary contributor.
Countries can borrow from the IMF through Special Drawing Rights issued at each country’s quota level and traded internationally. The Fund’s Managing Director oversees 18 departments that carry out its country, policy, analytical and technical works; their selection by the Executive Board on merit and strong knowledge of IMF mission is decided upon through merit selection criteria.
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