How Much Gold Does the IMF Have?
Gold‘s share in central bank reserves varies significantly among countries, depending on factors like transaction costs, relative returns, economic/financial uncertainties and geopolitical events.
As soon as the Fund began operations in 1946, prospective members were required to designate depositories for their initial quota payments – this led to its holdings being scattered among New York, London, Shanghai and Bombay.
The IMF’s Gold Holdings
Gold holdings form an essential component of the IMF’s balance sheet, providing it with resources necessary to provide loans during times of crises to member nations.
The Fund has adopted a policy of not selling any of its gold except under very special circumstances in order to minimize disruptions in the gold market.
Reason being, world’s top gold producers account for 30% of IMF voting power and could block any sale that requires 85-70% support to proceed.
Oxfam has raised concerns that proceeds from gold sales could be used to cover IMF lending to low-income countries (LICs). They propose selling some gold to raise resources necessary to maintain subsidized interest rates on program lending to these LICs – this would free up funds that could help combat coronavirus pandemics as well as invest in their long-term development.
Why the IMF Holds Gold
As part of its gold standard days, when 25 percent of initial quota payments to the IMF were made in gold by member nations, the Fund used this precious commodity as collateral against loans it made to its members. When its Articles were amended in 1978, profits from selling IMF gold would be placed into a Special Disbursement Account (SDA), to provide concessional balance of payments support to low-income countries.
Since 2004, SDA rules have not been altered; any amendment to them by the Fund would need ratification from three-fifths of membership or 85 percent voting power.
Modest gold sales to help Sub-Saharan African nations and LICs would not only bolster the IMF’s global role but would also benefit U.S. national interests – though to achieve these ends it requires that IMF sales are conducted without disrupting commercial markets – an impossible feat!
The IMF’s Gold Depositories
IMF gold depositories are designated in its Articles, By-Laws and Rules and Regulations; specifically Rule F-1 provides details about their locations (though language has been amended twice separately).
Gold stored at each of these locations was/was stored differently depending on its depository. For instance, in New York it was/was primarily held as complete melts from US Assay Office gold bars with some coin bars stored as coin bars; London saw most gold stored as Rand Refinery bars; while Nagpur typically stores Reserve Bank of India issue department gold bars.
At an initial Executive Board Meeting held during 1946-1947 to distribute IMF gold, a representative from South Africa asked that one of its depositories be located there; this request was never granted.
The IMF’s Gold Sales
In 2009, the IMF sold 13 million ounces of gold to finance its “new income model.” These sales were conducted with minimal volume and stringent safeguards against disruption of global gold markets.
As part of its efforts, the IMF reached an agreement with central banks holding creditor positions that allowed for sales at market-related prices and through preannounced auction schedules over time. Furthermore, each official sale was disclosed shortly afterwards by the Fund.
Profits from these sales could have been used to assist poor countries as they weather the coronavirus crisis. Jubilee Debt Campaign has proposed that the IMF use its gold reserves as leverage in negotiations for multilateral debt payment cancellation for 73 of the world’s poorest countries, saving more than $180 billion worth of payments and producing savings that total more than that amount in savings alone! For more details please view our briefing paper “Leveraging IMF Gold for Debt Relief”.
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