Why Does the IMF Have Gold?
The International Monetary Fund holds a substantial supply of gold at its depository locations in New York, London, Paris, Shanghai and Bombay, acquired through initial quota subscriptions by members, increases in their quota subscriptions over time, various increases in membership quota subscriptions as well as other means.
Bhandary and Zucker-Marques propose that the IMF sell off some gold to generate resources to maintain subsidised interest rates on loan programs to low-income countries (LICs) as well as enhance its catastrophe risk sharing mechanism.
It’s a security
At its inception in 1944, IMF members paid part of their quota in gold as part of their payments; due to its role in stabilizing global financial markets and helping low-income countries promote growth, members amassed substantial holdings of this precious metal.
As part of its Second Amendment, the Fund’s Articles, By-Laws, and Rules were updated to reflect a diminished role for gold. Due to no longer paying subscriptions in gold, Rule E-1 on depositories needed amending as members were no longer paying subscriptions in it; it was then renamed F-1 with deposits being relocated from London, Shanghai, Paris and Bombay to New York.
IMF gold sales would not affect the global gold market and could be conducted privately through central banks over two years, raising enough money to help pay for climate-vulnerable countries’ debt relief, saving lives and alleviating poverty in developing nations.
It’s a currency
As an international institution dedicated to economic reform and development, the IMF must have sufficient financial strength to stand on its own. Selling modest amounts of gold could help reinforce its financial security as a buffer against creditor claims.
Last time, when the IMF sold 13 million ounces to finance its new income model in 2007, there was no disruption to the gold market or sales process – an excellent testament to their longstanding track record as one of the world’s premier official holders of gold reserves used to safeguard global monetary system integrity.
According to the Second Amendment to the IMF’s Articles of Agreement adopted in April 1978, the Fund does not possess the power or mandate for purchasing or engaging in gold transactions; rather, it can sell it at market rates and accept gold from Members as repayment of loans they wish to borrow against it. An exception would be if a country desired transferring their gold directly into IMF depositories after prior approval by an 85% majority vote of its Executive Board.
It’s a commodity
The IMF is a global institution dedicated to financial stability and economic growth through loans, policy consultations, education and loans for struggling economies. Representing 190 nations around the globe as members, it offers loans as means of repaying any debts incurred by struggling nations.
At its founding in 1944, member countries paid part of their initial quotas and subsequent increases with gold, enabling the IMF to quickly amass an impressive amount – currently holding 90.5 million ounces at designated depositories.
Oxfam has called upon the IMF to increase gold sales and use proceeds to assist low-income countries fight poverty and save lives; mobilize international support for such sales which benefit Africa and LICs; this could include mobilizing support through US President Donald Trump.
It’s a store of value
At its inception, members paid part of their initial quota payments in gold so it could be used as collateral against credit extended by the Fund. This practice continued for over 30 years, building up its current stockpile of 90.5 million ounces of gold.
Over the past decade, the International Monetary Fund has sold some of its gold twice without disrupting world markets. They “mobilized” some off-market sales to central banks in India, Bangladesh, and Sri Lanka before conducting on-market sales in February 2010 and December 2010.
These gold sales have generated resources to maintain subsidized interest rates on program lending to low-income countries (LICs) through the Poverty Reduction and Growth Trust (PRGT), in particular windfall gold profits linked to windfall profits exceeding new appropriations agreed for this purpose. This development is welcome news as LICs face challenges reducing debt service costs while investing in health and education to fight poverty.
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