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Gold Sales As Opposition Grows Saturday, July 10, 1999
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IMF Discusses Gold Sales As Opposition Grows
01:03 a.m. Jul 10, 1999 Eastern
By Mark Egan
WASHINGTON (Reuters) - The International Monetary Fund's board met Friday to discuss selling some of its gold as more U.S. lawmakers joined the chorus denouncing the scheme, which cannot proceed without approval by the U.S. Congress.
As IMF officials gathered at a meeting shrouded in secrecy, the U.S. Congressional Black Caucus strongly denounced the proposed IMF gold sales, which are aimed at relieving the debts of the world's poorest countries.
''When this proposal comes before Congress for consideration, we will oppose it vigorously,'' members of the black caucus wrote in a letter to President Clinton.
''We will not support central bank gold sales; we will oppose them in whatever form they are presented to the Congress,'' the letter, signed by 26 black members of Congress, said. ''We intend to examine more realistic, more productive, and less harmful alternatives.''
A spokesman for the IMF said no statement would be issued after Friday's meeting. The board was to discuss how to sell up to 10 million ounces of the fund's 104 million ounce gold reserve without hurting gold prices. Gold hit a 20-year low of $258 per troy ounce this week after the Bank of England auctioned 25 tons of gold bullion as the first step in cutting its reserves to 300 tons from 715 tons.
The spokesman said the IMF board meeting could not produce any concrete plans since it is not yet clear whether the United States, which can veto the plan, will approve the sales.
''It is obvious that the United States cannot cast a vote on this issue at the moment because the U.S. administration has not yet received approval from Congress,'' the spokesman said.
The debt relief plan, which will use interest generated from the sales to help relieve debts of 41 of the world's poorest nations, as part of a plan approved last month by the Group of Seven industrialized nations. The plan needs an 85 percent vote at the IMF and since the United States has a 17 percent vote, Congress could block the scheme.
Sources at the IMF said the G7 countries want the fund to sell the gold through an auction, which they view as the most transparent means and the one least likely to disrupt markets.
Opponents of the plan claim that the IMF gold sales would further depress the price of gold, which has been battered in recent years by the global financial crisis and by gold sales by many central banks in a time of low inflation.
Since 36 of the 41 countries targeted for debt relief are also gold producers, the gold sales would harm their economies and negate the effect of the debt relief, critics claim.
''If the price of gold remains at the current 20-year low price of about $258 (per ounce,) 40 percent of South Africa's gold production will become unprofitable, more than 80,000 miners will lose their jobs, and upwards of 800,000 Africans will be plunged into absolute poverty,'' the black caucus said.
South Africa, which had initially backed the proposed IMF gold sales, changed its position this week claiming the plan would hurt the countries it was intended to help. Gold-producing Ghana also opposes the plan.
Gold has slumped from $291 an ounce at the beginning of the year, losing around $35, or more than 10 percent, since the Bank of England gold sale plan was announced in early May.
Switzerland intends to sell 1,300 tons of excess gold reserves and transfer the funds to a foundation to help victims of poverty, human rights abuses and catastrophes.
The stage seems set for a heated debate in Congress in the coming weeks and months over the IMF gold sales. The opposition of the black caucus, made up entirely of Democrats, adds to a growing list of U.S. lawmakers opposing the scheme.
House Republican Leader Dick Armey has thrown his weight behind a bill that would block the sale of IMF gold unless proceeds were returned to the United States and other IMF donor nations. Lawmakers from western U.S. gold producing states, such as Nevada Democratic Sen. Richard Bryan, also oppose the sales.
Others opposing the plan include Republican Whip Tom DeLay, the Western Governors Association and Senate Minority Leader Tom Daschle.
Copyright 1999 Reuters
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