ANALYSIS-IMF gold fight risks
delaying debt relief
Patrick Chalmers
LONDON, July 23 (Reuters) - Debt relief worth tens of billions
of dollars to the world's poorest nations could be held up by the
fight over IMF gold sales, development charities say.
Leaders from the Group of Seven (G7) most industrialised states
agreed proposals last month which with existing plans would wipe away $100 billion in debt arrears.
Planned International Monetary Fund sales of up to 311 tonnes of gold would form only a fraction of
that total.
''We are not going to get into the argument about gold,'' said Joseph Hanlon, policy adviser at
Jubilee 2000 UK, part of an anti-debt coalition spanning 50 countries.
He said arguments that sales would damage gold prices, hit developing-country gold producers or
constitute a back-door IMF funding mechanism all missed the point -- what mattered was the debt
itself and its effects of the world's poorest countries.
''It's a diversionary argument. It's a way of wasting a lot of time again by avoiding the main issue.
What they really ought to be worrying about is how to cancel more debt,'' he said.
The gold sale plan has fallen foul of African gold producers, mining lobbies and U.S. Congressmen,
who have an effective veto on the proposal due to IMF vote weightings.
Kevin Watkins, policy officer at the UK-based development charity Oxfam, said that if IMF sales
were held when first suggested in the mid 1990s there would not have been an issue.
''This has become a problem not because of the proposal to sell IMF gold but because a decision
on that has been delayed for so long that it now interacts with the plans of other central banks to sell
gold,'' he said.
Britain plans to sell 415 tonnes of gold over the next few years, replacing it with foreign currency,
while the Swiss want to sell 1,300 tonnes which are surplus to reserve requirements.
Watkins said that apart from Mali and Ghana, most of the 41 heavily indebted poor countries
(HIPC) targetted for debt relief were not significantly affected by gold prices.
''I think Ghana and Mali are specific problems. The question is do we address the problem through
a development assistance mechanism or do we address the problem of gold? IMF gold sales have
political support which makes them an attractive option,'' he added.
The World Gold Council disagrees, saying output from 30 HIPC gold producers is likely to hit 200
tonnes in 2000, offering those countries a rare chance to diversify exports.
''The paradox is that the future growth of these nations is being undermined by precisely those who
wish to proffer a helping hand -- the International Monetary Fund and the governments of some
well-developed countries,'' it said in a recent report.
According to the Council, whose members include some of the world's biggest gold mining
companies, Ghana mined 56 tonnes of gold in 1997 and Mali 17 tonnes, contributing 39 and 36
percent respectively to each one's merchandise exports that year.
Depressed gold prices, which hit a 20-year low near $253.00 an ounce this week, have already
taken their toll.
Ghana's Ashanti Goldfields said this week it would cut 2,155 jobs from September, blaming the cuts
on a ''drastic fall in the gold price'' exacerbated by the start of UK gold sales in July.
In South Africa, which is not part of the HIPC programme, several mines plan to fire more than
11,000 workers and another 100,000 mine or mine-related jobs are threatened.
Miners and lobbyists blame Britain, the IMF, Switzerland and speculators for gold's price slump.
What those critics fail to mention are the extensive hedge sales conducted by the miners themselves,
a process which brings metal to market years before it is dug out of the ground.
''If you look at the total hedge position of all producers, it's in the region of 3,000 tonnes built up
over the last 10 to 15 years. And it's grown again this year,'' said Hester le Roux, a director at
analysts Gold Fields Mineral Services.
''Gold's fall is not about the IMF sale, it's not even about the UK auction, it's a bigger trend that's
been around some time,'' she said.
Those opposing the sale risked not only disrupting debt relief plans, they also put their own market in
danger.
''The sentiment attached to IMF sales is enormous. And the reason why it's become so high profile
is because of the campaigns to stop the sales,'' le Roux said.
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