Gold sales are favoured by a number of European countries, notably the UK, but board approval would require US support and the US Treasury is sceptical about the approach, not least because it would require congressional approval.......
Debt relief gold sale ‘would not hit market’
By Andrew Balls in Washington
Published: March 30 2005 22:02 | Last updated: March 30 2005 22:02
The International Monetary Fund could sell part of its gold reserves to pay for its share of debt relief to poor countries without destabilising the market or hurting gold producing countries, according to its managing director.
The IMF's store of 3,217 tonnes of gold has a market value of $45bn (€34.7bn, £23.9bn) but is on the fund's books at just $9bn.
Rodrigo Rato told the Financial Times in an interview that if member countries wanted to use the IMF's undervalued gold reserves for debt relief they should do so through sales, rather than revaluation, to free real resources.
Gold sales are favoured by a number of European countries, notably the UK, but board approval would require US support and the US Treasury is sceptical about the approach, not least because it would require congressional approval.
Mr Rato highlighted two key issues first “to do it in an efficient way for the strength of the fund, which is to sell in the market”. Second: “Once we have to be an actor in the market, we would need to respect the way the market is function ing right now. That would be to the advantage of every body, the producers of gold, but also the fund.”
Separately, the IMF's directors were presented with a report by its finance department yesterday, say ing member countries whose central banks were selling gold could reduce those dis posals to accommodate any sales by the fund.
The report, a copy of which was obtained by the FT, highlights the strength of the gold market, with the price up by two thirds since 1999, when the fund last con sidered gold sales.
This reflected geopolitical tensions and the 1999 Cen tral Bank Gold Agreement, which governs future sales of gold by central banks, it said.
Poor countries that might be eligible for up to 100 per cent debt relief owe about $11bn to the IMF a fraction of the amount owed to the World Bank.
Pointing to recent sales by central banks, including the UK and Switzerland, the analysis said the fund could sell 13m-16m ounces over a period without disrupting the market. That would amount to up to 16 per cent of IMF holdings and would raise up to $7bn.
The report, prepared by the IMF's finance depart ment, stressed the need to avoid gold market disrup tions, including by making clear that a sale would not be the first stage in an ongo ing disposal of the IMF's gold and that it would retain large holdings for prudential reasons.
To the frustration of debt relief campaigners, while the US and the UK are pushing their partners in the Group of Seven leading countries to agree on generous debt relief, there is not agreement among those countries on how to press ahead. |
