U.S. backs IMF gold sales, big hurdles still ahead
03:01 p.m Mar 16, 1999 Eastern
By Janet Guttsman
WASHINGTON (Reuters) - U.S. President Clinton Tuesday
urged the International Monetary Fund to sell gold to fund new
plans for debt relief, but the idea, long under the IMF spotlight, still
faces big hurdles at home and abroad.
Clinton, announcing $70 billion in debt relief for poor countries,
many of them in Africa, proposed ''significant improvements'' to
an international program of debt relief, the Heavily Indebted Poor
Countries (HIPC) initiative.
''(We need) support for gold sales by the IMF to do its part, and
additional contributions by us and other countries to the World
Bank's trust fund to help meet the cost of this initiative,'' Clinton
told a U.S.-Africa ministerial meeting as he listed a menu of
proposed changes.
His comments, following statements on gold sales by officials in
Europe and Japan, sent the gold price spinning to a 6-1/2 week
low of $283 per ounce at the London fixing, down $3.80 from
London opening levels.
''Bill Clinton opened his mouth and said he thought the IMF
should sell gold to relieve third world debt, and that was it,'' said
one London dealer.
An IMF spokesman said the IMF had not yet set a date to debate
selling some of its 103 million ounce stockpile of the precious
metal, worth some $29 billion at current prices.
He noted that the IMF's policy-making Interim Committee had
already decided to explore the possibility of selling gold, but said
the U.S. Congress would have to back the plan.
''No decision has been taken and no decision on the actual timing
of any sales can be taken in view of the need for the U.S.
executive director to the IMF to secure congressional
authorization for the sale of gold by the fund,'' he said.
Other monetary sources said that, while U.S. agreement was
crucial for gold sales to go ahead, other major countries would
also have to back the proposal, which has in the past been fiercely
opposed by Germany's inflation-conscious central bank.
The German finance ministry said on Monday that Bonn would
only back the idea of gold sales if the Bundesbank approved the
deal, while the Bundesbank said its position had not changed.
Japanese finance ministry official Harun Kuroda said the idea of
IMF gold sales should be discussed ''very cautiously.''
French President Jacques Chirac said IMF gold sales might be a
possibility. ''We have to find a solution to the multilateral debt for
those who need it, without ruling out the sale of the IMF's gold
reserves if necessary,'' he said.
IMF rules say gold sales would need the backing of member
countries holding 85 percent of the votes at the international
lending institution, so Washington, with 18 percent of the votes,
must approve the sale for a deal to go ahead.
No details have been given on how much gold the IMF might sell,
but speculation centers on the sale of between 5 million ounces
and 10 million ounces. The money would go into a trust fund
which could also help fund a program of low-interest loans for
poor countries.
The U.S. administration's 2000 budget includes a request to
Congress to approve a request to use cash from IMF gold sales to
fund HIPC, which rewards reformist debtor states by forgiving up
to 80 percent of their sovereign debt.
But Congress, where many lawmakers oppose the IMF, stalled
for months last year on approving extra money for the fund. House
members, in a bipartisan initiative last week, put forward a Debt
Relief for Poverty Reduction Act which would cancel most of the
debt owed by poor countries to the U.S. government and reduce
debt to the IMF and the World Bank.
Copyright 1999 Reuters Limited |
