IMF to sell gold to assist low-income countries

Dominique Strauss-Kahn announces unprecedented move to assist poor countries

BASSETERRE, St. Kitts – PLANS to reduce risk exposure in economies of low-income countries will soon be actualised as the International Monetary Fund (IMF) has announced that it will sell some of its gold reserves to increase lending facilities for developing nations.

The announcement, made July 29, would make about US$8 billion accessible to low-income countries over the next two years. Although the decision has just been announced, the international financial organization has described the move as “unprecedented” and a way to significantly increase funding for more vulnerable countries during the ongoing global financial and economic crisis.

According to the IMF, interest payments on current loans for such countries would also be suspended until the end of 2011 in order to ease the economic stresses. In preparation for this move, the Board has approved a number of measures which it deems significant to increase concessional lending to up to a total of US$17 billion in the next five years.

The release stated, "Some of the money to boost IMF lending to low-income countries will come from the envisaged sales of IMF gold. The IMF Executive Board will consider a plan for the Fund to sell about 400 metric tons of gold in order to create a new income model for the institution.”

This news is refreshing for low-income countries, as some of the proceeds of those sales may be used to help provide new subsidy resources for concessional lending to those countries.

It was noted in March by the IMF that the global financial crisis poses serious threats to poorer countries and could reverse progress made over the last decade. In the words of IMF Managing Director Dominique Strauss-Kahn, the new facility is "an unprecedented scaling up of IMF support for the poorest countries, in sub-Saharan Africa and all over the world".

"Since the crisis hit, we have been listening and responding to our member countries. The scaling up in the IMF's support not only will help these low-income countries weather a crisis that is not of their making. Once the crisis has passed, it will also pave the way for a progress in the battle against poverty," Strauss-Kahn noted.

The new lending facilities would take effect later this year after the organization’s donor countries confirm their consent.