Abstract
Sony Kapoor examines how using IMF gold sales to fund multilateral debt cancellation could release much needed resources for meeting the millennium development goals (MDGs). He shows why multilateral debt cancellation is so critical and how the sale of IMF gold could finance it for the IMF as well as the World Bank. He addresses the concerns of the gold-producing poor countries by highlighting two distinct mechanisms by which the gold could be sold while eliminating or at least minimizing price impact. Finally, he underlines the fact that selling this gold and using its proceeds for debt cancellation would not in any way jeopardize the operations of the IMF.
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Notes
28 November 2004.
28 November 2004.
From 1980, when Fund Staff suggested that gold be sold and the proceeds be invested in income-generating assets.
‘Transparency in announcing and then sticking to an auction calendar gave reassurance to the markets’ The IMF and Gold, World Gold Council, 2001.
‘Financing the Fund's Operations – Review of Issues’, ‘in the late 1950s and in the 1960s, the IMF sold gold on several occasions to replenish its holdings of currencies’, ‘in order to generate income to offset operational deficits, some gold was sold to the United States and the proceeds invested in US government securities. A significant build-up of reserves through income from charges prompted the IMF to reacquire this gold from the US government in the early 1970s’ (IMF, 2001).
‘Auctions and restitution sales (1976–1980). The IMF sold approximately one-third (50 million ounces) of its then-existing gold holdings following an agreement by its members to reduce the role of gold in the international monetary system. Half of this amount was sold in restitution to members at the then-official price of SDR 35 per ounce; the other half was auctioned to the market to finance the Trust Fund, which supported concessional lending by the IMF to low-income countries’ (IMF, 2001).
‘In 1979–80, discussions took place regarding the establishment of a Substitution Account. Fund management supported the use of a (substantial) part of the Fund's gold holdings to ensure the viability of the Account, and also the sale of a small portion of the Fund's gold and use of the profits to create an investment fund and thereby strengthen the Fund's income position. The question of a Substitution Account was later dropped, as was the issue of gold sale for the purpose of deriving income for the Fund. This was done primarily because of the lack of a political consensus and concerns about the impact on the still nascent post gold standard international gold market’ (IMF, 2001).
Interview with Rachel Sanderson, August 5 (Reuters).
Mostly due to historical reasons.
References
Greenhill, Romilly (2003) ‘Unbreakable Link – Debt relief and the MDGs’, Jubilee Research, UK.
Kapoor, Sony (2003) ‘Can the IMF and the World Bank cancel 100 percent of HIPC debt’, Jubilee Research for Debt and Development Coalition Ireland.
Kapoor, Sony (2004) ‘Resource Rich BWIs, 100 percent Debt Cancellation and the MDGs’, (IOB) Dutch Government, June.
IMF (2001) ‘Financing the Fund's Operations – Review of Issues’, IMF, Washington.
Additional information
Proposes a concrete way to finance the MDGs
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Kapoor, S. Mobilizing IMF Gold for Multilateral Debt Cancellation. Development 48, 92–100 (2005). https://doi.org/10.1057/palgrave.development.1100122
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DOI: https://doi.org/10.1057/palgrave.development.1100122