core sector communique

IMF Executive Board Approves Distribution of US$2.7 Billion in Remaining Windfall Gold Sales Profits as part of a Strategy to Make Low-Income Lending Sustainable

September 28, 2012

The Executive Board of the International Monetary Fund (IMF) today approved the distribution of SDR 1.75 billion (US$2.7 billion) in remaining windfall gold sales profits as part of a strategy to bolster the IMF’s concessional lending vehicle for low-income countries and make it sustainable. The resources are in addition to SDR 700 million (US$1.1 billion) that have already been approved for a similar but separate operation to support low –income countries during the global financial crisis.

“This is a major step towards putting our important concessional lending operations for low-income members on a sustainable footing,” IMF Managing Director Christine Lagarde said. “During the 2009 financial crisis, we were able to boost financial assistance to our low-income country members, helping them weather the storm and preserve their hard-fought gains in the battle against poverty. The strategy endorsed today by the Executive Board ensures the IMF is better positioned to help our low-income members absorb future shocks and underpin their efforts to achieve stronger and sustainable economic growth.”

Under today’s decision, SDR 1.75 billion in reserves attributed to gold sales profits will be distributed to IMF member countries in proportion to their quota shares in order to raise subsidy resources for the Poverty Reduction and Growth Trust (PRGT), the IMF’s concessional lending vehicle. The distribution will happen only when members have given satisfactory assurances that an amount equivalent to at least 90 percent of the distribution will be made available to the PRGT. An amount of SDR 700 million in reserves attributable to windfall gold sales profits has already been approved for a similar distribution as part of a PRGT financing package agreed in 2009 to boost concessional lending capacity over the 2009-14 period. To date, assurances have been received that an amount equal to 87.4 percent of that distribution will be made available to the PRGT; the actual distribution will be effected once the 90 percent threshold of assurances is reached. An up-to-date list of member countries’ pledges is available online here.

“I wish to thank and recognize all those member countries that have stepped up to enable us to support our low-income members during the crisis, and call on our membership to demonstrate their commitment again by completing this global effort to provide the resources for our continued support in years to come,” Ms. Lagarde stated.

The IMF sold 403.3 metric tons of gold in 2009-10 as part of a plan to ensure the long-term financing of the IMF’s day-to-day operations through the creation of an endowment using anticipated profits of some SDR 4.4 billion (US$6.8 billion). High world gold prices during the sales period, over and above the US$850 an ounce envisaged when the sales were originally planned, generated “windfall” profits of some SDR 2.45 billion (about US$3.8 billion). With today’s decision, the Executive Board has approved the distribution of the entire windfall profit in the context of strategies to support concessional lending to low-income members—which currently is at a zero interest rate.