IMF gold sales to fund lending to poor countries

WASHINGTON: The International Monetary Fund announced Thursday it has harnessed windfall gold profits from member countries to fund loans to the world's poorest countries in the coming years.

"We have just reached the threshold of enough approvals from our membership to transfer the existing gold profit to meet the financing needs of our low-income countries," IMF managing director Christine Lagarde said.

Calling it "the good news of this week," Lagarde, speaking at a news conference as IMF and World Bank annual meetings got underway in Washington, noted it had been a years-long goal to put the IMF's Poverty Reduction and Growth Trust on a sustainable basis.

The IMF said that 151 of its 188 member countries had pledged more than 90 percent of the roughly $2.7 billion in windfall profits remaining from a gold sale to the PRGT.

The IMF had sought to use members resources linked to the gold sales to partially fund the PRGT, which offers lending under flexible conditions -- currently at a zero interest rate -- to low-income countries.

The PRGT now has funding to support more than $3.4 billion in concessional lending, allowing it to lend almost $2 billion annually, in line with the IMF's estimate for demand from poor countries.

"We now have secured critical resources to provide adequate levels of financial support to the poorest countries for years to come," Lagarde said in a statement.

"That so many countries, at different levels of development and from all of the world's regions, have supported this process shows the strong and universal commitment of our membership to help the world's poorest countries."

The IMF sold 403.3 metric tons of gold in 2009-2010 as part of a plan to ensure the long-term financing of the Fund's day-to-day operations through the creation of an endowment, using anticipated profits of some $6.8 billion.

But with world gold prices high at the time as the global economy struggled to recover from the 2008 global financial crisis, the sales fetched more than the IMF predicted, generating windfall profits of $3.8 billion.

"We applaud the IMF for using windfall gold sale profits to benefit poor countries," said Eric LeCompte, executive director of Jubilee USA Network, a faith-based antipoverty organization. "Zero percent interest loans means real relief for millions of the world's most vulnerable people."