The International Monetary Fund agreed to distribute the second part of a $3.8 billion windfall from gold sales to its 188 member countries, but only if they commit most of the money to an anti-poverty loan program. The IMF made the windfall in 2009 and 2010 from sales of 403.3 tonnes of gold, taking advantage of record prices in bullion.
The Fund in March agreed to distribute the first part of the windfall from gold sales, which totalled $1.1 billion, on condition member countries reinvested at least 90 percent of the money in a zero-interest loan program for low-income countries. On Friday the IMF's board decided to dish out the final $2.7 billion in funds under the same conditions.
Following the IMF board's decision, the windfall profits from gold sales will be distributed once countries have provided "satisfactory assurances" they will commit most of the money to the loan program. If a sufficient number of larger member countries commit to giving up most of their windfall allotments, a few smaller countries could retain most of their shares.
In 2009, the IMF set a target to raise $17 billion to lend to the poorest countries, which are threatened by the risk of euro-zone contagion and the drop-off in foreign aid after a global recession. IMF Managing Director Christine Lagarde has pushed to meet that goal, seeking to ease concerns that the IMF and donor nations may turn a blind eye to the world's poor as they home in on containing the euro zone crisis.
The windfall from the sales of gold should help the sustainability of the Poverty Reduction and Growth Trust (PRGT), which provides low-cost loans to poor countries in Africa, Asia and Latin America, Lagarde said. "The strategy endorsed today ... 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," she said after the IMF's executive board approved the distribution.
Legally, the profits from gold belong to all IMF member countries, so the Fund needed the board's approval before it could use money solely for loans to poor countries. An IMF official said the board debated for two years whether the gold windfall should go to fight poverty.
"The board felt that (the funds) should be used for other purposes, like adding to the endowment or keeping them reserved to address credit risks," the official told reporters. "Over the last couple of months, we've seen the membership come together to agree to fill the funding gap in the concessional lending trust."
So far, 87.4 percent of the first part of the windfall funds have been committed to the trust for low-income countries, just below the 90 percent target. Once the target is reached, countries will actually get the money. The profits will be divided among IMF members in proportion to their financial commitment to the fund, known as their quota share. As a result, the United States, Japan, France, Germany, Britain and China will receive the largest sums.
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