IMF to sell 403 tonnes of gold

Washington, April 8:

The International Monetary Fund (IMF) today proposed the sale of 403.3 tonnes of gold to bolster its sagging coffers as part of a critical financial overhaul.

The sale, amounting to some 12 per cent of its gold reserves, could yield around $11 billion, IMF officials said, supporting a reorganisation of the institution as it seeks to survive a downturn in lending to troubled countries, its main income source.

Managing director Dominique Strauss-Kahn said in a statement the IMF would use the funds to help shore up IMF finances and create a new endowment with more diverse investments to generate income. The announcement comes with the IMF in the midst of an intense effort to trim costs and slash jobs as its lending is scaled back, with some countries refusing the IMF’s conditional aid. The IMF faces a budget shortfall of some $140 million for the fiscal year 2008 that ends on April 30.

The sale would affect some 13 million ounces of the IMF’s 103.4 million ounces of gold reserves. IMF officials said the sale would likely take place over several years in an effort to avoid market disruption.

Still, the sale could have a dramatic impact on the market, where according to IMF officials some 500 tonnes are traded annually.

Gold prices recently hit an all-time record above $1,000 an ounce. An IMF official speaking on condition of anonymity said an average price of about $850 an ounce would generate about $11 billion. Of that, some $6.6 billion would be used to create the endowment, he said.

The IMF said the executive board agreed to revamp the institution’s income model from one that primarily relies on lending to one that ‘generates funds from various sources’. The expansion of the fund’s investment authority is contingent on a charter amendment that would need legislative action in most member countries.