Questions and Answers
IMF Gold Sales
Last Updated: May 16, 2013
On September 18, 2009, the IMF's Executive Board approved gold sales strictly limited to 403.3 metric tons, representing one eighth of the Fund's total holdings at that time. The gold sales program was completed in late December 2010.
- How much gold was sold?
- How was the gold sold?
- Why has the IMF decided to sell gold?
- How will the resources from gold sales help with lending to low-income countries?
- Why can't the IMF use the gold sales profits directly for low-income country lending?
- What were the proceeds from the sales?
- How was disruption of the gold market avoided?
- How did the on-market sales occur?
- Where can more information about the IMF gold be obtained?
- Statistical Treatment of Gold Sales
• The Executive Board approved sales strictly limited to the gold the IMF had acquired after the Second Amendment of the Articles of Agreement in April 1978. This amounted to 12,965,649 fine troy ounces or 403.3 metric tons, which represented one-eighth of the Fund's total holdings at the time of approval.
• The volume of gold sales approved by the Executive Board was unchanged from the proposed sales in the new income model endorsed by the Executive Board in April 2008, which was also the same volume as recommended by the Crockett Committee in its January 2007 report on the sustainable long-term financing of the IMF.
• The IMF announced in February 2010 that phased sales of gold on the market would be initiated shortly. At that time, a total of 191.3 tons of gold remained to be sold, following the sale of a total of 212 tons to three central banks during October and November 2009.
• According to the modalities for the gold sales adopted by the Executive Board, the Fund initially stood ready to sell gold off-market directly to central banks and other official sector holders at market prices. During October and November 2009, the Fund sold a total of 212 tons in this manner to the Reserve Bank of India, the Bank of Mauritius, and the Central Bank of Sri Lanka. On September 7, 2010, the Fund sold 10 metric tons to the Bangladesh Bank.
• Second, the gold sales were conducted on-market in a phased manner over time, following the approach adopted successfully by the central banks participating in the Central Bank Gold Agreement (CBGA).
• Participants in the CBGA renewed in 2009 announced ceilings on sales of 400 tons annually, and 2,000 tons in total during the five years starting on September 27, 2009, and noted that the Fund's sales could be accommodated under these ceilings.
• As one of the elements of transparency in the sales, the Fund informed markets that on‑market gold sales were about to commence on February 17, 2010 (See Press Release No. 10/44). The IMF provided regular updates on progress with the gold sales through its normal reporting channels.
• The strictly limited sales of Fund gold approved by the Executive Board will help put the financing of the IMF on a sound long-term footing, and also help to boost the Fund's capacity to provide concessional loans to low income countries.
• New income model: an endowment funded with the profits from gold sales is a central component of the new income model that the Board endorsed in April 2008. The new income model would provide more diverse income sources that are better aligned with the variety of functions performed by the Fund.
• Concessional lending: Resources linked to the gold sales will also be used indirectly to increase the Fund's capacity to provide concessional loans to low income countries.
• Back in 2009, the IMF agreed on a financing package aimed at raising its concessional lending capacity to SDR 11.3 billion (US$17 billion) over 2009–2014 through the Poverty Reduction and Growth Trust (PRGT) (See Press Release No. 09/268). Contributions linked to the windfall gold profits will count towards that package's target of raising an additional SDR 1.5 billion (US$2.3 billion) to subsidize the PRGT's low-interest concessional lending, which currently carries a zero interest rate, with the balance coming from other sources, including additional bilateral contributions from member countries.
• In February 2012, the Executive Board approved the distribution to all IMF members of SDR 700 million (about US$1.1 billion) from the general reserve attributed to a portion of the windfall profits from recent IMF gold sales, with the expectation that members would transfer their share or otherwise make a new contribution of an equivalent amount to support concessional lending to low-income countries. The distribution will be effected only after the Fund has received satisfactory assurances from members of PRGT subsidy contributions equivalent to at least 90 percent of the amount distributed—i.e. SDR 630 million (about US$1 billion).
Q. Why can't the IMF use the gold sales profits for low-income country lending directly instead of making a distribution to member countries and then asking them to transfer their share or contribute equivalent amounts?
• The Fund does not have the authority to use resources in the General Resources Account (GRA), including profits from the sale of post-Second Amendment gold, directly to provide subsidies for concessional lending to low-income countries, as the use of GRA resources for the benefit of only low-income countries would not be consistent with the requirement of uniformity of treatment of all IMF member countries. Making profits linked to gold sales available for the PRGT therefore requires an indirect approach involving:
- A distribution of reserves attributed to a part of gold windfall profits to all IMF member countries in proportion to their quota shares, and
- Voluntary transfers by members of their share directly to the PRGT or otherwise new subsidy contributions to the PRGT.
• The Fund's gold sales program generated total proceeds of SDR 9.5 billion (about $15 billion). As required under the Articles of Agreement, all sales were conducted at market prices, including direct sales to official holders.
• The IMF's Executive Board reaffirmed the long-standing principle that the Fund has a systemic responsibility to avoid causing disruptions that would adversely affect gold holders and gold producers, as well as the functioning of the gold market. Hence, the Executive Board adopted modalities for the gold sales consistent with guidelines it endorsed in February 2008 to safeguard against market disruption:
- Sales should be strictly limited to the amount of gold that the Fund had acquired since the Second Amendment of the Articles of Agreement (12,965,649 fine troy ounces or 403.3 metric tons, which represented one-eighth of the Fund's total holdings).
- The Fund's gold sales should not add to the announced volume of sales from official sources. (Participants in the Central Bank Gold Agreement renewed in 2009 noted that the Fund's sales could be accommodated under the announced ceilings, ensuring that on-market gold sales by the Fund would not add to the announced volume of sales from official sources.)
- The scope for sales of gold to one or more official holders should be explored. This would be advantageous because such transactions would redistribute official gold holdings without changing total official holdings. There would also be the practical advantage that the Fund could receive sales proceeds earlier, thereby beginning to generate income from an endowment sooner.
- Absent sufficient interest from other official holders to purchase gold directly from the Fund, phased on-market sales would represent the most appropriate modality for potential gold sales. This would follow the approach adopted successfully over a number of years by current Central Bank Gold Agreement participants.
- A strong governance and control framework, together with a high degree of transparency, would be essential for gold sales conducted by the Fund. A clear, transparent communications strategy, including regular external reporting on sales, should be adopted, in order to assure markets that the gold sales are being conducted in a responsible manner.
• To avoid any risk of disruption to the gold market, the on-market sales were conducted in a phased manner over time, an approach successfully adopted by central banks participating in the Central Bank Gold Agreement.
• The initiation of on‑market sales did not preclude further off-market gold sales directly to interested central banks or other official holders. Such sales reduced the amount of gold that was subsequently placed on the market.
• The IMF provided regular updates on progress with the gold sales through its normal reporting channels.
Read more about the IMF's gold in the factsheet Gold in the IMF.