IMF Managing Director Christine Lagarde Welcomes Progress towards Using US$1.1 Billion of Gold Profits as part of a strategy to Boost Concessional Lending to Low-Income Countries and Calls on More Members to Join Effort

Press Release No. 12/158
May 2, 2012

International Monetary Fund (IMF) Managing Director Christine Lagarde today welcomed steps taken by member countries to authorize the use of profits from IMF gold sales to support concessional lending to low-income countries, and called on more members to join the global effort to support the world’s poorest countries. Under a plan initially launched in 2009 aimed at raising concessional lending capacity to US$17 billion over the period 2009-2014, the Fund has decided to distribute to the membership some SDR 700 million (about US$1.1 billion) in reserves attributed to a part of the profits from its 2009-2010 gold sales program. However, the distribution will be effected only when members provide satisfactory assurances that they will make new concessional lending subsidy contributions equivalent to at least 90 percent of the amount distributed—i.e. SDR 630 million (about US$978 million—see Press Release No. 12/56).

As of April 30, 2012, some 69 countries representing 48.67 percent of the proposed distribution had pledged to use their portion of the distribution to subsidize lending to low-income countries, which may currently borrow at zero or low interest from the Poverty Reduction and Growth Trust (PRGT), the IMF’s concessional lending vehicle. Details are published in the latest Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries and an updated list of countries making pledges is available online here.

“Many of our low-income members have weathered recent crises much better than in the past, thanks to their impressive efforts in strengthening economies and fighting poverty,” Ms. Lagarde stated. “Yet at a time when their resilience and hard-won gains might be tested again by global volatility, increased low-interest lending will be crucial to helping many of them absorb further shocks and continue their efforts to achieve deeper and more sustainable economic growth,” she added.

“I wish to thank all those donor countries that have stepped up so quickly, and call on the rest of our members to join in this global effort rapidly so we can complete this operation and ensure adequate support for low-income countries,” Ms. Lagarde stated.

Background

A distribution equivalent to a portion of the gold sales profits was first endorsed by the IMF’s Executive Board in July 2009 as part of a financing package aimed at securing adequate resources for the PRGT. The total financing package aims at raising the PRGT’s concessional lending capacity to SDR 11.3 billion (US$17 billion) over 2009 - 2014 (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.

Making profits linked to gold sales available for the PRGT requires an indirect approach involving a distribution of reserves to all IMF member countries in proportion to their quota shares. The distribution will be effected only once members have provided satisfactory assurances for new PRGT subsidy contributions equivalent to at least 90 percent of the amount distributed—i.e., SDR 630 million (about US$978 million). The timeframe of the operation is therefore contingent upon receiving such assurances from the IMF membership.

Total proceeds from the 2009-2010 gold sales amounted to SDR 9.54 billion (about US$14.8 billion), of which SDR 2.69 billion (US$4.2 billion) represented the book value and SDR 6.85 billion (US$10.6 billion) was profit. Aside from the SDR 700 million that would be distributed under the plan to boost concessional lending resources, the Executive Board has already decided to place at least SDR 4.4 billion (US$6.8 billion) of the profits—equivalent to the assumed average gold sales price in 2008 when the Fund’s new income model was adopted— in an endowment designed to diversify the IMF away from a reliance on lending income. The Executive Board has yet to decide how to use the remaining SDR 1.75 billion (about US$2.7 billion) in windfall gold profits that resulted from a higher-than-anticipated average gold sales price (see Public Information Notice No. 11/121).

For more information click on the following links:



PRGT Subsidy Pledges Based on the Partial Distribution1

(As of April 30, 2012)

Armenia

Belarus

Botswana

Burkina Faso

Cambodia

Cameroon

Canada

Chad

China

Comoros

Congo, Democratic Republic of the

Côte d’ Ivoire

Denmark

Djibouti

Dominica

Egypt

Estonia

Ethiopia

Fiji, Republic of

Finland

France

Gabon

Greece

Grenada

Guinea

Guinea-Bissau

Haiti

Honduras

Hungary

Italy

Kenya

Korea

Kyrgyz Republic

Lao People’s Democratic Republic

Lebanon

Lithuania

Luxembourg

Macedonia, Former Yugoslav Republic

Maldives

Malta

Mauritania

Mauritius

Moldova

Morocco

Mozambique

Myanmar

Nepal

New Zealand

Nigeria

Pakistan

Poland

Portugal

San Marino

São Tomé and Príncipe

Senegal

Serbia, Republic of

Seychelles

Sierra Leone

South Africa

Sri Lanka

Sweden

Tajikistan

Togo

Trinidad and Tobago

Tunisia

United Kingdom

United States

Uzbekistan

Zambia

1/Pledges made in light of the proposed partial distribution of reserves attributed to part of the windfall profits from the recent gold sales. Pledges may be subject to domestic processes to enable members to make PRGT subsidy contributions.



IMF EXTERNAL RELATIONS DEPARTMENT

Public Affairs    Media Relations
E-mail: publicaffairs@imf.org E-mail: media@imf.org
Fax: 202-623-6220 Phone: 202-623-7100