February 24, 2012
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The Executive Board of the International Monetary Fund (IMF) today approved the distribution to all IMF members of SDR 700 million (about US$1.1 billion) in reserves attributed to a portion of the windfall profits from recent IMF gold sales, with the expectation that members would return equivalent amounts to support concessional lending to low-income countries (LICs). The distribution 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 Poverty Reduction and Growth Trust (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.
Because the windfall gold sales profits are part of the IMF’s general resources available for the benefit of all IMF members, deriving PRGT subsidies from these resources involved a strategy to have the profits first distributed as dividends out of the IMF’s general reserves to all IMF members in proportion to their quota shares, with individual members then deciding voluntarily to return a corresponding amount as a contribution to the PRGT. Under the decision approved today, the distribution will be effected only when members provide satisfactory assurances that they would make 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.
Managing Director Christine Lagarde said: “This is an important contribution to ensure the Fund’s continued support of its low-income members through adequate financing of the Poverty Reduction and Growth Trust. This is particularly important at a time when global volatility threatens low-income countries’ hard-won gains in strengthening their economies and reducing poverty. I urge Fund members to quickly confirm their pledges so that we can move forward.”
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 on the basis of today’s decision, 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 at the time of the endorsement of the new income model in 2008—in an endowment to diversify the IMF’s income away from lending income under the new income model it endorsed in 2008, and has yet to decide how to use the remaining SDR 1.75 billion (about US$2.7 billion) in windfall gold profits that had resulted from the higher-than-anticipated average gold sales price (see Public Information Notice No. 11/121).
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