Press Release: IMF Board of Governors Approves Key Element of IMF's New Income Model

May 6, 2008

Press Release No. 08/101

On May 5, the Board of Governors of the International Monetary Fund (IMF) overwhelmingly approved a broadening of the Fund's investment authority, a key element of the proposed new income model for the Fund that will allow the institution to generate revenues from a variety of sources. Governors from 176 of the Fund's 185 member countries cast their votes. Of these, all voted in favor of the Resolution. Approval of the Resolution required a majority of the votes cast.

"With this decisive endorsement, the Fund's members have once again demonstrated their support for reforming key components of the institution's framework, including its financial structure," IMF Managing Director Dominique Strauss-Kahn said. "Together with the resounding vote last week to change the representational structure of the Fund, this vote further reinforces the legitimacy of the Fund. I thank the membership for this vote of confidence in the institution's future."

The Board of Governors' approval of a broader investment mandate will enable the Fund to increase the average expected return and adapt its investment strategy over time. The investment policies will reflect the public nature of the funds to be invested and include safeguards to ensure that the broadened investment authority does not lead to actual or perceived conflicts of interest. The Resolution proposes an amendment of the Fund's Articles of Agreement, which will need to be accepted by at least three-fifths of IMF members representing 85 percent of the total voting power in order to become effective. Most member countries will need the approval of domestic legislatures to accept the proposed amendment.

This approval is a key component of the new income model, which also includes the creation of an endowment funded by limited gold sales. Once established, the endowment with profits from the gold sales will be invested as part of the Fund's broadened investment strategy, with the objective of generating income while preserving the long-term real value of these resources.

The new income model, recommended by the IMF Executive Board on April 7 (see Press Release No. 08/74), will be based on more robust and diverse sources of revenue in line with the Fund's multiple functions. It will replace the current model that primarily relies on income earned on Fund lending. On April 7, the IMF Executive Board also approved a new budgetary framework, which reduces net spending by 13½ percent in real terms over the next three years. The new income and expenditure framework is expected to cover the US$400 million shortfall projected in the medium term.

"The new income model is predictable and in line with other financial institutions. In combination with sharp expenditure cuts, it will put the Fund's finances on sustainable footing," Mr. Strauss-Kahn said. "Once fully implemented, we will have an integrated budget process that will enable the Fund to work more efficiently and cost-effectively by focusing its resources and work on its areas of expertise."

Other key elements of the new income model:

• Creating an endowment with the profits from the limited sale of 403.3 metric tons of the Fund's gold holdings. If approved, gold sales would be conducted in a transparent manner with strong safeguards to ensure they do not add to official sales and avoid any risk of market disruption. U.S. Congressional approval is needed before the U.S. Executive Director can vote in favor of gold sales.

• Resuming the long-standing practice of reimbursing the Fund's budget for the cost of administering the trust fund for concessional lending to low-income countries-the PRGF-ESF Trust-beginning in the financial year in which the Fund adopts a decision authorizing the gold sales. This cost recovery will not affect the Fund's ability to provide concessional lending to low-income countries.


The Board of Governors is the highest decision-making body of the IMF and consists of one governor and one alternate governor appointed by each member country. The governor is usually the minister of finance or the governor of the central bank. Most powers of the IMF are vested in the Board of Governors. The Board of Governors may delegate to the Executive Board all except certain reserved powers. The Board of Governors normally meets once a year

The Executive Board functions in continuous session and is responsible for conducting the business of the IMF. It is composed of 24 Directors, who are appointed or elected by member countries or by groups of countries, and the Managing Director, who serves as its Chairman. The Board usually meets several times each week. It carries out its work largely on the basis of papers prepared by IMF management and staff.

The IMF holds 103.4 million ounces (3,217 metric tons) of gold at designated depositories. The IMF's total gold holdings are valued on its balance sheet at about US$9.2 billion on the basis of historical cost. As of April 30, 2008, the IMF's holdings amounted to US$90.1 billion (at then current market prices). A portion of these holdings were acquired since the Second Amendment of the IMF's Articles of Agreement in April 1978, amounting to 12.97 million ounces (403.3 metric tons), with a market value of US$11.3 billion as of April 30, 2008. This part of the Fund's gold holdings is not subject to restitution to members.


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