Press Release: IMF Executive Board Approves Distribution of US$1.1 Billion Gold Sales Profits to Facilitate Contributions to Support Concessional Lending to Low-Income Countries

IMF News, February 24, 2012

Source details

Canonical URL: Press Release: IMF Executive Board Approves Distribution of US$1.1 Billion Gold Sales Profits to Facilitate Contributions to Support Concessional Lending to Low-Income Countries

The Executive Board 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.
The distribution is intended to facilitate members returning equivalent amounts to support concessional lending to low-income countries (LICs) through contributions to the Poverty Reduction and Growth Trust (PRGT).
The distribution will be effected only when members provide satisfactory assurances that they will 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 contingent upon receiving such assurances from the IMF membership.

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 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.
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.
The balance of the package’s financing target is expected to come 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, the approach involves:
- first distributing the profits as dividends out of the IMF’s general reserves to all IMF members in proportion to their quota shares; and
- individual members then deciding voluntarily to return a corresponding amount as a contribution to the PRGT.
Under today’s decision, the distribution will proceed only after satisfactory assurances from members to return at least 90 percent of the distributed amount as PRGT subsidies.

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).
- SDR 2.69 billion (US$4.2 billion) represented the book value.
- SDR 6.85 billion (US$10.6 billion) was profit.
Disposition of the SDR 6.85 billion profit:
- SDR 700 million (about US$1.1 billion) proposed for distribution to members (subject to assurances to return at least SDR 630 million).
- At least SDR 4.4 billion (US$6.8 billion) has been decided to be placed in an endowment to diversify the IMF’s income away from lending income under the new income model endorsed in 2008.
- 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 the higher-than-anticipated average gold sales price.

SDR 700 million = about US$1.1 billion (distribution amount).
90 percent threshold for member assurances = SDR 630 million = about US$978 million.
PRGT concessional lending capacity target = SDR 11.3 billion = US$17 billion (over 2009–2014).
Additional target for PRGT subsidies counted from windfall profits = SDR 1.5 billion = US$2.3 billion.
Total gold sales proceeds = SDR 9.54 billion = about US$14.8 billion.
Book value portion = SDR 2.69 billion = US$4.2 billion.
Profit portion = SDR 6.85 billion = US$10.6 billion.
Endowment set-aside = at least SDR 4.4 billion = US$6.8 billion.
Remaining undecided profit = SDR 1.75 billion = about US$2.7 billion.

Source: IMF Press Release No. 12/56, February 24, 2012.