Press Release: IMF Executive Board Approves Distribution of US$2.7 Billion in Remaining Windfall Gold Sales Profits as part of a Strategy to Make Low-Income Lending Sustainable

IMF News, September 28, 2012

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Canonical URL: Press Release: IMF Executive Board Approves Distribution of US$2.7 Billion in Remaining Windfall Gold Sales Profits as part of a Strategy to Make Low-Income Lending Sustainable

The Executive Board of the International Monetary Fund (IMF) approved the distribution of SDR 1.75 billion (US$2.7 billion) in remaining windfall gold sales profits.
These resources are intended to bolster the IMF’s concessional lending vehicle for low-income countries, the Poverty Reduction and Growth Trust (PRGT), and make low-income lending sustainable.
The resources are in addition to SDR 700 million (US$1.1 billion) previously approved for a separate operation supporting low-income countries during the global financial crisis.

The decision is framed as “a major step towards putting our important concessional lending operations for low-income members on a sustainable footing,” according to IMF Managing Director Christine Lagarde.
The strategy aims to better position the IMF to help low-income members absorb future shocks and underpin efforts to achieve stronger and sustainable economic growth.
The concessional lending to low-income members currently is at a zero interest rate.

SDR 1.75 billion in reserves attributed to gold sales profits will be distributed to IMF member countries in proportion to their quota shares.
The distribution will occur only when members have given satisfactory assurances that an amount equivalent to at least 90 percent of the distribution will be made available to the PRGT.
An earlier distribution of SDR 700 million in reserves attributable to windfall gold sales profits was approved as part of a PRGT financing package agreed in 2009 to boost concessional lending capacity over the 2009-14 period.
To date, assurances have been received that an amount equal to 87.4 percent of that SDR 700 million distribution will be made available to the PRGT; the actual distribution will be effected once the 90 percent threshold of assurances is reached.

The IMF sold 403.3 metric tons of gold in 2009-10 as part of a plan to ensure long-term financing of the IMF’s day-to-day operations through the creation of an endowment using anticipated profits of some SDR 4.4 billion (US$6.8 billion).
High world gold prices during the sales period, over and above the US$850 an ounce envisaged when the sales were originally planned, generated “windfall” profits of some SDR 2.45 billion (about US$3.8 billion).
With the Executive Board’s decision, the entire windfall profit has been approved for distribution in the context of strategies to support concessional lending to low-income members.

IMF Managing Director Christine Lagarde thanked and recognized member countries that have stepped up to support low-income members during the crisis.
Ms. Lagarde called on IMF membership to demonstrate commitment again by completing the global effort to provide the resources for continued support in years to come.
An up-to-date list of member countries’ pledges was noted as available online (not reproduced here).

SDR 1.75 billion = US$2.7 billion (remaining windfall gold sales profits approved for distribution).
SDR 700 million = US$1.1 billion (previously approved for a separate operation in 2009).
SDR 4.4 billion = US$6.8 billion (anticipated profits used to create an endowment for long-term financing).
SDR 2.45 billion ≈ US$3.8 billion (windfall profits generated by higher-than-expected gold prices).
403.3 metric tons (amount of gold sold in 2009-10).
US$850 an ounce (gold price envisaged when sales were originally planned).
90 percent (assurances threshold required to trigger distribution to PRGT).
87.4 percent (assurances received so far for the SDR 700 million distribution).

Press Release No. 12/368 — September 28, 2012