The International Monetary Fund is under pressure to sell some of its gold to offer debt relief to poorer countries.
As countries struggle to shore up their economies against the backdrop of the novel Coronavirus pandemic, more and more debt concerns are taking center stage. The topic was one of the main topics discussed at this week’s annual meeting of the International Monetary Fund.
The Jubilee Debt Campaign (JDC) is using it as an opportunity to urge the IMF to start selling some of its gold to offer Debt relief to the world’s troubled countries. According to a press release issued by the JDC on Monday (12 October), the sale of gold could provide much needed help in the fight against the COVID-19 pandemic in less developed countries.
Spot gold prices have risen from $1,500 to $1,900 an ounce this year, taking the IMF’s total gold reserves to 90.5m ounces, meaning they are now worth about $175bn. That adds about $38 billion in value.
The JDC points out that if the IMF sells less than 7 per cent of its total gold reserves, it will make a profit of $12bn, enough to forgive the debts of more than 70 of the poorest countries over the next 15 months.
“The profit from selling less than 7 percent of the IMF’s gold would be enough to offset all debt payments by the world’s poorest countries to the IMF and The World Bank over the next 15 months. This would be less than the increase in the value of IMF gold since the coVID-19 crisis began, “the release said.
The JDC is a British charity whose aim is to end poverty caused by unjust debt.
The head of the JDC, Sarah-Jayne Clifton, said that poorer countries do not have the monetary tools that developed countries can use to help them cope with the impact of coVID-19.
“The IMF has the tools and resources to help fill that gap. It is now in a position to initiate a full debt repayment cancellation programme… This will have a huge impact, helping poorer countries cope with the current economic and health crisis and supporting their faster economic recovery in the years ahead, “Clifton said in a press release.
However, in spite of the JDC’s call, the IMF seems unlikely to be willing to sell any of its gold reserves, especially in these uncertain times.
“The IMF has no current plans to sell gold,” the Guardian quoted IMF spokesman Gerry Rice as saying. Gold reserves provide a fundamental underpinning to the IMF’s balance sheet, enabling the fund to lend safely and cheaply to member countries. This is particularly important now, as the IMF is providing substantial support to its member countries, including the poorest, in the context of the COVID-19 pandemic.”
Rice also said the IMF has approved emergency financing of more than $10 billion for 47 low-income countries since March.
The World Gold Council also said gold would continue to play a key role in the IMF’s portfolio.
“The IMF regards gold as an important part of its balance sheet and says it has no current plans to sell gold,” Shaokai Fan, director of central bank relations at the World Gold Council, told Kitco News in an email on Wednesday.
Moreover, the WGC argues that gold has played a crucial role in the crisis for the world’s central Banks, despite a slowdown in demand this year.
“We believe central Banks will continue to be net buyers of gold this year, although purchases may not be as large as in previous years,” Mr Fan said.
Official sector gold purchases reached record levels of 656 tonnes in 2018 and 667 tonnes in 2019. So far in 2020, the central bank has bought more than 200 tons of gold.