IMF Gold Sales look certain as pressure increases for deeper debt relief

A five-year campaign to sell off a chunk of the IMF's huge stockpile of gold to fund debt relief for the world's poorest countries looks close to a breakthrough, following comments this week from a senior IMF official. Up to 5 per cent of the IMF's stockpile of gold could be disposed of on the world market to finance the rolling programme of debt relief for the poorest most indebted countries, the HIPC initiative. IMF deputy managing director Alassane Ouattara said that a large majority of its member countries were headed towards an agreement and that “the debate was not about if, but how much gold to sell.” A decision could be taken on April 27 during the Spring Meetings of the IMF in Washington. Unusually, he added a personal comment of the importance of debt relief, referring to his time in government in West Africa.

He said that the wider move towards debt relief had to be ambitious, and that it would require sacrifices from rich countries as well as reform from the poor ones. “Debt is a burden and I know this from personal experience when I was prime minister of Cote d'Ivoire and I had to spend almost 50 per cent of the budget on debt service,” he said.

Over recent weeks many of the G7 countries have put forward proposals on the form that debt relief should take. All have expressed either the wish to see IMF gold sold, or at least to see the policy on gold reviewed. Both the USA and Canada have argued that up to 10 million ounces of gold should be sold, which would account for just under $3 billion at current world prices. The UK has called for sales of at least $1 billion. In the face of such support for this policy, it has become clear that IMF reluctance would not carry the day.

Alex Brummer, Economics Editor of the Guardian newspaper, commented that the IMF agreeing to fund its share of debt relief through gold sales will not in itself necessarily speed up debt relief. The IMF has complicated the issue of debt relief by aligning its structural adjustment operations in African and other poor countries with the debt relief programme, and IMF staff are known to oppose any proposed reduction of the time frame for debt relief from six to three years.

The linking of debt relief to the IMF's highly controversial and, in many cases, failing structural adjustment programmes is why the gold sales decision has received only a lukewarm reception among debt campaigners. Nevertheless, if it leads to a reduction in HIPC debt, then that is clearly a step forward. HIPCs owe a total of $206 billion (private, bilateral and multilateral debt). $7.8 billion of this is owed to the IMF. The sale of gold will be invested to earn interest, which will be used to fund the IMF's contribution to the HIPC initiative.