IMF insists it will sell gold someday

Section:

IMF Confirms Plans to Sell 403 Tonnes of Gold

By Jan Harvey
Reuters
Wednesday, February 11, 2009

http://in.reuters.com/article/domesticNews/idINLB54061420090211

LONDON -- The International Monetary Fund said it does not intend to alter plans to sell just over 400 tonnes of gold to fund changes to its financing base, an IMF spokeswoman said on Wednesday.

A recent surge in IMF lending to countries facing balance of payments crises related to the global economic slowdown and financial turmoil has led analysts to question whether the Washington-based institution will proceed with the plan.

But a spokeswoman for the IMF -- the third largest official holder of gold -- said the sale would still go ahead.

"There are no plans to change the proposal for a new income model," she said.

"The package of IMF governance reforms, including gold sales, was submitted to the U.S. Congress last November, but will need to be reintroduced as a formality," the IMF spokeswoman said. "The timeline will depend on the Congress' schedule."

The IMF agreed in May last year to create an endowment with the profits from the proposed sale of the gold as part of a broader makeover of the IMF's financial structure and investment strategy.

Such a move, however, depends on approval by member countries' legislatures, including the U.S. Congress. With a change of administration in Washington and a focus in the United States on the economic turmoil, the issue of gold sales and more general IMF reform has been pushed to the back burner.

The sale of 403.3 tonnes of gold was originally proposed in 2007 after a committee chaired by Andrew Crockett recommended the IMF adopt a new funding model. The IMF said on its website its finances had become unsustainable after a decline in its lending business.

With more countries now seeking IMF assistance to ward off the effects of the global financial crisis, there is speculation that as this business picks up, it will roll back its plans to sell bullion.

"It is possible that the issue of gold sales to plug a funding gap that is disappearing ... and which are already two years down the line from the Crockett Committee's report, could be put on the back burner," metals consultancy VM Group said in a report.

"At the very least, the IMF's renewed relevance has strengthened the case of those who oppose such sales," it said.

Gold was quoted at $946.25/8.25 at 1821 GMT on Wednesday.

The fund has said repeatedly that sales would be made under the umbrella of a central bank gold agreement to avoid disruption to the market.

The existing Central Bank Gold Agreement, which limits gold sales by central banks to ensure the market is not flooded with bullion, is in its final year and is due to expire in September.

Analysts say the IMF's desire to sell gold is a major indicator that a further agreement will be signed, despite sales hitting a historic low last year as central banks hung onto the precious metal as a 'safe' reserve asset.

Members sold 357 tonnes of gold in the year to September 2008, well below the annual limit of 500 tonnes.

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