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The IMF has to sell part of its gold reserves in order to give the poorest countries a moratorium. This is what the Commission is advocating Jubilee Debt Campaign (JDC), a British non-profit organization dedicated to debt forgiveness for the weakest economies. By selling some of the gold, the fund can write off debts of the 73 poorest countries until at least the end of 2021.
With 2,814 tonnes, the IMF has one of the largest gold reserves in the world. Since the abandonment of the gold peg in 1971, the precious metal no longer plays an active role in the monetary system, but it nevertheless remains an important reserve. Most of the IMF's gold reserves were contributed when the fund was established in 1944.
The fund used its gold holdings to provide credit to countries, but since 1978 the role of gold has also been marginalized within the fund. Still, it keeps the precious metal as a nest egg, just like most central banks. The IMF's last major gold sale was in 2009, when the fund sold 200 tonnes of gold to India.
According to the Jubilee Debt Campaign, the IMF can benefit from the high Gold price by selling some of its gold again. By selling less than 7% of the stock, the fund can raise $12 billion, enough to forgive loans to the poorest countries. According to the non-profit organization, this is necessary because these countries have hardly any opportunities to provide monetary or fiscal stimulus.
"There is a huge disparity in the resources that countries have at their disposal to weather the corona crisis. Poorer countries simply do not have the monetary and other resources that the rich countries use to prop up their economies. The IMF has the tools and resources to help close this gap. It now has the ability to arrange a comprehensive debt forgiveness that could save the poorest countries $180 billion in debt over the next four years. This would have a huge impact and help poorer countries to tackle the current economic and health crisis and support their economic recovery in the years to come."
In addition to selling gold, the IMF could also put new SDRs into circulation. This also happened during the financial crisis of 2008/2009. The IMF can compensate for this with the increase in the value of its gold reserves. Since the beginning of this year, the value of its gold holdings has risen by $38 billion, according to the British non-profit organization.
For the time being, the IMF has no plans to gold to sell, spokesman Gerry Rice told the British newspaper Guardian. The gold stock is an important part of the fund's balance sheet. Especially now that the IMF has already provided more than $10 billion in loans to 47 poor countries due to the corona crisis:
"Gold reserves are a fundamental reinforcement of the IMF's balance sheet. As a result, the fund can provide loans to countries safely and at low cost. This is particularly important at a time when the IMF is providing exceptional support to its members, including the poorest member states, in the context of the coronavirus pandemic."
Since the corona crisis, several countries have applied for support from the IMF. Currently, the fund has lent $250 billion of its total budget of $1 trillion. These are mainly loans to emerging economies and developing countries, such as This overview Show me. Due to the corona crisis, many emerging economies have to draw on their reserves. Some countries even had to sell gold as a result. In August, central banks even added gold to the sale. The last time that happened was a year and a half ago.
This contribution was made from Geotrendlines
