IMF urged to sell gold to battle cash crunchHello to all,
https://www.turkishpress.com/news.asp?id=161122
A panel of financial statesmen advised the IMF to sell 400 tons of its gold reserves as part of a new strategy to avert a long-term crunch in its finances.
But the International Monetary Fund should proceed with care in selling any gold to avoid destabilizing world markets, the panel members including former Federal Reserve chief Alan Greenspan recommended.
The IMF has more than 3,200 metric tons of gold as part of its financial stockpile, but has fought shy of offloading any of it. The sale of 400 tons could raise 6.6 billion dollars at current market prices, the panel said.
IMF chief Rodrigo Rato appointed the panel in May last year to come up with ideas to avert a cash crisis for the global lender, which has seen its operational income slump as debtor countries repay their Fund loans early.
The committee was chaired by Andrew Crockett, former head of the Bank for International Settlements, and also included European Central Bank president Jean-Claude Trichet and People's Bank of China governor Zhou Xiaochuan.
It said the IMF should also broaden its investment mandate, with a view to generating extra income of 45 million dollars a year on capital markets.
And the IMF could invest part of the annual dues paid by its 185 members, yielding a potential 300 million dollars a year, the panel's report said.
"If adopted, the measures would set the Fund's finances on a sustainable basis, and ensure a solid financial foundation for the Fund's important role in the international community," Crockett said.
Rato welcomed the recommendations, which will be taken up for debate by the IMF's executive board.
"The report represents a key milestone in our work and is an important step in developing an appropriate new income model," he said.
Money from the gold sales should be put in an endowment fund, which could yield annual investment profits of 195 million dollars, the report by Crockett's panel said.
"The committee emphasizes that these limited gold sales should be handled in a way to avoid causing disturbances to the functioning of the gold market and, accordingly, should be coordinated with current and future central bank gold agreements so as not to add to the volume of sales from official sources."
The IMF's finances have become strained as more and more clients emerge from years of economic crisis, during which they became reliant on its bailouts, to stand on their own feet.
The latest country to exit IMF supervision is Ecuador, whose new leftist government said this month it would pay back its 33-million-dollar debt early, so depriving the Fund of income from interest repayments.
The IMF expects to post an operating shortfall of 105 million dollars in its current fiscal year through April, with 67 million of that linked to early repayments from Indonesia, Serbia and Uruguay.
To plug an immediate shortfall, the IMF said last May it would transfer its reserves of 8.7 billion dollars into a new investment account to generate extra returns on the bond markets.
But Rato noted at the time that the IMF needed to come up with long-term solutions to its funding problems.
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