[stop-imf] FT: IMF presses case for gold sales to help relieve debt burden]

[Robert Weissman]

FINANCIAL TIMES

IMF presses case for gold sales to help relieve debt burden
By Andrew Balls in Washington

Published: March 30 2005 22:02 | Last updated: March 30 2005 22:02

The International Monetary Fund believes the best way to provide more debt =
relief for the world's poorest countries is for rich countries to come up w=
ith new resources to pay for up to 100 per cent relief on the sums owed to =
the IMF and World Bank.

Given the political difficulties in coming up with those funds, the IMF say=
s the next best alternative might be carefully planned sales of a small por=
tion of the IMF's gold.

The IMF's analysis shows that selling a small portion of the fund's gold to=
 pay for the IMF's share of debt relief need not cause disruption to the ma=
rket, if the sale is well managed.

The gold market, the IMF says, is much stronger than in 1999 when the insti=
tution last considered gold sales despite the fact that some central banks =
have been selling gold.

By sticking to the terms of the 1999 Central Bank Gold Agreement, which gov=
erns future sales of gold by central banks, the IMF could raise the require=
d resources without causing market volatility or hurting gold producing cou=
ntries.

The problem with this approach is that it would require near-universal supp=
ort of the fund's shareholders. And at the board's discussion, on Wednesday=
, the US director made clear that the Bush administration did not favour go=
ld sales.

At a time when the US administration is trying to negotiate a tough budget,=
 obtaining congressional approval for IMF gold sales might be no easy matte=
r. The fund and its sister organisation the World Bank have no shortage of =
critics on Capitol Hill.

However, the preferred US approach, making use of the sums at the IMF avail=
able for lending to poor countries to pay for debt relief, has no greater c=
hance of approval.

As with gold sales, it would require an 85 per cent majority at the board. =
The US has the votes to block gold sales; Europe has the votes to block div=
erting funds from the Poverty Reduction and Growth Facility, which provides=
 concessional financing to poor countries.

Rodrigo Rato, the IMF's managing director, in an interview with the Financi=
al Times, said the amounts that could potentially be diverted from the PRGF=
 were too small to make a difference. =93There are some spare resources in =
revolving credit,=94 he said, =93but we are talking about a very small amou=
nt. It's peanuts.=94

To the great frustration of debt relief campaigners, while the US and the U=
K are pushing their partners among the Group of Seven leading countries to =
agree on generous debt relief, there is not agreement among those countries=
 on how to press ahead.

Apart from the controversy over the IMF's gold, the US is in favour of writ=
ing off the far larger stock of multilateral debt owed to the World Bank. T=
he UK and other European countries focus on reducing the burden of debt ser=
vice paid to the institution.

The G7 has agreed to set up a =93work programme=94 to examine the range of =
schemes favoured by different countries.

Few observers see any agreement as likely at the spring meetings of the fun=
d and the bank in two weeks' time.