JoC Editorial: IMF should sell gold (fwd)

[Robert Weissman <rob@essential.org>]

Below follows an editorial from the Journal of Commerce calling for the
IMF to sell gold to fund debt relief. Campaigners should be ready for a
spate of propaganda like this -- the so-called "debt relief" described
here is conditioned on structural adjustment, through the IMF and World
Bank's HIPC program. 

We support gold sales for debt cancellation -- but real debt cancellation,
without structural adjustment conditionalities. It is going to be very
important in the months ahead to be precise in our calls for debt
cancellation.

Robert Weissman
Essential Information			|   Internet:	rob@essential.org

Journal of Commerce
Headline:      Editorial: IMF should sell gold
June 10, 1999
http://www.joc.com/issues/current/e1dit/e27948.htm

IMF should sell gold

              The International Monetary Fund should sell some of its gold
reserves to pay
              for debt relief for highly indebted poor countries.

              Where else is the money going to come from? Most countries
have either
              come out in favor of IMF gold sales or are willing to
consider the idea. We
              think the time has come.

              Debt relief for several dozen poverty-wracked countries in
Africa, Asia and
              Latin America has been deferred long enough, largely out of
concern about
              how to foot the bill. Meanwhile, people are starving while
the gold sits in
              neat stacks, gathering dust in the vaults.

              The IMF's gold is earning no interest. Meanwhile, countries
have shown they
              are not willing to make bilateral contributions to finance
the debt relief that
              everyone agrees is needed.

              It can't be a one-way street, of course. The countries
receiving debt relief
              must be required to demonstrate a clear commitment to
pro-market
              economic reform.

              The IMF must provide assistance in a way that reinforces its
policy-based
              lending. This is the only way to provide direction and a
clear exit from
              unsustainable debt burdens.

              The fiscal criteria for debt relief needs to be made less
restrictive, thereby
              increasing the amounts of assistance and the number of
countries eligible for
              help.

              The relief should be provided as early as possible. Only two
countries --
              Uganda and Bolivia -- have actually received debt relief
under the Highly
              Indebted Poor Countries initiative of the IMF and its sister
institution, the
              World Bank.

              In fact, the Group of 7 leading industrial nations is
expected to propose a
              new and more liberal version of the HIPC program at its
summit next week
              in Germany. In the United States, support for debt-relief
efforts also appears
              to be swelling in Congress.

              We share the IMF's belief that there needs to be tighter
links between debt
              relief and poverty reduction and social policies. The
resources released
              through debt relief must strengthen poor countries' programs
to improve
              social and economic services for their impoverished people.

              At the same time, trade liberalization needs to be
reinvigorated so the export
              products of the highly indebted poor countries have
unrestrained access to
              industrial-country markets. And export earnings cannot be
used simply to
              pay off old debts.

              Sustainable development is not possible when whole
populations are living
              under crushing debt burdens. Debt relief can provide an
incentive for reform
              and a boost to development.

              The IMF, which holds the third-largest gold stock after the
United States
              and Germany, is considering selling up to 311 tons of the
3,200 metric tons
              it holds. Such sales could be done in an orderly and prudent
manner.

              While gold prices could come under further downward pressure
with any
              announcement of the sales, physical demand for gold remains
high and
              worries about the Year-2000 computer problem could tend to
push the
              price up toward the end of this year. The market could absorb
 reasonable
              IMF gold sales.

              Ironically, the gold-sale initiative could backfire on some
highly indebted
              poor countries, according to analysts at Deutsche Bank.

              Some members of this group of nations -- including Bolivia,
Burkina Faso,
              Ghana, Guinea, Guyana and Sudan -- rely on gold sales for a
considerable
              part of their export revenue.

              When the British Treasury recently announced plans to reduce
its official
              gold holdings from 715 metric tons to 300 tons over the next
few years, the
              price of gold fell $20 an ounce in a matter of days.

              The gold standard was abandoned in the early 1970s, and gold
has lost a
              great deal of its significance as a global reserve medium.
The IMF and
              central banks can at least earn interest on currency
reserves.

              Gold reserves may inspire public confidence, but this is
purely a
              psychological effect. Central banks are adopting a more
modern approach
              to reserve management, one in which gold plays a much smaller
 role than in
              the past. The IMF should do the same.

              Strengthening the Highly Indebted Poor Countries initiative
is high on the
              IMF agenda, Michel Camdessus, the agency's managing director,
 said last
              week at the Council on Foreign Relations in New York. If a
decision is
              made to sell some of the IMF's gold, he said, the IMF will
make every effort
              to ensure that such sales are conducted with minimal
disruption to the
              markets.

              Let's get on with it.