A sharp rise in the price of the precious metal means that since the start of 2020, the value of the IMF’s gold reserves has increased by $ 38 billion.
The JDC said that selling less than 7% of the IMF’s gold would generate a profit of $ 12 billion, which is enough to write off debts owed by the 73 poorest countries until the end of 2021 and leave again the Washington-based organization with $ 26 billion more in gold. she held at the start of the year.
The IMF and its sister organization, the World Bank, identified the need for a comprehensive debt relief plan for poor countries, which would include debts to governments, multilateral organizations and the private sector.
The JDC said the gold sales would act as a catalyst for a broad debt deal and help convince China, a large creditor, that it would not be asked to shoulder a disproportionate share of the effort. rescue.
Sarah-Jayne Clifton, Director of the JDC, said: “There is a huge inequality in the resources available to countries to help them overcome the Covid crisis. Poor countries simply don’t have the monetary and other tools they have that rich countries use to keep their economies afloat.
“The IMF has the tools and resources to fill this gap. It now has the capacity to unlock a comprehensive debt cancellation system that could save poorer countries $ 180 billion in debt repayments over the next four years. This would have a huge impact, helping poorer countries cope with the current economic and health crisis and supporting their faster economic recovery in the years to come.
In addition to using the profits from gold sales, the JDC said rich countries should be prepared to use the IMF’s ability to create reserve assets, known as Special Drawing Rights, to cancel debts of poor countries.
An issue of SDRs was last used by the IMF during the 2008-09 financial crisis. This would increase the reserves of each IMF member country. The JDC proposes that richer countries set aside 9% of any SDR issuance to help poorer countries.
The United States is blocking a SDR broadcast but the JDC believes there is the possibility of a change of mind after next month’s presidential election.
The JDC said a combination of gold and SDR sales would raise enough to write off all debts owed by the poorest countries to multilateral organizations, including the IMF and the World Bank, until 2024. This would save countries $ 70 billion.
IMF spokesperson Gerry Rice said: “Gold reserves provide a fundamental strength to the IMF’s balance sheet, allowing the Fund to lend safely and at low cost to its member countries. This is particularly important at the present time, when the IMF is providing exceptionally strong support to its members, including its poorest member countries, in the context of the Covid-19 pandemic. The IMF does not intend to sell gold at this time.
“The IMF has approved more than $ 10 billion in emergency financing to 47 low-income countries since March and last week we extended a second six-month tranche of debt service relief in the form of donation to 28 poor countries, funded by richer countries. ”