IMF approves distribution of $1.1b reserves to support low-income countries

The Executive Board of the International Monetary Fund (IMF) on February 24, 2012 approved the distribution to all IMF members of SDR 700 million (about $1.1 billion) in reserves, with the expectation that members would return equivalent amounts to support concessional lending to low-income countries (LICs).

According to the IMF, the distribution was first endorsed by the IMF’s Executive Board in July 2009 as part of a financing package aimed at securing adequate resources for the Poverty Reduction and Growth Trust (PRGT).

“This is an important contribution to ensure the Fund’s continued support of its low-income members through adequate financing of the Poverty Reduction and Growth Trust. This is particularly important at a time when global volatility threatens low-income countries’ hard-won gains in strengthening their economies and reducing poverty. I urge Fund members to quickly confirm their pledges so that we can move forward,” said IMF’s Managing Director Christine Lagarde.

The total financing package aims at raising the PRGT’s concessional lending capacity to SDR 11.3 billion ($17 billion) over 2009–2014.

Contributions linked to the windfall gold profits will count towards that package’s target of raising an additional SDR 1.5 billion ($2.3 billion) to subsidize the PRGT’s low-interest concessional lending, which currently carries a zero interest rate, with the balance coming from other sources, including additional bilateral contributions from member countries, an IMF statement said.

It noted that the total proceeds from the 2009-2010 gold sales amounted to SDR 9.54 billion (about $14.8 billion), of which SDR 2.69 billion ($4.2 billion) represented the book value and SDR 6.85 billion ($10.6 billion) was profit.

Aside the SDR 700 million that would be distributed, the IMF Executive Board says it has already decided to place at “least SDR 4.4 billion ($6.8 billion) of the profits—equivalent to the assumed average gold sales price at the time of the endorsement of the new income model in 2008—in an endowment to diversify the IMF’s income away from lending income under the new income model it endorsed in 2008, and has yet to decide how to use the remaining SDR 1.75 billion (about $2.7 billion) in windfall gold profits that had resulted from the higher-than-anticipated average gold sales price.”

By Ekow Quandzie