In April, the IMF executive board approved three measures to plug the Fund’s budget deficit (see Update 59, 58, 55). First, the Fund’s investment authority will be expanded to allow investment of reserves in riskier assets. This required approval by the board of governors, which happened in May, but because it involves an amendment to the Articles of Agreement it still needs legislative approval from IMF member countries.
Secondly, the executive board approved the creation of an endowment from gold sales but the actual sales require a further decision by the board. By US law, the US executive director is not allowed to agree to gold sales without explicit prior Congressional approval. Since gold sales require an 85 per cent majority and the US holds 17 per cent of the vote, the sales can not go ahead without the US. It is unclear when the US Congress will address the issue, but NGOs in the US are planning to use the authorisation has an opportunity to force reform at the IMF (see Update 60).
The final measure is a resumption of charging the trust funds that hold resources for low-income countries for administrative and management costs. The IMF manages the PRGF and HIPC trust funds on behalf of donors, largely Europeans. Initially money from the trust funds had been used to reimburse the Fund for administrative costs, but that practice was halted at the request of donors who wanted their resources used for low-income countries. The US and many middle income countries wanted the reimbursements reinstated, because ultimately it was the charges the middle income countries were paying on IMF loans that subsidised those administrative costs. As part of a political compromise between the US and Europe, it was agreed that the reimbursements would not resume until the gold sales are approved.
Despite these important changes the IMF has not been very forthcoming or transparent about the details. The fiscal year 2009 – 2011 medium term budget, which was discussed and approved by the board in April has not yet been made public. Neither has the exact text of the changes to the investment authority, nor the policy paper that describes the other changes. A fourth measure, the returning of dividends to Fund members in times when the Fund is flush with money, is also included in a schematic chart in an article on the Fund’s website, but not mentioned anywhere in the press releases or other public relations material.