The IMF has approved a plan to use $2.3 billion of the profits from the sale of its gold reserves to fund concessionary lending to low-income countries (LICs, see Update 78). As gold sale profits belong to IMF members, they must be distributed to members and then returned as contributions to the Poverty Reduction and Growth Trust (PRGT), which subsidises IMF loans to LICs. The gold sale and distribution are expected to raise $1.1 billion but the disbursal is conditional on IMF members guaranteeing to return at least 90 per cent of the windfall to the PRGT. For some countries this contribution means going through parliamentary budgeting processes and securing the contribution from emerging market members is seen as potentially problematic. However, there is some discontent with the arrangement in civil society. Bhumika Muchhala of NGO Third World Network argues: “It is unfortunate that the IMF will not revise its rules for the use of its gold sale proceeds in a way that would actually benefit its LIC members, for example debt cancellation. Recycling the funds to the PRGT compounds the history of adverse pro-cyclical fiscal, monetary and tax policy advice in LIC borrowers and adds to external debt burdens, which have been growing from the fall-out of the crisis. Instead, a straight-forward debt cancellation would free up hard-earned foreign exchange in LICs for their essential import needs, or other development-oriented public expenditure.”
21 November 2011
It is time for the IMF and World Bank to understand their own responsibility and decolonise their approach.
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