A report by a Committee of Eminent Persons advised the International Monetary Fund on Wednesday to sell 400 tons of its gold reserves as part of a new strategy to set the Fund's finances on a sustainable basis.
The report said IMF's current revenue model, which relies primarily on the incoming generated from lending to member countries, is not appropriate and it recommends a new set of revenue measures. "This package of measures, which is unanimously supported by the Committee, is designed to align better the Fund's income model with the variety of functions the Fund currency performs," said Andrew Crocket, chairman of the Eminent Committee. The Eminent Committee was in May 2006 as part of the IMF's Medium-Term Strategy and includes Mohamed A. El-Erian, President and CEO of Harvard Management Company; Alan Greenspan, former Chairman of the U.S. Federal Reserve Board of Governors; Tito Mboweni, Governor of the South African Reserve Bank; Guillermo Ortiz, Governor of the Bank of Mexico; Hamad Al-Sayari, Governor of the Saudi Arabian Monetary Agency; Jean-Claude Trichet, President of the European Central Bank and Zhou Xiaochuan, Governor of the People's Bank of China. "If adopted, the measures would set the Fund's finances on a sustainable basis, and ensure a solid financial foundation for the Fund's important role in the international community," said Crocket, who is president of JPMogan Chase International and former Director General of the Bank for International Settlements (BIS). Among the measures, the committee advised the IMF to sell 400 tons of its gold reserves. The IMF has 3,217 metric tons of gold and the sale of 400 tons could raise 6.6 billion dollars at current market prices. "Investment of profits from its sale could yield a real return of some SDR 130 million (about 195 million dollars) a year, said the report, but added the move should proceed with care in selling any gold to avoid causing disturbances to the functioning of the world gold market. The report also advised the IMF to broaden its investment mandate, which could produce additional income of 45 million dollars a year on capital markets IMF Director General Rodrigo de Rato welcomed the Committee's finding that the IMF needs an appropriate income model and stressed the importance of addressing this issue expeditiously. "The process of discussion and consultation with the Executive Board and, more generally, with the IMF's membership on the report's recommendations has already begun; I am looking forward to our discussions in the Executive Board and to building a consensus on this important issue". A set of formal proposals will be submitted for consideration to the Executive Board in the next months and a progress report will be provided to the International Monetary and Financial Committee during its meeting in April 2007.