Public Agenda (Accra)
25 April 2005
Accra — In a dramatic turn of events, the International Monetary Fund (IMF), has joined debt campaigners across the globe by stating clearly that it is in fact possible to sell its vast undervalued (and idle) gold reserves to finance further debt relief for some of the world's poorest countries.
The viability of this proposal, after years of opposition, has been formally recognised by the staff of the IMF in a new paper. The IMF paper, prepared by the Fund's Department of Finance at the request of the major creditor nations last year, was discussed by the IMF Board on 30 April.
It illustrates very clearly the technical feasibility of gold sales and says that these resources can be spent on the cancellation of developing country debt.
The paper states clearly that it is possible to sell large amounts of gold on the open market without negative impact on world gold prices. Gold sales could be managed within the framework of the Central Bank Gold Agreement (CBGA). This acknowledgement will alleviate the concerns of gold producing nations, many of which are low-income countries.
The paper also states that the Fund's Articles of Agreement provide for the outright sale of gold at prevailing market prices, the proceeds of which could be used to cancel impoverished countries' debts. The IMF is the world's third largest holder of gold after the United States and Germany. It holds 103.4 million ounces of gold (3.217 tons) currently valued at US$ 9 billion. At end-2004, its market value was estimated at around US$ 45 billion.
Civil society groups operating under the banner of the Global Call to Action Against Poverty argue that the clock is ticking for poor countries. In their view, every 3.6 seconds someone in the developing world dies of starvation. Every 30 seconds, a child in Africa is killed by malaria, a preventable disease. Too many have died and too many lives have been blighted.
"We cannot afford to sit on our hands anymore. Every year, every month, every day and every second of delay is morally unacceptable. The time to act is now! The world is watching", says the global debt campaigners.
The debt campaigners further argued that since the G7 began discussing proposals for up to 100% debt cancellation in June 2004, more than 4 million children under-five have died. "How many millions must perish before world leaders move from rhetoric to action", they asked.
Statistics show that developing countries are crippled with a debt of almost US$ 2.5 trillion. Of this amount, low-income countries owe over US$ 523 billion to some of the world's wealthiest countries and institutions (such as the IMF and the World Bank). In 2002, low-income countries paid out US$ 39 billion in debt service, roughly equal to US$100 million per day.
With the IMF turning over a new leaf, it now joins the world to acknowledge that low income countries are blighted by unacceptably high levels of poverty.
Crucially, these countries desperately need additional resources if the Millennium Development Goals are to be met by 2015. Current debt relief efforts, in the framework of the Heavily Indebted Poor Countries (HIPC) Initiative have so far clearly failed to deliver the promise of a "robust exit from the debt crisis" and it is now widely recognised that debt relief has simply not gone far enough for countries to be able to fight poverty.
Civil society organisations across the globe have long argued that the phased sale of the IMF's idle gold reserves would be an effective and highly efficient way of freeing up additional resources for debt cancellation.
The paper was discussed again at the G7 meeting on 15 April in Washington DC. It is now up to the world's political leaders to ensure that this opportunity is acted upon.
Unfortunately when the G7 leaders met last in the U.S. they failed to commit themselves to the critical issue of debt cancellation, poor countries ensnared to debt.
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