US Treasury supports IMF gold sales, urges reform

The US Treasury has shifted its stance on International Monetary Fund (IMF) gold, saying it will now back the sale of about 8% of the Fund's reserves.
The US Treasury has shifted its stance on International Monetary Fund (IMF) gold, saying it will now back the sale of about 8% of the Fund's reserves.

David McCormick, the undersecretary for international affairs, said that the Treasury "will help ensure that the IMF has adequate resources to fulfil its vital global mission by seeking authority from Congress for a limited sale of IMF gold."

The amount in question would be consistent with the Crockett report on the long-term financing of the Fund, which said the institution should sell 12.9 million ounces of its 103.4 million ounce holding.

The proceeds from the sale would be used to finance an endowment to ensure the Fund's financial sustainability.

The endowment would generate roughly $250m per year, McCormick said, which along with $100m-worth of budget cuts proposed by Dominique Strauss-Kahn, the managing director of the Fund, would ensure the institution covered its current funding gap.

Reform

McCormick called on the Fund to "reform to remain relevant."

The Fund had to shift its focus from lending to developing countries to exchange-rate surveillance, maintaining openness to international investment and supporting global financial market stability.

He urged the Fund to change its governance structure to give greater sway to emerging markets.

"The IMF must now adapt to accommodate the increasing weight and responsibilities of these emerging economies," McCormick said. "That means updating the outmoded governance structure which reflects more the economic realities of the 1970+s than the global economy of today."

Voting quotas must be "meaningfully" shifted to reflect the burgeoning power of the emerging markets and must also give more prominence to GDP, he said.

To read McCormick's comments in full, click here

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