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In 2002, John Williamson and I proposed that the gold at the IMF be used to deal with global public good (bad) of unsustainable debt of poor countries – and in particular to allow the IMF to finance suspension of debt service to the IMF and the multilateral development banks following an external shock.
Bingo. The biggest external shock since our proposal finally got the world off its you-know-what. Last week the IMF Board approved the sale of 403.3 metric tons of IMF gold to permit, among other things, low-income countries to borrow substantially MORE (a doubling of their access limits defined as a percent of their quota) at concessional rates, including at zero interest charges for two years. It’s not precisely what we suggested but it is in the same spirit.
As I said then (in 2003) and say again: IMF gold is an untapped capital asset of the IMF which provides comfort to the Central Bank heads of IMF member countries (comfort that in case of any IMF losses – though this has never happened – the difference could be covered without the Fund going to its member countries). That’s a good thing – it builds confidence in the IMF itself and thus in the global economy (up to a point). The question is whether a small portion of that global asset held at the IMF wouldn’t have a higher “return” if it helped poor countries make the investments and spend the resources to transform their societies and improve the welfare of their peoples.
Kudos to the IMF, the U.S. Congress (especially Barney Frank), the NGO community who never let go of the sale of gold to help the world’s poor -- and to us at CGD.
CGD blog posts reflect theviews of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.
When the world’s finance ministers and central bank governors assemble in Washington later this month. they would do well to focus on another looming debt crisis that could hit some of the poorest countries in the world, many of whom are also struggling with problems of conflict and fragility and none of which has the institutional capacity to cope with a major debt crisis without lasting damage to their already-challenged development prospects.