IMF gold sales would harm struggling economies

The International Monetary Fund’s proposal to sell 10% of its gold to assist debt relief would harm, rather than help, some of the world’s poorest nations, says the World Gold Council.

The New York-based organization released an 80-page study showing the importance of gold mining to developing nations in sub-Saharan Africa and elsewhere. The report says these countries are just beginning to broaden their export base, away from agricultural commodities and towards industrial growth, largely assisted by their fledgling gold mining industries.

Of the 41 heavily indebted poor countries the IMF is trying to assist, more than 30 are gold producers or potential gold producers. For nine of them, gold amounts to at least 5% of export revenues, and for two of them, the yellow metal accounts for more than 30% of export revenues.

The report estimates that, at US$280 per oz., projected export earnings for these countries from gold would total US$1.6 billion by the end of 2000.

The World Gold Council and other industry organizations are urging the G-7 nations backing the proposal to reconsider on the grounds that the proposed sale has already adversely affected the international price of gold, as well as the economic development of many emerging economies.

The IMF proposal, combined with official sector sales (central bank selling), is being blamed for ongoing weakness in gold prices. The World Gold Council has suggested that the IMF examine alternative methods to finance international debt relief.