Washington, April 23 (RFE/RL) - Gold! The very mention of the precious metal conjures images of great wealth and of stability in times of financial uncertainty.
The world's premier financial institution - the International Monetary Fund (IMF) - owns 103 million ounces of gold as a central element of its reserves. Almost since its founding in the 1940s, however, there have been suggestions that the fund sell of some of its gold to pay for needs of the moment. And just as frequently, a vast majority of member nations have said no.
Now, however, for the first time, there is a growing possibility that the IMF may actually sell off a small part of its gold stock. But before anyone gets the idea that the IMF has lost its faith in gold or is going to give away some of its asset base, Managing Director Michel Camdessus uickly points out that all he is proposing is a small diversification of the fund's balance sheet.
"This very limited diversification of our reserves shouldn't be a problem," he told reporters following Monday's meeting of the IMF's policy making Interim Committee, composed of 24 finance ministers. "It should be a management operation," he said, but "you know gold is something special and gold has always an extraordinary ability to capture imaginations (and) to generate debates."
Camdessus's proposal is that the fund sell up to five percent of its gold reserves - or between four and five million ounces - and put the money into diversified investments. The earnings from those investments - perhaps around 100 million dollars per year - would be used to underwrite a five year transition to self-sufficiency for the IMF's special facility to help poorer nations known as ESAF (Enhanced Structural Adjustment Facility).
The finance ministers and central bank governors who make up the Interim Committee have endorsed continuation of ESAF, which is being restructured so that it will be completely self sustaining after five years.
But to get there will require additional millions of dollars to pay for the transition and Camdessus has proposed the gold sale as part of a package of financing. As usual, a number of finance ministers - led by German's Theo Waigel - raised strong objections. But this time, said Belgian Deputy Prime Minister and Finance minister Philippe Maystadt, who chairs the committee, "even those members who expressed reservations about selling a limited amount of gold avoided too harsh positions." At the end of the day, he said, "they did not close the door - it's still possible to work out a compromise."
Managing Director Camdessus said the discussion this time was "remarkable" because the debate for the first time was "not about selling gold or not, the debate was among those who have reservations about selling gold...about the safest way to preserve the IMF's financial integrity."
Camdessus said the best argument is that if the fund sells gold and keeps the proceeds on its balance sheet, utilizing only the income out of it, "then in no occassion do you shrink the balance sheet of the IMF."
The only thing it does, says Camdessus, is to have "managed, diversified the reserves, but you have not taken risk for the financial integrity of the fund." Actually, added the Managing Director, "the formula of selling the gold I have proposed is probably much safer in terms of financial integrity of the institution" than other ideas of depending on pledges from member nations, for example. Selling any part of the gold will require an 85 percent majority of member nations' approval, and the debate will surely continue Tuesday in the meeting of the so-called Development Committee, a group with roughly the same membership as the Interim Committee, but which deals with both the fund and the World Bank. Camdessus and other officials say the issue will still take some time to work out but that they are hopeful of a decision by the fund's annual meeting next autumn. In the meantime, many nations in Eastern Europe and the former Soviet Union are benefiting from ESAF. Albania, Armenia, Georgia, Kyrgyzstan and Mongolia are nations which have received loans totaling almost 660 million dollars from the facility over the past three years.