In a bid to cash in from the soaring price of gold, the International Monetary Fund (IMF) has proposed selling a portion of its gold holdings in a bid to revive its flagging fortunes caused by reduction in its role as a financier to distressed economies.
The 60-year old Fund, like any thrifty pensioner keen on maximising returns, wants to invest the sale proceeds in US government and corporate bonds to generate regular income and meet a $400 million shortfall projected over the next two to three years.
It had recently announced budgetary cuts of $100 million spread over three years up to 2011.
IMF director general Dominique Strauss-Kahn says the decision to overhaul the ts income model was difficult but necessary to modernise the institution and put it on a ''solid financial footing''.
The Washington-based institution expects to profit from the recent surge in gold prices that had reached around $1,000 per ounce in March and have remained volatile ever since, as investors retreat from volatile financial markets.
Though the IMF feels the radical plan would net around $6 billion for the sale of 12.97 million ounces or 12 per cent of its holdings of 103.4 million ounces, estimated at January prices to be worth $95 billion, IMF officials say the sale would have to be staggered over several years to avoid causing a market disruption.
Over the last 60 years the IMF has acted as lender of the last resort to poor countries and distressed economies, helping them meet their payment obligations and restructure their economies. In the early '90s, India had borrowed from the IMF to overcome a balance of payment crisis, prior to its early steps towards liberalisation.
However, in the past decade the need for emergency loans from the IMF has diminished as several developing economies, particularly in Asia, have improved their economies and accumulated foreign exchange reserves defuse financial crisis.
The decision follows the Fund restructuring its voting power last month to move voting power away from traditional powers like the US, the UK and Germany to emerging countries, including China, India and Brazil, which are playing a growing role in the global economy.