IMF to sell 12.5% of gold stake in efficiency drive

IMF to sell 12.5% of gold stake in efficiency drive

By Robert Daniel, MarketWatch
Last Update: 4:45 AM ET 4/8/08

TEL AVIV (MarketWatch) -- The International Monetary Fund said it would sell more than 14.2 million ounces of gold, currently valued at more than $13 billion, and cut substantial costs as part of an efficiency drive.

The agency, with 185 member countries, aims to promote monetary cooperation, foster economic growth and employment, and provide temporary help to countries that have problems with their balance of payments.

In a statement on Monday, Managing Director Dominique Strauss-Kahn said the IMF had made "difficult but necessary choices" to close an income shortfall and make the agency more efficient through a "new and sustainable income and expenditure framework."

With the changes, the IMF's income model would be based largely on generating funds from various sources rather than relying on lending, the agency said.

The restructuring also includes broadening the IMF's investment authority to help it boost returns. Safeguards would be put in place to ensure that the IMF's new investments don't create conflicts of interest, the IMF said.

And the new model includes $100 million of spending cuts over the next three years. The Associated Press reported that the reductions would include as many as 100 job cuts.

Reuters reported that the IMF holds about 113.5 million ounces of gold, so the gold to be sold amounts to 12.5% of its holdings. The metal would be sold "in a transparent manner with strong safeguards" to avoid disrupting the market, the IMF said.

The new model "could generate an additional $300 million in income within a few years," the IMF said.

The proposal faces at least two key hurdles. One is that the U.S. Congress must approve the IMF's proposal to sell gold. And most member countries also will have to enact legislation to expand the IMF's investment authority.

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