Hit by fallout from the financial meltdown, the world's poorest nations are eyeing a stash of gold owned by the International Monetary Fund.
Ahead of weekend meetings of the IMF and World Bank in Washington, officials from developing nations and anti-poverty advocates are lobbying to get some of the billions of dollars in profits the IMF could reap if it sold a chunk of its vast holdings of gold.
In recent years, business has been slow at the world's lender of last resort. Countries were not borrowing. Operational funds were down. Looking ahead to its budgetary needs, the IMF board approved last May a broad financial overhaul strategy to ensure the soundness of the fund over time.
Part of the plan involves selling one-eighth of its stash of 103.4 million ounces of gold in a way that would avoid causing disturbances in the gold market. Money from the sale would be used as a source of income to pay operational expenses at the fund.
The IMF's membership plus the U.S. Congress still must give a final go-ahead for the sale.
When the gold sale was proposed at the end of January 2007, the 12.97 million ounces of gold proposed for sale had an estimated value of $6.6 billion.
Since then, gold prices have skyrocketed. The gold now has a market value of around $12 billion, the IMF says.
Anticipating that a gold sale would reap much more money than anticipated, the Group of 20 nations decided at its summit earlier this month in London that $1 billion of the money derived from the sale should be used to leverage low-interest loans to low-income countries, including those affected by the financial meltdown, which started in the United States and spread to other wealthy nations.
"This is a terrible financial crisis affecting the world, and it's hitting Africa very hard through falling remittances, falling exports, falling access to credit," said Oliver Buston, European director for ONE, a global advocacy group dedicated to fighting extreme poverty and preventable disease, particularly in Africa.
"The price of gold has skyrocketed. Basically, the fund and some of its member countries want to keep the profit that would be derived from this sale of gold themselves. What we're saying is `give some of that windfall to the poorer countries.'"
African leaders and anti-poverty groups long have urged the IMF to sell gold to raise immediate funding for poor countries, which are now being hard hit by falling exports and lower commodity prices. This gold sale under review, however, was not initially designed to provide money for loans or direct grants. It was part of the IMF's strategy to adjust its income stream to ensure its fiscal strength for the future.
Rocker Bob Geldof and the British-based charity Oxfam are urging the fund to direct $5 billion of the gold profits to the world's poorest countries, not in the form of loans but as direct grants or debt relief.
If the IMF does not make a decision about the gold sale at this weekend's meeting, that might be good news, said Neil Watkins, executive director of Jubilee USA Network, an alliance of 75 religious denominations, development agencies, human rights and other groups battling global poverty and pressing for debt relief for poor nations. African and other nations that would benefit are beginning to speak up about their needs, and the G-20 plan to use $1 billion to leverage low-interest loans for poor nations is no longer "set in stone," Watkins said.
He said many governments have indicated informally that they are open to giving even more to low-income countries.
"We hope we can get more governments on board, and that will take longer than this weekend," Watkins said. "From our point of view, if it's left vague in the communique over the weekend, it would be a better outcome because it means it's still very much in discussion."
