To be able to assist provide debt reduction to low revenue international locations devastated by climate-related catastrophes, the Worldwide Financial Fund (IMF) ought to promote 4% of its gold, a research mentioned as local weather financing dominates early talks on the COP29 summit.
Promoting 4% of the Washington-based lender’s gold would generate $9.52 billion, the research mentioned, masking debt reduction for 86 international locations.
From the Caribbean to Africa, low revenue international locations have turned to the IMF lately for assist within the face of shocks just like the COVID-19 pandemic, driving up repayments to the lender of final resort in subsequent years.
Though the IMF has a facility generally known as Disaster Containment Aid Belief (CCRT), this solely covers 30 poor international locations and has simply $103 million accessible, mentioned researchers from the Boston College World Improvement Centre.
The CCRT is used to repay an eligible member state’s loans to the IMF for as much as two years, offering quick reduction and permitting these funds to be focused at different priorities.
“Many climate-vulnerable international locations have been unable to entry the CCRT as its eligibility standards fails to account for local weather vulnerability … and funding is severely restricted,” the researchers mentioned in a report.
The answer lies in promoting a few of the IMF’s 90.5 million ounces of gold reserves, the report mentioned, profiting from elevated costs to spice up the fund and canopy extra international locations.
“With present gold costs exceeding $2,600 per ounce, promoting a small fraction of gold has the potential to generate important revenues and simply replenish the CCRT,” it mentioned.
Gold was buying and selling at $2,606.42 per ounce on Wednesday.
IMF gold reserve gross sales are uncommon. The final was in 2009/10, when it offloaded an eighth of its reserves, which was triggered by the necessity to increase its lending capability.
At its inception in 1944, member states used to pay their IMF quotas with gold, the analysis report mentioned, which means it amassed reserves at a historic price of simply $45 per ounce.
Repayments of IMF loans are taking a much bigger chunk of annual debt servicing prices for weak economies, the report mentioned.
The Indian Ocean island of Madagascar pays $106 million to the IMF subsequent 12 months, 1 / 4 of its debt service, rising to $158 million and 41% in 2026, the report added.
Mozambique may even expertise a rise in repayments to the IMF throughout an identical interval, the researchers discovered.
Any sale of IMF gold would require assist from the majority of its govt board members, and for member states to pledge to channel their share of the proceeds to the CCRT, they mentioned.
“Replenishing the CCRT ought to be thought of a excessive precedence as a result of, in distinction to different IMF lending applications, the CCRT comes with no conditionality,” they concluded.
