Finance news

The U.S. Treasury supports allowing the International Monetary Fund to sell some of its $98 billion in gold reserves to help cover a revenue shortfall, the department's top international official said.

“We have a very credible plan for cost reduction that's in the process of being implemented'' at the IMF, David McCormick, Treasury's undersecretary for international affairs, told reporters in Washington. “For that reason, Treasury supports limited gold sales.''

The Treasury endorsed IMF sales of as much as 12.9 million ounces recommended by Andrew Crockett, former head of the Bank of International Settlements, to set up an investment fund to cover the IMF's budget shortfall, McCormick said.

The Treasury, which until now has opposed letting the fund sell bullion, reversed its stance to endorse elements of cost- cutting plans of IMF Managing Director Dominique Strauss-Kahn, McCormick said. Strauss-Kahn has proposed eliminating as much as 15 percent of its 2,600 staff and saving $100 million of its $922.3 billion budget to offset dwindling revenue from lending.

“In the managing director, there is a leader there that is really building momentum and pushing in all the right directions,'' McCormick said.

The IMF holds 103.4 million ounces of gold, trailing only the U.S payday loan. and Germany, according to the World Gold Council. Gold futures for April delivery fell $10.20, or 1.1 percent, to $937.60 an ounce at 9:57 a.m. on the Comex division of the New York Mercantile Exchange.

Congressional Support

The U.S. Congress can block any sale of the reserves, since approval requires an 85 percent majority from the 185 countries that are members of the IMF and the U.S. has a 17 percent voting stake. Congress blocked IMF attempts to sell gold in 2005 and 1999.

Treasury has had “a number of quiet discussions on the Hill, and I think have some confidence that there will be some support for this,'' McCormick said.

Strauss-Kahn is seeking approval from the U.S. and other major IMF shareholders for plans to cut costs and shore up revenue. Without the changes, the IMF may post annual losses of $400 million by 2010, the lender said in a Dec. 7 statement.

The IMF's finances have come under pressure as economic growth and government revenue accelerated in emerging markets, reducing their need for emergency loans.

Source