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IMF's gold-for-debt plan irks
industry
By Emad Mekay
WASHINGTON - Anti-poverty groups are
accusing the US gold industry of seeking to block
a sale of the precious metal from International
Monetary Fund (IMF) reserves as part of an effort
to write off wealthy nations' claims against the
world's poorest and most heavily indebted
countries. But an industry group counters that the
plan could harm poor nations rather than help
them.
The face-off between anti-debt
campaigners and gold miners and market players
comes in the run-up to next month's Group of Eight
(G8) summit to be held in Scotland. Third World
debt forgiveness is expected to feature
prominently at the talks.
Officials
attending the spring meetings in April of the IMF
and its sister lending agency, the World Bank,
said they expected a major G8 announcement on a
gold sale during the summit, scheduled for July
6-8 in the remote resort of Gleneagles. But the
idea of using the IMF's huge gold reserves to fund
the debt forgiveness plan has met stiff opposition
from some US lawmakers, whose approval is
essential for the deal. Any sale would require the
approval of 85% of the IMF members' votes. The US
holds 17% of the votes, which makes Washington's
consent key to the plan.
The US is the
second-largest gold producing nation in the world
after South Africa. Most of its gold is produced
in western states such as Nevada. In February, a
dozen US senators wrote to US Treasury Secretary
John Snow urging him to turn his back on the deal.
There is no consensus, so far, in favor of gold
sales within the industrialized nations either.
Anti-debt campaigners said lobbying by US
and international gold companies seriously
threatened to take the plan off the table. The
groups singled out Denver-based Newmont Mining Co,
the world's largest gold producing corporation, of
leading the opposition from fear that IMF gold
sales will lower world market prices for the
metal. When contacted, Newmont declined to
comment.
The groups, which include Africa
Action, Essential Action, the Global AIDS
Alliance, Global Exchange, and Jubilee USA, say
the company and the industry are ignoring a
proposal from the IMF itself that said limited
sales from IMF reserves would ensure that the deal
would have no net impact on the world gold market.
"Newmont's misguided opposition is on the brink of
sabotaging IMF debt cancellation - thus ensuring
millions of poor people will be deprived of the
benefit of IMF debt cancellation," the groups said
in a statement last week. "This is a
life-and-death matter."
But a gold
industry association said the proposal would prove
ineffective: it was too limited and would not
bring relief to poor nations. "We have recommended
against the sales of IMF gold to fund debt relief
for poor nations. We think it's a
counterproductive proposal," said Carol Raulston,
a spokesperson for the Washington-based National
Mining Association (NMA). The NMA said many of the
nations that the IMF program is supposed to help
are in fact large gold producers themselves and
could be hurt by the news of the sale when prices
fall.
The organization said it had not
engaged in intensive lobbying against the IMF
proposal, however, adding that US legislators
opposed to the deal understood on their own that
the IMF gold sales would have a negative impact on
their own gold producing states as well as on poor
countries. "You really do not have to try to exert
much influence," Raulston said. "They understand
the issue and the consequences that this proposal
could have."
The debt issue has energized
activists, industry, and experts alike for many
years. Debt servicing has sapped money from poor
countries' treasuries and transferred it to the
coffers of public and private lenders in wealthy
nations. In the process, activists and academics
say, poor governments have been left with less
cash for domestic priorities, including health,
education, and social services.
Countries
like Ghana, Kenya and Bolivia, among others, are
heavily indebted to rich nations and to
multinational players like the IMF and the World
Bank. The IMF had originally opposed the gold sale
proposal first floated by the anti-debt
campaigners but eventually came out in favor of
it. The fund's technical researchers have said
that it is in fact possible to sell its vastly
undervalued and idle gold reserves to finance
further debt relief for some of the world's
poorest countries.
The IMF's board
discussed the fund's finance department paper,
requested by major creditor nations last year, at
a meeting on April 30. Research by two
Washington-based think tanks, the Center for
Global Development and the Institute for
International Economics, also shows that by
selling just 15% of its gold reserves, the IMF
could raise as much as US$7 billion. This would be
enough to write off 100% of the IMF's outstanding
claims against poor countries that have qualified
for debt relief.
The IMF values the gold
on its balance sheet at roughly $9 billion, on the
basis of historical cost - well below its current
market price of $45 billion, according to the two
economic think tanks. In addition, activist groups
and think tanks alike have said that new market
changes have further lowered the risks of a large
sell-off. The price of gold has risen by about 50%
since 1999, easing concerns of gold-producing
countries and making it easier for the IMF to
generate sufficient revenues from a sale involving
a fairly small portion of its reserves.
Even so, according to the NMA's Raulston,
"Historically, when such proposals have even been
made, the rumors of sales have depressed the sale
of gold, hurting those economies and causing job
losses. Similar effects have been felt in the
United States. I think you have to look at the
size of the problem. We should find a solution
that really works rather than one that pretends to
provide relief and really doesn't match the size
of the problem."
(Inter Press
Service) |
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