IMF must dip into its pot of gold says Oxfam
IMF must dip into its pot of gold says Oxfam
International agency Oxfam is calling on the world’s finance ministers, especially those from the seven richest countries (the G7), to cancel all multilateral debts owed by the poorest countries when they meet at the IMF and World Bank spring meetings this weekend.
The IMF is sitting on enormous reserves of gold. Its own report for the meetings shows that selling the gold to finance debt cancellation is feasible and would not hurt the gold market or gold-producing countries. Oxfam believes such a step would allow billions of dollars to be released for investing in education and health, helping to lift millions out of poverty.
The G7 finance ministers have themselves promised to act. They pledged in February “to bring forward proposals for agreement” on both World Bank and IMF debt cancellation at these Spring Meetings.
“Since the G7 met in February, another two million people have died due to poverty,” said Oxfam New Zealand Executive Director Barry Coates. “How long will leaders delay canceling debt and increasing aid?”
Britain has already promised to effectively cancel its share of the debts owed by the poorest countries to the World Bank and the IMF. Oxfam is calling on the other rich countries – including New Zealand - to follow suit.
“Associate Minister of Finance Trevor Mallard will be at the meetings on behalf of New Zealand and we urge him to align New Zealand with the UK proposal,” said Coates. “So far the Government has failed to support gold sales and funding for debt cancellation. It is affordable, urgent and consistent with the promises that the Government has made to support poverty reduction.”
“A tiny annual investment by rich country governments – around a dollar per person in the case of New Zealand – would allow one hundred percent of the poorest countries’ debts to be cancelled.
Currently, the world’s poorest countries spend more on debt repayments - $140 million a day – than they do on health. At least eleven countries that rely on debt relief to help reduce poverty, including Ghana, Malawi, Uganda and Zambia, continue to spend more every year paying back debt than they do on basic health services. In 2004 Zambia spent $210 million more on servicing debt than it did on educating its children.
Closer to home, around 40% or Papua New Guinea’s annual budget is spent on debt service, diverting money from social priorities such as getting children into school, combating rising HIV/AIDS and TB and providing jobs for unemployed youth.
NOTES TO EDITORS:
All figures are NZ dollars
Each year, $1,260 billion is spent on defence globally and wealthy nations spend between $70-84 billion on development aid.
Debt relief works: in Tanzania for example, it allowed the Government to scrap primary school fees in 2001, enabling more than two million children to attend school.
The UK has promised to meet the cost of servicing its share of the poorest countries’ multilateral debts until 2015. It has put a proposal on the table for the upcoming meetings, inviting all other countries to copy its initiative. If New Zealand did this, it would cost around $1 - 2m per annum at first, increasing to a maximum of $5m per annum.
IMF GOLD SALES:
The IMF holds the largest official reserves of gold in the world after the United States and Germany. This gold only makes up about 2% of the IMF’s total available resources. The IMF is currently holding 100 million ounces of gold, worth over $63 billion but hugely undervalued at $11 billion.
If the IMF were to sell just a tenth of its gold (334.48 tons) it would provide enough funding to prevent half a million mothers from dying during childbirth each year ($5.6 billion). Resources could provide health workers to attend births, purchase vital medicines such as antibiotics, and pay for transport so that pregnant women have access to treatment. Source: USAID
The US is currently opposed to using the IMF gold to cancel debt, yet the majority of the G7, including Japan, France, Italy, Canada and the UK all see it as a viable option.
An IMF paper (March 30, 2005) positively encourages governments to make better use of its gold reserves, and says this can be done without negatively impacting the market. It finds that gold could be sold to relieve the debt of poor countries, if: this is done through a small number of phased sales that could be readily accommodated by the market, there is a clear and consistent communication strategy vis-à-vis markets and there is close consultation with other official actors (i.e. the Central Bank Gold Agreement)
In 1999, as a response to the Jubilee debt relief campaign, the IMF re-valued a small portion of its gold reserves to kick start the initial Heavily Indebted Poor Countries (HIPC) scheme. Under HIPC world leaders promised to write off $155bn of debt, yet less than $50bn has actually been cancelled.
What they promised: excerpt from G7 Finance Ministers communique Feb 2005
“We are agreed on a case-by-case analysis of HIPC countries, based on our willingness to provide as much as 100 per cent multilateral debt relief. To finance the relief of debts owed to the IMF and to enable the Fund to continue to play a role in the poorest countries, the Managing Director has stated that he will bring forward proposals at the Spring Meetings, covering the Fund’s gold and other resources and in an orderly way. For the relief of debts owed to the World Bank and African Development Bank we will work with their management and shareholders to bring forward proposals for agreement at the Spring Meetings to achieve this without reducing the resources available to the poorest countries through these institutions.”
Oxfam is calling for:
A ‘millennium financing plan’ that includes as a first step an announcement of 100% cancellation of multilateral debt owed by the poorest countries, financed in part by selling the IMF’s Gold Reserves.
As part of this plan, an immediate announcement of $70 billion extra aid annually to reach the Millennium Development Goals. At the same time, all donor countries should set clear timetables to reach the agreed target of 0.7% of GNI spending on overseas development assistance by 2010. New Zealand is currently well short of this target (0.26% of GNI) and has not set a timetable, one of the few remaining countries to be in this position.