Poorest countries take back seat as IMF Board frets over cost of Greek default

IMF member countries have failed to come to a decision on how to spend a $3 billion windfall amidst concerns by some members that they need to put funds aside in case Greece defaults on its debts.

The Board was supposed to come to a decision in mid-September, but the windfall – made from selling gold at record prices – will sit in the IMF’s account until next year.

The IMF’s Board is reported to be split three ways between putting the money in reserves in case a country such as Greece defaults, investing it in financial markets to create an even larger income for the institution, or using it for low income countries, possibly through debt relief.

Tim Jones, Policy Officer at Jubilee Debt Campaign, said:

“The IMF is awash with money, yet countries such as Sierra Leone, the Democratic Republic of Congo and Jamaica have seen their debts increase. The IMF was a cheerleader for the deregulation which brought economic turmoil, but whilst it prospers, others are being made to pay. The gold windfall should be set-aside to cancel debts for countries suffering from a sudden crisis such as a natural disaster or external financial crisis.”

As well as the $3 billion in windfall, the IMF projects it will make a profit of $1.2 billion in 2011 rising to $2.3 billion in 2012.[1] The IMF’s profit comes from the interest it charges borrowers such as Greece, Ireland, Pakistan and Jamaica.

It is rumoured those who want the gold money to be put in the IMF reserves include Eurozone countries. If the money is put in the IMF reserves it could make a small contribution to cover loses if a country such as Greece defaults on their repayments to the institution.

Tim Jones, Policy Officer at Jubilee Debt Campaign, said:

“The IMF and European countries seem to be eyeing the $3 billion to help cover their bad decision to bail out the banks who have caused the European debt crisis. Instead, the banks should be made responsible for their reckless lending by reducing the debt they claim to be owed.”

The IMF Board is made-up of 24 Executive Directors with different voting powers. The US has one Executive Director with 17 per cent of the votes, whilst the UK has its own Executive Director with 5 per cent of votes. In contrast, 43 African countries have just two Directors who share 5 per cent of the votes between them.[2]

Contact: Tim Jones on +44 (0)20 7324 4722 or +44(0)7817 628196


[1] IMF. (2011). Review of the Fund’s income position for FY 2011 and FY 2012.

[2] http://www.imf.org/external/np/sec/memdir/eds.aspx 

[3] The IMF makes money be charging interest and fees on the loans it gives to high and middle income countries. Low income countries are exempt from such charges so do not make a net contribution to the IMF’s income.

[4] For more information read Jubilee Debt Campaign briefing ‘Financial crisis creates bumper bank balances at the IMF

Share This