Silver lining from IMF

Johannesburg - The global storm clouds overshadowing low-income countries in recent years have now received a silver lining from the International Monetary Fund (IMF) or rather, a large quantity of gold and a rand windfall.

The IMF is planning to sell 403 tons of its gold reserves in an effort to soften the effect of the global recession.

"We will do it judiciously so as not to unsettle developing countries that depend on gold exports," Dominique Strauss-Kahn, the head of the IMF, told South African and Ghanaian journalists on Wednesday during a teleconference.

According to Strauss-Kahn, central banks are already planning to reduce their gold reserves over the next five years.

"We will accede to that. There won't be more gold than planned on the global market," he said. Central banks have agreed the IMF may sell gold within the previously agreed frameworks.

Over the next five years the IMF will make $17bn (about R135bn) available to low-income countries. Strauss-Kahn believes about 60 will benefit.

By means of "concession loans" the IMF will help developing countries survive the recession. Strauss-Kahn points out that poorer countries are worst affected by a lack of liquidity. The yield from the gold sales will be used to ensure that the loans are granted on very favourable terms, for which up to $1.5bn will be required. The plan, he explains, is to grant countries loans at a 0% interest rate.

"But there will nevertheless be conditions. We want to ensure that the problems - for example, a budgetary deficit - are relieved, but also that efforts are made to tackle the causes sustainably."

On Wednesday the gold price was trading at $929/oz, the price having shed 1%.

-Sake24