Page 1 GAO-12-766R IMF Gold Sales

United States Government Accountability Office 

Washington, DC 20548

July 26, 2012

The Honorable Richard G. Lugar

Ranking Member

Committee on Foreign Relations

United States Senate

Dear Senator Lugar:

Subject: IMF: Planning for Use of Gold Sales Profits Under Way, but No Decision Made for 

Using a Portion of the Profits

The International Monetary Fund (IMF) has historically financed its operating costs with income 

earned from the interest that member governments pay to borrow its funds.1 However, a rapid 

reduction in IMF lending in the mid-2000s significantly decreased the IMF’s income. In 

response, in 2008 the IMF Executive Board (Board) endorsed a new income model that moved 

away from relying primarily on lending income to generate revenue and, among other things, 

called for the IMF to sell 403.3 metric tons of gold to help finance its operations.2 In 2009, the 

Board approved a plan to use projected gold sales profits of roughly $8 billion for two purposes:

(1) to create an approximately $7 billion endowment for operations that would generate 

investment income to partially finance IMF operations and (2) to provide about $1 billion to 

subsidize concessional, or below-market rate, lending to low-income countries through the 

Poverty Reduction and Growth Trust (PRG Trust). The IMF concluded the gold sales in 2010 

and earned $10.8 billion in profits from the sales, including unanticipated additional windfall 

profits of about $2.8 billion.3

 1

In 1945, governments established the IMF with the main purpose of providing the international financial system with 

stability. The IMF monitors the world economy, provides policy advice and financing to members experiencing 

economic difficulties, and conducts economic research and analysis, among other activities. 

In addition, since 2009, the IMF’s income position has greatly 

improved due to increased income earned from dramatically higher new lending during the 

global economic crisis.

2

The Board only permitted the IMF to sell the gold it obtained after the Second Amendment to the IMF’s Articles of 

Agreement in 1978. The Second Amendment changed the role of gold in the international monetary system and in 

the IMF.

3

We are reporting gold sales profits in U.S. dollars as published by the IMF in September 2011 (IMF Executive Board 

Considers Use of Windfall Gold Sale Profits, Public Information Notice No. 11/121, Sept.16, 2011). We refer to 

original projected profits as the amount the IMF earned from the gold sales to fund the endowment for operations, 

windfall profits as the amount the IMF earned from the gold sales to fund the PRG Trust (for which a use was agreed 

upon before the sales), and additional windfall profits as the amount the IMF earned from the gold sales in excess of 

the funds needed for the endowment for operations and PRG Trust (for which a use was not agreed upon before the 

sales). 
Page 2 GAO-12-766R IMF Gold Sales

In June 2009, Congress authorized the Secretary of the Treasury to instruct the U.S. Executive 

Director to the IMF to vote in favor of the gold sales and to seek to ensure that the IMF provide 

additional resources for lending to low-income countries.4

To address these objectives we reviewed relevant U.S. laws; Department of the Treasury 

(Treasury) documents; and IMF documents, including the IMF Articles of Agreement, Board 

decisions, policy papers, financial statements, annual reports, and public information notices. 

We report IMF financial, PRG Trust lending, and gold sales proceeds and profits data. As 

needed, we converted IMF special drawing rights (SDRs) to U.S. dollars for reporting 

purposes.

Responding to your interest in the 

IMF’s gold sales, we examined (1) the status of the IMF’s plan for using profits from the gold 

sales, and (2) the IMF’s proposed options for using the additional windfall profits from the sales.

5

We conducted this performance audit from December 2011 to July 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.

We also interviewed officials from the Treasury and the U.S. Executive Director’s 

Office to the IMF as well as IMF staff. We determined that the data and information used are 

sufficiently reliable for the purposes of this report.

Results in Brief

The IMF is proceeding with its plan for creating an endowment for operations and increasing its 

resources for low-income country lending using the approximately $8 billion in gold sales profits 

it had projected earning from the 2009–2010 sales. First, the IMF is working to establish the 

approximately $7 billion endowment to partially fund IMF operations. The Board is expected to 

finalize the endowment’s investment strategy and governance structure in calendar year 2012 

with implementation in financial year 2013,6 according to IMF documents and staff.7

 4

Supplemental Appropriations Act, 2009, Pub. L. No. 111-32, June 24, 2009, Sec. 1402 amending the Bretton Woods 

Agreement Act by adding Sec. 66 (22 U.S.C. § 286rr).

IMF and 

U.S. Treasury officials said the Board understood that it would require some time to take the 

needed actions, including adopting new rules and regulations, to create the endowment for 

operations. The Board is discussing various aspects of the endowment’s investment strategy, 

such as acceptable risk levels, and governance structure, such as using external managers to 

help avoid potential conflicts of interests. Second, the Board approved a strategy for the use of 

about $1 billion in gold sales profits to subsidize concessional lending to low-income countries 

through the PRG Trust. Implementation of the Board decision depends on the IMF receiving 

sufficient assurances from member countries. Before the decision will go into effect, members 

representing at least 90 percent of the $1 billion distribution intended for the PRG Trust must 

first indicate that amounts equivalent to their share of the distribution should be transferred by 

5

The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official 

reserves. Its value is based on four key international currencies—euro, Japanese yen, United Kingdom pound 

sterling, and U.S. dollar—and SDRs can be exchanged for freely usable currencies. On April 12, 2012, 1 SDR 

equaled approximately $1.54.

6

The IMF’s financial year 2013 starts on May 1, 2012 and ends on April 30, 2013. 

7

According to IMF staff, the Board met in June 2012 to discuss implementation of the endowment for operations. The 

Board plans additional discussions on the endowment in October 2012. 
Page 3 GAO-12-766R IMF Gold Sales

the IMF, or will otherwise be provided to the PRG Trust. As of July 9, 2012, the United States 

and 105 other countries, representing about 79 percent of the proposed distribution, have 

indicated that they would support subsidizing lending to low-income countries. The IMF is 

investing the gold sales profits in short-term official deposits pending implementation of the 

endowment for operations and funding of the PRG Trust. Returns earned on this investment are 

in the IMF Investment Account.8

The IMF Board is considering three main options for using the approximately $2.8 billion in 

additional windfall profits from the gold sales but has not decided which option to pursue. The 

options under consideration are to increase the (1) endowment for operations; (2) PRG Trust 

resources; or (3) existing precautionary balances.9

We are not making any recommendations in this report.

According to IMF documents, each option 

has advantages and disadvantages. The first option of using the additional windfall profits to 

increase the size of the endowment for operations would create a larger income source for IMF 

operations, but the IMF indicates that placing funds in the endowment for operations is 

permanent and precludes using funds for other purposes absent any future Board decision. 

According to the IMF, the second option of using the additional windfall profits for the PRG Trust 

could help close the projected funding gap in the trust beyond 2014, thus reducing the amount 

of bilateral contributions needed from IMF members in the short term and providing funds the 

IMF can use to support lending to low-income countries. However, a difficulty with this option is 

that it would require securing sufficient assurances from member countries, including the United 

States, that resources of this amount would be made available to the PRG Trust. If the Board 

selects this option, the IMF would request the United States to direct the amount attributable to 

the U.S. share of the windfall profits, almost $500 million, to the PRG Trust in accordance with 

the decision. The third option of counting the additional windfall profits toward precautionary 

balances requires no distribution to members and would help increase the IMF’s reserve 

coverage given its sharply higher lending since the global financial crisis. However, IMF 

documents indicate that this option does not provide funds to assist low-income countries, 

though it does not preclude using these funds for other purposes later with Board approval. 

According to IMF staff, the Board might not discuss the use of the additional windfall profits until 

late 2012. Until the Board makes a decision, the additional windfall profits remain invested in 

short-term official deposits where interest gained accrues to the Investment Account.

Background

The IMF is governed by a Board of Governors, an Executive Board, and a Managing Director. 

The Board of Governors, the highest policy-making authority of the IMF, consists of one 

governor and one alternate governor for each member country. Each member country appoints 

a governor who is usually the minister of finance or the governor of the central bank. The Board 

of Governors maintains all IMF powers not granted directly to the Executive Board or Managing 

Director. Governments appoint the 24-member Executive Board, which provides the day-to-day 

 8

The IMF’s Articles of Agreement authorize the establishment of an Investment Account whose income may be used 

to meet the expenses of conducting IMF business. Since the IMF established the Investment Account in June 2006, 

the Board has adopted annual decisions to transfer income from the Investment Account’s non-gold sales profits 

portfolio to the IMF’s General Resources Account to help meet the IMF’s administrative expenses.

9

Precautionary balances are one element of the IMF’s multi-layered framework for managing its own financial risks. 

These balances are available to absorb possible financial losses, thereby helping protect the value of reserve assets 

that members place with the IMF, through which the IMF provides assistance to members with financing needs.
Page 4 GAO-12-766R IMF Gold Sales

authority for IMF operational policy and lending, among other matters. The IMF assigned each 

of its 188 member countries a quota, based broadly on its relative size in the world economy, 

which determines its contribution to the IMF’s ordinary resources.10 The five largest 

shareholders—the United States, Japan, Germany, France, and the United Kingdom—each 

appoints its own Executive Director to the Board, while groups of countries elect most of the 

remaining members.11

The United States is the largest financial contributor to the IMF, providing 17.69 percent of total 

IMF resources as of May 21, 2012. As the largest contributor, the United States has the largest 

voting share, 16.75 percent, providing the U.S. government with veto power over major 

decisions. At the IMF, a Board decision to sell gold requires approval by an 85 percent majority 

of the total voting power. Because the United States has more than 15 percent of the voting 

share, U.S. government support is necessary to approve any gold sales.

The Board selects the Managing Director of the IMF, who serves as its 

chairman and chief executive officer.

To finance its operations, the IMF has relied primarily on income from its lending to member 

countries. This lending income represents the difference between the rate the IMF charges 

when it lends and the rate the IMF pays countries for use of their quota resources, or for use of 

borrowed resources, where applicable, to finance the loan. In the mid-2000s the IMF reported 

that, given decreasing demand for IMF loans, lending income would not be sufficient to fund 

IMF operations. However, since that time, the global economic crisis has led to a sharp increase 

in IMF lending and income resources (see fig. 1).

 10The IMF’s ordinary resources are assets held in the General Resources Account that primarily derive from 

members’ quota payments. 

11The IMF Executive Board is reviewing a proposed amendment that would facilitate a move to a more 

representative, all elected Board. Press Release No. 11/486 (Dec. 22, 2011). 
Page 5 GAO-12-766R IMF Gold Sales

Figure 1: IMF Operational Income and Expenses, Financial Years 2006-2011

Note: Operational income includes interest and charges, interest on SDR holdings, net income from investments, service charges, 

and commitment fees. Operational expense includes remuneration, interest expense on borrowing, and administrative expenses, 

including salaries. We used IMF financial year average U.S. dollar to SDR exchange rates to convert original SDR amounts into 

U.S. dollars. 

In May 2006, the IMF Managing Director established the Committee of Eminent Persons to 

Study Sustainable Long-term Financing of IMF Running Costs to examine income-generating 

options, other than lending income, for the IMF and recommend new income models that could 

generate long-term financing for the IMF’s operations. The committee published its report in 

January 2007, and the Board reached agreement on a new income model for the IMF on April 

7, 2008.12

• Expand the IMF’s investment authority to enhance the return on its investments and enable 

it to adapt its investment strategy over time.

The new income model includes three core elements:

• Create an endowment for operations from the profits of selling a limited portion of the IMF’s 

gold.

• Resume the practice of recovering the costs incurred by the IMF in administering the trust 

fund for concessional lending to low-income countries, beginning from the financial year in 

which the IMF adopts a decision authorizing gold sales.

The committee report on the new income model projected that investing the proceeds from the 

gold sales would provide the IMF with about $200 million per year, assuming a real rate of 

return of 3 percent.

 12Committee to Study Sustainable Long-term Financing of the IMF Final Report (Jan. 31, 2007). IMF Survey, Board 

Backs Plan to Adopt New Income Model for IMF (Apr. 7, 2008).
Page 6 GAO-12-766R IMF Gold Sales

To deal with its decreased income, the IMF also restructured its budget over three financial 

years from 2009 through 2011. In addition, it cut 380 staff positions and other non-personnel 

spending resulting in a reduction of annual administrative spending by $100 million in real 

terms, about 10 percent of total budget expenses.13

To create the endowment for operations agreed to in the new income model, between 2009 and 

2010, the IMF sold all 403.3 metric tons of gold acquired after the Second Amendment to the 

IMF’s Articles of Agreement in April 1978.14 All gold acquired after 1978 came from borrowing 

members who repaid the IMF in gold.15

The IMF began the gold sales in October 2009 with off-market sales to central banks. Four 

central banks purchased a total of 222 metric tons of gold: India (200 metric tons), Mauritius (2 

metric tons), Sri Lanka (10 metric tons), and Bangladesh (10 metric tons). The IMF began onmarket gold sales in February 2010 and concluded them in December 2010 resulting in the sale 

of 181.3 metric tons of gold. Figure 2 shows the key events related to the IMF gold sales and 

the average monthly price of gold during the planning for the gold sales and the actual sales.

 13Treasury’s 2010 report in response to section 1701 of the International Financial Institutions Act, as amended by 

the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999. Pub. L. No. 105-277, Div. A 

§ 101(d) Title V, § 583. 

http://www.treasury.gov/resource-center/international/development-banks/Documents/2011%2006%2010%201815%

20NAC%20report_final.pdf. 

14The Board only permitted the IMF to sell the gold it obtained after the Second Amendment to the IMF’s Articles of 

Agreement. Following the Second Amendment, the Articles of Agreement limit the use of gold in the IMF’s operations 

and transactions. The IMF may sell gold at market prices, and may accept gold from member countries for loan 

repayment. Following the sale of the 403.3 metric tons of post-Second Amendment gold, the IMF holds 2,814.1 

metric tons of gold, making it the third largest official holder of gold.

15Most of this gold came from the IMF’s 1999 and 2000 off-market gold transactions with Mexico and Brazil. In these 

transactions the IMF sold gold to Mexico and Brazil at the market price and placed the profits in a special account 

invested to fund debt relief under the Heavily Indebted Poor Countries Initiative. The IMF then accepted the gold 

back, at the same market price, in settlement of Mexico and Brazil’s financial obligations. Cambodia also paid its 

overdue obligations to the IMF in gold in 1992. 
Page 7 GAO-12-766R IMF Gold Sales

Figure 2: Timeline of Key IMF Gold Sales Events

The IMF earned proceeds of $15 billion, of which $10.8 billion represented the profits from the 

gold sales and $4.2 billion the pre-existing book value of the gold which was converted from a 

non-liquid to a liquid asset.16

In April 2009, the Group of 20 (G-20) member countries suggested that some gold sales profits 

could be used as part of a strategy to increase the IMF’s capacity to provide concessional loans 

to low-income countries. In response to the increase in the prices of food and fuel, as well as 

the global financial crisis,

The Board originally projected earning approximately $7 billion in 

profits from the gold sales, based on an average sale price of $850 per ounce of gold, all of 

which would be used to fund the endowment for operations.

17

 16The book value is the value of the gold on the IMF’s balance sheets.

the IMF also restructured its lending instruments for low-income 

countries which are financed by the PRG Trust. Uncommitted PRG Trust loan resources, 

17GAO, International Financial Institutions Met Many Goals in Response to Financial, Food, and Fuel Crises, but 

Impact on Spending Difficult to Establish, GAO-11-832 (Washington, D.C.: Sept. 28, 2011). 
Page 8 GAO-12-766R IMF Gold Sales

including recently secured pledges from bilateral lenders, amounted to $11.4 billion at the end of 

February 2012.

18

In July 2009, the Board agreed to a new financing package for low-income countries in order to 

meet the IMF’s projected demand for concessional lending through 2014.19 The package 

included plans to generate subsidy resources for the PRG Trust by using resources linked to 

gold sales windfall profits resulting from an average price greater than the $850 per ounce 

originally projected for the endowment for operations. IMF documents estimated that a gold sale 

price of $935 per ounce would generate sufficient profits to both fund the $7 billion for the 

endowment for operations and provide up to $1 billion for the PRG Trust.20 Under the lowincome country financing package agreed to by the Board, gold sales profits would help 

generate approximately $770-920 million (in end-2008 net present value terms) of additional 

PRG Trust subsidy resources.

21

Table 1: Total IMF Gold Sales: Components, Amount Earned, and Intended Use

However, gold sale prices increased even more than the $935 

per ounce projection to fund the endowment for operations and low-income country financing 

package. As a result, the IMF earned an additional windfall of $2.8 billion in extra profits beyond 

the originally projected $8 billion (see table 1). The Board is currently considering three main 

options for these additional windfall profits.

Component of sales proceeds Amount earned Use

Original projected profits $7 billion Endowment for operations

Windfall profits $1 billion PRG Trust

Subtotal profits $8 billion

Additional windfall profits $2.8 billion To be determined

Total profits $10.8 billion

Book value $4.2 billion Held as currency in the General Resources 

Account

Total proceeds $15 billion

Source: GAO analysis of IMF data.

Figure 3 shows the overall process for selling the 403.3 metric tons of gold, the total proceeds 

and profits earned from the sales, and the IMF’s plans for using the profits from the sales.

 18As of January 2012, 71 member countries are eligible for PRG Trust lending. Eligibility to borrow from the PRG 

Trust is generally based on two criteria: (1) a country has an annual per capita gross national income below the World 

Bank/International Development Association’s operational cutoff (which was $1,175 for financial year 2012) and (2) a 

country lacks the capacity to access international financial markets on a durable and substantial basis. 

19IMF Announces Unprecedented Increase in Financial Support to Low-Income Countries, Press Release No. 09/268 

(July 29, 2009). 

20IMF, Use of Gold Sale Profits – Initial Considerations and Options (Mar. 16, 2011). IMF, Use of Windfall Gold Sale 

Profits – Further Considerations (Aug. 4, 2011). 

21The total financing package is intended to raise $2.3 billion to subsidize the PRG Trust’s low-interest concessional 

lending with the balance coming from other sources, including $310-620 million (in end-2008 net present value terms) 

in bilateral contributions from member countries. The remainder of the PRG Trust subsidy resources in the financing 

package will come from (1) a transfer of resources from the PRG Trust Reserve Account (up to $950 million in end2008 net present value terms) and (2) delaying reimbursement to the General Resources Account for the costs of 

administering the PRG Trust for financial years 2010 through 2012 of approximately $230-310 million (in end-2008 

net present value terms). 
Page 9 GAO-12-766R IMF Gold Sales

Figure 3: The IMF’s 2009 and 2010 Gold Sales Process and Outcome

Note: In addition to the three main additional windfall options illustrated, the Board has 

considered other options. 

The IMF Is Proceeding with Its Endowment for Operations and Its Low-Income 

Countries Lending Plan

The IMF is working to establish the endowment for operations. The Board is expected to finalize 

the investment strategy and governance structure for the approximately $7 billion endowment 

for operations in calendar year 2012 with implementation in financial year 2013, according to 

IMF documents and staff. IMF and U.S. Treasury officials said that the Board understood when 

it endorsed the gold sales in 2008 that it would take the IMF time to implement the steps 

required for creating the endowment for operations. Those steps included completing the gold 

sales, which took over a year, and amending the Articles of Agreement to expand the IMF’s 

investment authority. In February 2011, IMF members accepted the investment authority 

amendment. According to the IMF, this amendment enables the Board to determine the 

investment strategy for the Investment Account and provides flexibility for the IMF to broaden its 

range of investments in order to enhance the average expected return on those investments. 

This amendment also provided for the transfer of the gold sales profits from the IMF’s General 

Resources Account to the Investment Account.
Page 10 GAO-12-766R IMF Gold Sales

According to IMF officials, the Board has discussed the endowment’s investment strategy over 

the past year. The committee report’s assumption that the endowment would yield a 3 percent 

rate of return on its investments over the long term is still guiding the Board’s consideration of 

the potential types of investments for the endowment. The IMF reported that Board members 

agreed to develop investment policies that will take into account a number of factors, including 

the IMF’s mandate to promote international financial stability, investment objectives, income 

needs, assessment of acceptable risk levels, and investment practices of other public 

institutions.22

IMF officials said that the Board is discussing the governance structure for the endowment for 

operations, which will depend, in part, on Board decisions regarding the investment strategy. 

The IMF reported that Board members agreed to create a governance structure in which the 

Board plays a central role in determining and monitoring implementation of investment 

policies.

The Board’s discussion of the endowment’s investment strategy has ranged from 

a portfolio based on the current Investment Account’s conservative asset allocation to one that 

is fully diversified with a broader range of asset classes, according to U.S. Treasury officials. 

The U.S. Treasury prefers a relatively conservative approach in order to protect the principal.

23 U.S. Treasury officials said that the governance structure should include a strong 

internal controls framework, and they are examining best practices used by other endowments, 

international financial institutions, and asset management firms. According to IMF officials, the 

IMF hired an external legal firm in 2008 to review potential conflict of interest issues and identify 

mitigation strategies, such as pursuing an investment strategy where the manager does not 

actively trade investments and hiring an external manager to oversee the endowment for 

operations. IMF staff said that they have recently re-engaged with this legal firm to discuss the 

investment options now under consideration. Any new rules and regulations for the endowment 

for operations will require a 70 percent majority vote from Board members.24

In February 2012, as part of the financing package for low-income countries,

The IMF Executive Board Has Approved Distribution of Profits for Low-Income 

Countries Lending

25 the Board 

approved the distribution of about $1 billion in IMF reserves attributable to gold sales windfall 

profits to help subsidize concessional lending to low-income countries through the PRG Trust.26

 22IMF, Report of the Managing Director to the International Monetary and Financial Committee on a New Income and 

Expenditure Framework for the International Monetary Fund (Apr. 9, 2008). 

However, the timeframe for the actual transfer is uncertain because it depends on additional 

action by IMF members.

23IMF, Report of the Managing Director to the International Monetary and Financial Committee on a New Income and 

Expenditure Framework for the International Monetary Fund (Apr. 9, 2008). 

24The amendment expanding the IMF’s investment authority, approved by members in February 2011, states that the 

IMF may use a member’s currency held in the Investment Account for investment as it may determine, in accordance 

with rules and regulations adopted by a 70 percent majority of the total voting power. 

25The IMF’s financing package for low-income countries also called for additional bilateral subsidy contributions. As 

of the end of 2011, 25 countries had pledged about $311 million in bilateral subsidy contributions for the PRG Trust. 

These countries include: Algeria, Argentina, Australia, Austria, Botswana, Canada, China, Denmark, Italy, Japan, 

South Korea, Kuwait, Malta, Morocco, Netherlands, Peru, Philippines, Qatar, South Africa, Spain, Sweden, 

Switzerland, Trinidad and Tobago, United Kingdom, and Uruguay. 

26IMF Executive Board Approves Distribution of US$1.1 Billion Gold Sales Profits to Facilitate Contributions to 

Support Concessional Lending to Low-Income Countries, Press Release No. 12/56 (Feb. 24, 2012). 
Page 11 GAO-12-766R IMF Gold Sales

To move the windfall profits into the PRG Trust, the IMF plans to use an indirect transfer 

mechanism because windfall profits are part of the IMF’s general resources and therefore are 

available for the benefit of all IMF members.27

IMF members have three main options for the use of the amount equivalent to their shares of 

the distribution. Members can request that the amounts be:

The PRG Trust resources, however, are only 

available for the benefit of low-income countries. The indirect mechanism requires the IMF to 

distribute the approximately $1 billion in windfall profits to all IMF members in proportion to their 

quota shares after first obtaining assurances from members representing at least 90 percent of 

the $1 billion that they will direct a corresponding amount to the PRG Trust.

• Transferred directly to one or more of the PRG Trust subsidy accounts.

• Placed in the newly created Interim Administered Account for Windfall Gold Sales Profits. 

The purpose of this account is to hold the amount proportional to member’s quota share 

while the member completes any domestic processes needed to direct it to one or more of 

the PRG Trust subsidy accounts. After the member completes the domestic processes, the 

member can request, for example, that the IMF transfer the resources from the Interim 

Administered Account to one of the PRG Trust subsidy accounts.

• Paid directly to them and not transferred to one of the PRG Trust accounts.

Members can also request that the IMF allocate resources toward more than one option. On 

April 30, 2012, the U.S. Treasury requested that the U.S. share of the resources, almost $192 

million, be transferred directly to the PRG Trust General Subsidy Account. According to U.S. 

Treasury officials, the United States has the authority to direct the funds to the PRG Trust.

The IMF has decided that it will not distribute the windfall profits until it has received assurance 

from the members that at least the equivalent of 90 percent of the windfall profits, about $978 

million, will be transferred to the PRG Trust. The IMF expects to receive satisfactory assurances

based on past experience using this type of mechanism. Because members can decide to 

transfer some, or all, of the amount of windfall profits proportional to their quota shares to their 

own accounts instead of the PRG Trust, the IMF is anticipating some loss of the windfall profits. 

IMF staff will provide the Board with periodic updates regarding progress toward reaching the 

goal of approximately $978 million, and the IMF Managing Director will notify the Board when 

the threshold is reached. At that time the actual distribution will go into effect. If the 90 percent 

threshold is not reached, the IMF will not transfer the windfall profits. According to IMF and 

Treasury officials, a new Board decision for the use of the windfall profits would then be required 

in order to authorize such a distribution or other action. As of July 9, 2012, 106 countries 

representing about 79 percent of the distribution have indicated that amounts equivalent to their 

share of the distribution should be transferred by the IMF, or will otherwise be provided to the 

PRG Trust.

28

 27According to IMF officials, under the general IMF legal framework, funds in the General Resources Account are 

uniformly available to all members and cannot be placed in the PRG Trust for the benefit of only low-income 

members. 

28The IMF periodically updates the number of countries that have pledged their share of the proposed distribution for 

low-income country lending: http://www.imf.org/external/np/fin/prgt/index.htm. 
Page 12 GAO-12-766R IMF Gold Sales

Following the completion of the gold sales in December 2010, the IMF placed the profits in the 

General Resources Account. In March 2011, after the amendment to the Articles of Agreement 

expanding the IMF’s investment authority entered into force, the IMF transferred these profits to 

the Investment Account. The Investment Account now contains two portfolios: the gold sales 

profits portfolio and the original non-gold sales profits portfolio funded by the transfer of 

currencies from the General Resources Account. The IMF invested the gold sales profits 

portfolio in short-term official deposits pending further action; such as the implementation of the 

endowment for operations and transfer of a portion of the windfall profits to the PRG Trust. This 

conservative investment strategy is designed to preserve the capital of the gold sales profits 

until the profits are placed in the endowment, according to IMF officials. This portfolio returned 

$3.1 million in financial year 2011 and is projected to return $48.6 million in financial year 2012. 

These earnings are currently in the Investment Account.

The IMF Board Is Considering Options for Using the Additional Windfall Profits 

from the Gold Sales but Has Not Made a Decision

The IMF Board is currently considering three main options that have generated the most 

support from members for distributing the $2.8 billion in additional windfall profits, or 

unanticipated earnings yielded from the gold sales. The Board held a preliminary discussion on 

the use of the additional windfall profits in April 2011 and met again in September 2011. For 

both meetings, IMF staff issued papers on the options for the additional windfall profits and 

trade-offs associated with these options.29

One option is to use the additional windfall profits to increase the size of the endowment for 

operations. This option would increase the size of the endowment from $7 billion to $9.8 billion, 

a 40 percent increase. According to the IMF, increasing the size of the endowment would help 

ensure a sustainable and diversified income base, as envisioned under the new income model, 

and create a larger income source for IMF operations. However, the IMF indicates that, absent 

future Board decisions, placing funds in the endowment is permanent and precludes using 

funds for other purposes.

A second option under consideration is to use the additional windfall profits to increase the 

capacity of the PRG Trust. The IMF estimates that pledging the additional windfall profits to the 

PRG Trust could create a sustainable and self-financed concessional lending framework for 

low-income countries beyond 2014 and limit the reliance on member contributions. Currently, 

the IMF projects that the PRG Trust is adequately financed to meet demand through 2014 due 

to the new financing package for low-income countries the Board approved in 2009. However, 

IMF documents project that the long-term annual demands on the PRG Trust through 2034 

could range from $1.7 billion to $2.9 billion, exceeding the projected available resources of 

approximately $1.1 billion per year in the PRG Trust after 2014. Such a shortfall could reduce 

the IMF’s concessional lending unless it requests member contributions for the PRG Trust. On 

the other hand, the IMF notes that a key concern for this option is that it would require a 

distribution of the additional windfall profits to members with prior agreement that most would 

transfer the resources to the PRG Trust. However, according to IMF staff, it may be time 

consuming to receive sufficient assurances that members will direct the transfer of resources to 

the PRG Trust. The IMF would ask members to follow the same process being used for 

 29IMF, Use of Gold Sale Profits – Initial Considerations and Options (Mar. 16, 2011). IMF, Use of Windfall Gold Sale 

Profits –Further Considerations (Aug. 4, 2011).
Page 13 GAO-12-766R IMF Gold Sales

distribution of the $1 billion in windfall profits, discussed earlier.30

A third option the IMF Board is considering is counting the additional windfall profits toward 

precautionary balances. According to the IMF, this option would increase the IMF’s reserve 

coverage given a sharp rise in IMF lending associated with the global financial crisis. In April 

2012 the Board conducted a review of the adequacy of precautionary balances and compared 

the findings to the last review the Board conducted in September 2010.

If the Board selects this 

option, the IMF would ask the United States to direct that the amount of the windfall profits 

proportional to the U.S. quota share, almost $500 million, be transferred to the PRG Trust. U.S. 

Treasury officials stated that they support this option.

31

Table 2: IMF Precautionary Balances, Outstanding Credit, and Commitments as of July 2010 and February 

2012

As table 2 illustrates, 

precautionary balances have increased as IMF commitments and credit outstanding have risen 

sharply.

IMF Resources July 2010 February 2012

Total IMF

precautionary balances

$11.1 billion $14.3 billion

Total IMF

outstanding credit

$73.8 billion $137.7 billion

Total IMF

commitments 

$218.7 billion $314.3 billion

Source: IMF data.

In September 2010, the IMF set the medium-term target for precautionary balances at $23 

billion.32

According to the IMF, these options are not mutually exclusive and the Board could consider

different combinations. For example, the Board could decide to use some of the additional 

windfall profits for the endowment for operations and some of the additional windfall profits for 

the PRG Trust using the indirect transfer mechanism. The Board has also considered other 

At that time, IMF projections indicated that precautionary balances would not reach this 

target until financial year 2016. The IMF estimates that counting the additional windfall profits 

toward precautionary balances would accelerate the current timetable for reaching the mediumterm target to 2015, a year earlier. According to the IMF, this would increase the IMF’s reserve 

coverage to guard against credit and financial risk. Furthermore, this option does not require 

distribution to members, and profits would remain in the IMF Investment Account. Also, 

implementing this option does not preclude a later Board decision to distribute the additional 

windfall profits to members for transfer to the PRG Trust after first obtaining sufficient 

assurances that members will transfer the resources to the trust. However, this option does not 

immediately provide funds to assist low-income countries. In addition, the IMF has stated that 

the current pace of precautionary balances accumulation is adequate.

 30Under this option, members would direct the additional windfall profits, or otherwise provide amounts as agreed, to 

the PRG Trust to be used as subsidy resources. 

31In September 2010 the Board reviewed precautionary balances as of July 2010, and in April 2012, it reviewed 

precautionary balances as of February 2012. 

32In April 2012 the IMF increased the indicative medium-term target to $31 billion. 
Page 14 GAO-12-766R IMF Gold Sales

options for providing support to low-income countries, such as providing additional interest relief 

on PRG Trust credits; augmenting the Post-Catastrophe Debt Relief Trust;33 or using the 

additional windfall profits to fund further debt relief, grants, or technical assistance. However, 

IMF officials stated that these alternative options have not generated significant support from 

members.34

As of May 2012, the IMF Board has not set a date for when it will decide how to distribute the 

additional windfall profits, according to U.S. and IMF officials. In September 2011, the IMF 

issued a Public Information Notice

The IMF Board Has Not Set a Date for Selecting an Option for Additional 

Windfall Profits

35 stating that the Board lacked consensus on how to use the 

additional windfall profits and thus made no decision. The notice also stated that in a year’s time 

the Board would revisit the use of the additional windfall profits. As of June 2012, IMF officials 

stated the Board has not decided how it will use the additional windfall profits and might not 

discuss this again until September 2012. According to IMF staff, the Board reviewed the status 

of the IMF’s precautionary balances and plans to review the IMF’s lending instruments for lowincome countries before reconvening discussions on the additional windfall profits. U.S. 

Treasury officials stated that because Board members have a wide divergence of views about 

the use of the additional windfall profits, they believe it is important to analyze each option and 

not rush a decision. However, U.S. Treasury officials stated that they would like other members 

to support the use of the additional windfall profits for low-income countries in the IMF.

36

 33The Post-Catastrophe Debt Relief Trust is a fund that allows the IMF to join international debt relief efforts for poor 

countries that are hit by the most catastrophic of natural disasters. The IMF established the PCDR Trust in June 

2010.

Currently, the additional windfall profits are in the IMF’s Investment Account with the other 

profits from the gold sales. Any interest earned from the additional windfall profits currently 

remains as part of the IMF’s Investment Account pending a Board decision. 

34IMF officials explained that the Board could in principle decide, with a 70 percent majority of total voting power, to 

make a distribution to members based on their quota share for the use of members if such a distribution was deemed 

appropriate. Treasury officials said the Board has not discussed this possibility.

35IMF Executive Board Considers Use of Windfall Gold Sale Profits, Public Information Notice No. 11/121 (Sept. 16, 

2011).

36Treasury officials stated that they support the use of the additional windfall profits for low-income countries in the 

IMF, including consideration for increased concessionality of lending for low-income country members. 
Page 15 GAO-12-766R IMF Gold Sales

Agency Comments

We provided the Treasury and the IMF a draft of this report for comment. Both the Treasury and 

the IMF provided written comments that are reproduced in enclosures I and II. In addition, 

Treasury and the IMF provided technical comments that we incorporated as appropriate. In 

commenting on this report, Treasury found that the report provided a very good overview of the 

plans for the use of the IMF’s gold sales proceeds, as well as of the considerations being 

discussed in the IMF regarding the disposition of the additional windfall profits. The IMF found 

that this report is largely factual and broadly agreed with its findings.

We are sending copies of this report to appropriate committees, the Secretary of the Treasury, 

and the Managing Director of the IMF. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me at (202) 512-9601 or 

melitot@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs 

may be found on the last page of this report. GAO staff who made major contributions to this 

report are listed in enclosure III. 

Sincerely yours, 

Thomas Melito

Director

International Affairs and Trade

Enclosures - 3 
Page 16 GAO-12-766R IMF Gold Sales

Enclosure I: Comments from the Department of the Treasury
Page 17 GAO-12-766R IMF Gold Sales
Page 18 GAO-12-766R IMF Gold Sales

Enclosure II: Comments from the International Monetary Fund
Page 19 GAO-12-766R IMF Gold Sales
Page 20 GAO-12-766R IMF Gold Sales

Enclosure III: GAO Contact and Staff Acknowledgments 

GAO Contact

Thomas Melito, (202) 512-9601 or melitot@gao.gov. 

Staff Acknowledgments

In addition to the contact named above, Cheryl Goodman, Assistant Director; Marisela Perez; 

Rachel Girshick; Mary Moutsos; Bruce Kutnick; Karen Deans; Martin de Alteriis; Etana Finkler; 

and Kara Marshall made key contributions to this report.

(320888)
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