GAO

United States General Accounting Office

Testimony

Before the Joint Economic Committee

For Release on Delivery

Expected at

10:00 a.m., EDT

Wednesday,

July 21, 1999

INTERNATIONAL 

MONETARY FUND

Current Financial 

Situation

Statement of Harold J. Johnson, Associate Director 

National Security and International Affairs Division 

and 

Gary T. Engel, Associate Director, Accounting and 

Information Management Division

GAO/T-NSIAD/AIMD-99-254

Page 1 GAO/T-NSIAD/AIMD-99-254

Mr. Chairman and Members of the Committee:

We are pleased to be here today to discuss issues related to the 

International Monetary Fund’s (IMF)1

 financial situation. Our remarks will 

be based on our past work for this Committee2

 and our ongoing review 

required by the Omnibus Appropriations Act for fiscal year 1999.3

 The 

information we will present on our ongoing work is preliminary. We expect 

to complete our work and report to the congressional committees specified 

in the law by the end of September. As requested, today we will discuss 

• the Fund’s current situation regarding quota resources that the IMF 

obtains from its member countries and that is used for most of its 

financial assistance;

• the level of resources that the Fund has reported as actually available 

for lending; and

• other resources that the Fund potentially has available for conducting 

its operations, such as resources obtained through borrowing and the 

Fund’s gold holdings.

As you requested, we will discuss the IMF’s financial situation from both a 

current and historical perspective, highlighting the share of the IMF’s 

financial resources that have been contributed by the Group of Ten (G-10)4

countries. Also as requested, we will provide current and historical 

perspectives on the IMF’s gold holdings.

1

 The IMF is an organization of 182 member countries that was established to promote international 

monetary cooperation and exchange rate stability and to provide short-term lending to member 

countries that experience balance-of-payments difficulties.

2 International Monetary Fund: Observations on Its Financial Condition (GAO/T-NSIAD-98-220, July 23, 

1998).

3 The Omnibus Appropriations Act for fiscal year 1999 (P.L. 105-277, Oct. 21, 1998) appropriated about 

$18 billion for the IMF and required us to report on seven specific matters. We have divided this 

mandate into three reports: International Monetary Fund: Approach Used to Establish and Monitor 

Conditions for Financial Assistance (GAO/GGD/NSIAD-99-168, June 22, 1999); International Monetary 

Fund: Trade Policies of IMF Borrowers (GAO/NSIAD/GGD/99-174, June 22, 1999); and a report on the 

IMF’s financial operations that will be issued by September 30, 1999. The act requires the latter report 

to include the IMF’s current financial condition and certain current and historical information on its 

lending.

4

 The G-10 comprised 10 industrialized countries: Belgium, Canada, France, Germany, Italy, Japan, the 

Netherlands, Sweden, the United Kingdom, and the United States. Switzerland became the 11th 

member in 1984.

Letr
Page 2 GAO/T-NSIAD/AIMD-99-254

Summary For the financial year ended April 30, 1999, the IMF had about $287 billion 

in resources in its General Resources Account (GRA) obtained primarily 

from members’ quota. However, from the GRA IMF could use only about 

$195 billion, that is, the amount from members that are sufficiently strong 

economically to permit their currencies to be used for IMF operations. The 

remaining $92 billion was unusable for lending as it consisted of member 

currencies in weak positions and gold, which the IMF does not consider to 

be a liquid resource. Of the usable amount, about $118 billion had been 

lent, committed, or reserved leaving about $77 billion available for 

additional credit to IMF members and to meet members drawing on their 

reserves held by the IMF.

In addition to these resources, the IMF has several other resources 

potentially available for lending. The IMF's Articles of Agreement permit 

the Fund to borrow resources for its operations and transactions. The IMF 

has borrowed from member governments on multiple occasions and 

maintains two standing arrangements with groups of countries for use 

when quota resources are insufficient. These arrangements, the General 

Arrangements to Borrow (GAB) and the New Arrangements to Borrow 

(NAB), are standing credit lines worth a combined total of about

$46 billion. The IMF drew about $6 billion under these arrangements in 

July 1998 and December 1998 to finance lending to Russia and Brazil but 

repaid these obligations in March 1999.

As of April 30, 1999, the IMF had about 103 million fine ounces of gold 

holdings with a market value on that date of about $30 billion.5

 According 

to IMF’s Executive Board, the gold provides an underlying strength to IMF’s 

financial condition, can be used to replenish currency holdings if IMF does 

not have enough liquid resources to pay creditors, and is available for 

contingencies. However, gold is a non-interest-earning asset and is not 

deemed by the IMF to be a liquid resource. In the past, the IMF sold gold 

for a variety of purposes, most recently during 1976-80 to raise funds to 

support lending to poorer IMF member countries. In addition, during that 

same period, IMF restituted gold, that is, sold gold, to the members that had 

previously used gold to pay part of their quota. The IMF has determined 

that ownership rights to the Fund’s gold clearly reside with the IMF. 

However, under the Fund’s Articles of Agreement, members may have 

residual rights to the gold in two instances: if the Fund elects to restitute 

5

 As of July 14, 1999, the market value of the Fund’s gold holdings had declined to about $26 billion.

Letr
Page 3 GAO/T-NSIAD/AIMD-99-254

gold to members or if the Fund is liquidated. In the first instance, gold 

could be restituted to countries that were members on August 31, 1975, 

based on their relative quotas at that time. In the case of liquidation, gold 

may be restituted to members on the same basis after the Fund’s liabilities 

have been satisfied.

Background Before discussing the details of IMF’s financial situation, it is useful to give 

some background on members’ quotas, currency purchases and 

repurchases, and gold holdings.

Members’ Quotas Quotas are the membership dues that countries pay when they join IMF 

and when there is an approved increase in such dues. Quotas comprise the 

bulk of the Fund’s resources for providing financial assistance. Up to

25 percent of quotas must normally be paid in reserve assets, which are 

currencies that are freely usable in the principal foreign exchange markets 

(U.S. dollars, yen, euros, or the pound sterling) or “special drawing rights” 

(SDR).6

 The balance may be paid either in a country’s domestic currency or 

with noninterest-bearing promissory notes.7 The portion paid in freely 

usable currency, or SDRs, is referred to as the member’s reserve assets or 

initial reserve tranche position. This portion can be drawn by the member 

as needed based upon the representation of a balance of payments need. If 

withdrawn, these amounts are to be replaced with the country’s own 

currency; however, members are not obligated to replenish their reserve 

tranche positions by, for example, repurchasing their own currency with 

freely usable currency. 

Currency Purchases and 

Repurchases

When a member needs additional funds other than from its reserve tranche 

position, the country purchases the currency it needs from IMF with an 

equivalent amount of its own currency. The member later repurchases its 

6 The SDR is a unit of account that IMF has used since 1969 to denominate all its transactions. Its value 

comprises a weighted average of the values of four currencies: the U.S. dollar, Japanese yen, euros, and 

pound sterling. Because the value of the SDR relative to the U.S. dollar changes daily, the dollar value of 

amounts converted from SDRs also changes daily.

7

These promissory notes are made payable to IMF, are denominated in the member's domestic currency, 

and are held by the member's designated central bank or other designated depository. IMF views these 

notes as fully equivalent to its currency holdings because IMF can cash the notes on demand within 24 

hours to receive members' domestic currency. IMF members are obligated to maintain the SDR value 

of their quotas.
Page 4 GAO/T-NSIAD/AIMD-99-254

own currency using SDRs or other currency on terms established by IMF. 

Because IMF's financial assistance is in the form of currency purchases by 

member countries, it does not reduce the combined total of IMF’s currency 

holdings in terms of SDR equivalents; that is, the funds are not lent out.8

 

Instead, the composition of IMF’s currency holdings changes as 

“borrowers” replace the currency they purchase with their own currency. 

The relationship of IMF's holding of a member’s own currency to the 

member’s quota is an important one because it determines whether the 

member is a creditor, debtor, or in a neutral position with IMF. With some 

exceptions, currencies of members who are creditors are considered 

usable by IMF to finance transactions, while currencies of countries in a 

neutral borrowing or a debtor position are considered unusable by IMF. 

Appendix I lists IMF member countries classified as creditor, neutral, or 

borrower as of April 30, 1999. 

Gold Holdings The IMF holds about 103 million fine ounces of gold at designated 

depositories in four member countries.9

 The IMF acquired almost all of its 

gold prior to January 1, 1974, when its Articles of Agreement required that 

in most cases 25 percent of members' quota subscriptions be paid in gold 

and that certain transactions between member countries and the IMF be 

conducted in gold. In 1978, IMF's Articles of Agreement were amended to 

reflect the end of the fixed currency exchange rate system that had 

governed the international financial system up to that time. IMF’s Articles 

specify that based on an 85-percent majority vote of the total voting power 

of the Executive Board, the IMF may sell its gold on the open market and it 

may accept gold, at market prices, in discharge of a member’s obligations 

to the Fund. 

The IMF values its gold at SDR 35 per ounce (about $47 per ounce as of 

April 30, 1999), its value at the time of acquisition.10 Therefore, the IMF's 

gold holdings are valued on its balance sheet at SDR 3.6 billion (about

8

 The IMF considers its financing to low-income developing countries on concessional 

(below-market-interest-rate) terms to be lending. This lending is financed from a trust account, the 

Enhanced Structural Adjustment Facility (ESAF) Trust that is administered by the IMF outside of its 

General Department.

9

 These gold holdings represented about 9 percent of the world’s official gold holdings in March 1999.

10An exception is a small amount of gold (21,396 ounces) that Cambodia gave to IMF in December 1992 

in partial settlement of an overdue loan obligation. The IMF values this amount at SDR 5.1 million 

(about $6.8 million currently).
Page 5 GAO/T-NSIAD/AIMD-99-254

$5 billion). However, the IMF reports in a footnote to its financial 

statements the market value of its gold holdings as of its financial year-end. 

On April 30, 1999, the IMF estimated its gold was worth about $30 billion. 

Were the IMF to sell some of its gold, it is unclear how much money could 

be raised because the world price fluctuates and might be affected as a 

result of the sale. In addition, the IMF has stated it does not have legal 

authority to buy, lease, or swap gold.

Availability of IMF 

Resources

We will now discuss the resources that are available to the IMF to conduct 

its operations.

Current Size and Historical 

Growth of IMF’s Quota 

Resources

In January 1998, IMF Board of Governors11 approved a new quota12 level of 

SDR 212 billion ($288 billion), a 45-percent increase from the prior quota 

level of about SDR 146 billion. The quota became effective in January 1999 

when members having 85 percent of the total quotas consented to the quota 

increase. As of April 30, 1999, about $5 billion in quotas had not been paid 

to the IMF by 27 members. Specifically, seven member countries13 are 

currently in protracted arrears to the IMF for overdue obligations and are 

ineligible to consent to or pay their quota increases until they become 

current on their obligations. In addition, 20 other members14 have not 

individually consented to the quota increase and have until July 30, 1999, to 

do so.

Since the IMF was created in 1945, total quotas have grown substantially. 

This growth in IMF’s quotas came from increased membership, eight quota 

increases since 1959, and several special and ad hoc increases in quotas of

11 The Board of Governors is the highest decision-making body of the IMF.

12 A general quota increase involves all member countries. Quotas of individual members or groups of 

members may be increased at other times.

13 The Islamic State of Afghanistan, the Democratic Republic of Congo, Iraq, Liberia, Somalia, Sudan, 

and the Federal Republic of Yugoslavia (Serbia and Montenegro). The Federal Republic of Yugoslovia 

has not yet succeeded to the membership of the Socialist Federal Republic, which ceased to be a 

member in 1992. 

14 The Bahamas, Belgium, Brunei Darussalam, Estonia, Grenada, Guatemala, Haiti, Lao PDR, Lebanon, 

Luxembourg, the Marshall Islands, Micronesia, Namibia, Nepal, Qatar, St. Vincent and the Grenadines, 

San Marino, Turkmenistan, United Arab Emirates, and Uruguay.
Page 6 GAO/T-NSIAD/AIMD-99-254

individual members.15 During this period as reported by the IMF, the 

overall general quota increases ranged from about 34 percent to about

61 percent. The United States has historically contributed the largest 

amount of quota resources. However, the U.S. share of quotas has fallen, 

from a high of about 39 percent of total quotas in 1945 to the current level 

of 17.5 percent. The decrease in the U.S. share of quotas is primarily due to 

the expansion in IMF membership over the years—152 countries have 

joined the IMF since its founding. However, the absolute size of the U.S. 

quota has increased, from about $2.8 billion in 1945 to the current amount 

of about $50 billion.16 Figure 1 shows the historical growth in IMF quotas in 

both nominal and inflation-adjusted 1998 dollars. Also shown is the 

number of IMF members at the time of each quota review. 

Figure 1: Approved IMF Quotas at General Reviews, 1945-1998 

Note 1: Quota values are expressed in 1998 dollars using the average 1998 dollar/SDR exchange rate 

and an SDR price deflator. This deflator is constructed from the weighted average inflation rate of 

15 This includes seven general reviews and a 1958/59 special review. The first, second, third, and 10th 

general reviews resulted in no increases in quotas.

16 Other countries with large quotas include Japan and Germany (about $18 billion each, or 6 percent of 

quotas), and France and the United Kingdom ($14.5 billion each, or 5 percent of quotas).
Page 7 GAO/T-NSIAD/AIMD-99-254

those countries that comprise the SDR basket of currencies. For nominal dollars, we used the annual 

average dollar/SDR exchange rate. For the period prior to the creation of the SDR in 1969, we used 

the inflation rate of the United States because the IMF used the U.S. dollar as its unit of account. This 

methodology is preliminary and will be further developed in our subsequent report.

Note 2: For the 1995 10th General Review, the nominal dollars exceeded 1998 dollars due to a 

historically high SDR exchange rate.

Source: GAO analysis of IMF data.

The Fund relies primarily on quota resources to meet credit demands from 

its members. However, during some periods of great demand for IMF 

financing, the IMF has borrowed funds from member countries to use for 

its operations. In December 1978, 62 percent of IMF credit outstanding was 

funded from resources that IMF had borrowed.

Resources Currently 

Available for Lending 

In July 1998, we testified that about $43 billion of the $201 billion in total 

resources were available at that time for lending. As of April 30, 1999, 

about $77 billion of the $287 billion of the IMF’s total resources were 

available for lending. Today, using these updated figures, we will explain 

the step-by-step process that the IMF uses for making its estimate of 

resources available for lending. 

As before, the IMF begins with its total amount of resources, about

$287 billion as of April 30, 1999. Before considering IMF extended credit, 

about $195 billion, or 68 percent, is usable as indicated in figure 2.
Page 8 GAO/T-NSIAD/AIMD-99-254

Figure 2: IMF Estimated Usable and Unusable Resources, April 30, 1999

Note: The SDR/U.S. dollar exchange rate was SDR 1= $1.35123.

Source: GAO analysis of IMF data.

These usable resources consist of (1) holdings of currencies of members 

considered by the Executive Board to have sufficiently strong balance of 

payments and reserve positions for their currencies to be used in IMF 

operations and (2) IMF’s holdings of SDRs. The remaining $92 billion of 

resources is considered unusable. These resources cannot be used to 

finance IMF transactions because they are

• currencies of members that are using IMF resources and are therefore in 

a weak balance-of- payment or reserve position;

• currencies of members with relatively weak external positions who 

have drawn on their reserve position but have not borrowed;

• gold holdings of the Fund which require an 85-percent vote by the 

Executive Board to be used and are not considered by the IMF as liquid 

assets; or

• other non-liquid assets, such as buildings and facilities. 
Page 9 GAO/T-NSIAD/AIMD-99-254

The use of IMF credit by a member generally increases the IMF’s unusable 

resources and reduces its usable resources by equivalent amounts. From 

December 31, 1988, through April 30, 1999, a minimum of 29 members had 

currency that the IMF identified as sufficiently strong to be used in IMF 

operations.17 The maximum number of countries in this situation during 

this time period was 39. 

Usable Resources of the 

G-10 and Other IMF 

Members

Figure 3 shows the percentage of usable resources provided by the G-10 

and other IMF members as of April 30, 1999.

17 The level of usable currencies fluctuates as certain currencies strengthen over time and become part 

of the operational budget or as countries experience difficulties and thus are no longer included as part 

of the operational budget. In that instance, the entire stock of that country’s currency becomes 

unusable.
Page 10 GAO/T-NSIAD/AIMD-99-254

Figure 3: G-10 and Other IMF Members’ Usable Resources as of April 30, 1999

Source: GAO analysis of IMF data.

As of April 30, 1999, about 77 percent of the resources the IMF deemed 

usable were contributions made by the G-10. The United States is the 

single largest contributor of usable resources with 26 percent of the total. 

In addition, IMF’s holdings of SDRs amounted to about $5 billion that 

comprised about 2 percent of its usable currencies.18

18 SDRs can be held by, but not allocated to, the General Resources Account of the IMF. The GRA 

receives SDRs in partial payment of quotas, from charges on the use of IMF resources, and from 

repurchases. 
Page 11 GAO/T-NSIAD/AIMD-99-254

Available and Uncommitted 

IMF Resources

As of April 30, 1999, the IMF had $195 billion of usable resources to meet 

requests for funds and requests for use of creditor members’ reserve assets. 

The IMF takes several steps to calculate its available and uncommitted 

resources, referred to as liquid resources, as indicated in table 1.

Table 1: IMF Available and Uncommitted (Liquid) Resources as of April 30, 1999

Note: SDR conversion rate = $1.35123.

Source: GAO analysis and IMF data.

First, the IMF reduces its total usable resources of $195 billion by about

$81 billion, which is the amount of outstanding credit extended as of 

April 30, 1999. The IMF then reduces its available and usable resources of 

$114 billion as of April 30, 1999, by (1) $18 billion of commitments made to 

countries needing assistance and (2) a minimum working balances reserve 

of $19 billion, which is the amount IMF officials believe is needed to make 

payments in specified currencies. IMF’s Executive Board set the minimum 

working balances at 10 percent of the quotas of members in a strong 

external and reserve position. This leaves about $77 billion available for 

additional credit to IMF members and to meet members drawing on their 

reserves held by the IMF. Figure 4 shows a breakdown of IMF’s liquid 

resources as of April 30, 1999.

U.S. dollars in billions

Total usable resources (before IMF extends 

credit) $195

Less: Resources used (credit extended) (81)

Available and usable resources $114

Less: Commitments (18)

Less: Minimum working balances (19)

Available and uncommitted resources $77
Page 12 GAO/T-NSIAD/AIMD-99-254

Figure 4: IMF Liquid Resources as of April 30, 1999

Note: The SDR/U.S. dollar exchange rate was SDR 1= $1.35123.

Source: GAO analysis of IMF data.

Over the past 20 years the amounts of usable and unusable resources have 

varied. Usable resources over the period averaged about 60 percent of 

total resources, with a significant portion coming from the G-10. As 

figure 5 shows, during this period, the United States was the major 

contributor of usable resources, except during 1978 and 1979 when it was 

deemed insufficiently strong and was excluded from IMF’s operational 

budgets.19

19 Following the depreciation of the U.S. dollar in the fall of 1978 the United States mobilized resources 

including $5 billion from the Fund to defend the dollar.
Page 13 GAO/T-NSIAD/AIMD-99-254

Figure 5: Usable and Unusable Quota Resources, End of Calendar Years 1978-98, and April 30, 1999

Source: GAO analysis of IMF data.

IMF Borrowing Historically, IMF has borrowed only from official sources to supplement its 

resources obtained from members’ quotas. This includes member 

countries and their central banks, one country that was not a member at 

the time the funds were borrowed and its central bank, and the Bank for 

International Settlements.20 The Fund has not borrowed from private 

capital markets, although IMF’s Articles of Agreement permit it to do so. 

According to IMF, the preference for borrowing from official rather than 

private sources reflects the nature of the Fund as a cooperative, 

20 The Bank for International Settlements is an organization of central banks that is based in Basle, 

Switzerland. It is the principal forum for consultation, cooperation, and information exchange among 

central bankers.
Page 14 GAO/T-NSIAD/AIMD-99-254

intergovernmental institution whose basic purpose is to facilitate the 

overall adjustment process by using surpluses to assist countries in deficit 

positions.

The IMF first activated its General Arrangements to Borrow (GAB)21 credit 

lines in 1964. In the 1970s during periods of large payment imbalances, 

borrowed resources financed some 45 to 62 percent of IMF credit between 

1974 and 1979 and 40 to 50 percent between 1980 and 1985. According to a 

U.S. Treasury official, some of the borrowings were necessary to satisfy 

Reserve Tranche drawings by industrial countries, including the United 

States. Since 1985, the IMF decreased its borrowing substantially and 

between 1992 and 1997 did no borrowing. 

The IMF resumed borrowing in July 1998, when it borrowed about

$2 billion under the GAB to finance credit assistance to Russia. Also, in 

December 1998, the IMF borrowed about $4 billion from its recently 

established credit line, the New Arrangements to Borrow (NAB),22 in 

connection with a 3-year credit arrangement with Brazil. Both of these 

amounts were repaid in March 1999, shortly after the IMF received funds 

from the recent quota increase. 

IMF Gold Holdings IMF policy stresses the importance of gold as a reserve asset for the Fund. 

In 1995, the IMF’s Executive Board reviewed the Fund’s position on holding 

gold as a reserve asset and established several governing principles for 

managing its gold reserves. These principles state that

• gold provides a “fundamental strength” to the IMF;

• gold provides operational maneuverability in the IMF’s use of its 

resources and adds credibility to its precautionary balances;

• gold should be held to meet unforeseen contingencies; 

• the IMF has a responsibility to avoid disruption to the functioning of the 

gold market; and

• profits from gold sales should be retained and invested and only the 

income from such investments should be used for agreed upon 

purposes.

21 The GAB is an arrangement of credit lines that the IMF maintains with G-10 countries for use in 

emergencies.

22 The NAB is an enlarged version of the GAB with 25 members. Together, GAB and NAB had a 

combined total about $46 billion as of April 30, 1999.
Page 15 GAO/T-NSIAD/AIMD-99-254

These governing principles reaffirm a long-held belief by the Fund that gold 

forms a key part of the organization’s reserve structure.23

IMF Has Sold and Restituted 

Gold 

From 1976 through 1980, the IMF reduced its gold holdings by one-third but 

has not disposed of any gold since then. Sales of gold on the open market 

or restitution of gold to the members who contributed it have been used for 

a variety of purposes

• Sales for replenishments: On several occasions in the late 1950s and in 

the 1960s, the IMF sold gold to replenish its holdings of usable 

currencies.

• Sales to offset operating deficits: To generate income to offset 

operational deficits, the IMF sold gold to the United States and invested 

the proceeds in U.S. government securities. A significant buildup of 

reserves through income from charges to members prompted the IMF to 

reacquire the gold from the U.S. government in the early 1970s.

• Gold auctions: Between April 1976 and May 1980, the IMF disposed of

25 million ounces of gold to finance an IMF trust fund, which was 

created in 1976 to support concessional lending to low-income 

countries. 

• Restitution of gold to members: Between 1977 and 1980, the IMF 

restituted a total of 25 million ounces of gold, in four annual 

installments, to members in proportion to their quota shares as of 

August 31, 1975. For the United States, this translated into the 

acquisition of 5.74 million ounces of gold. 

According to IMF officials, the proposal for an IMF trust fund to provide 

balance of payment support to developing countries originated with U.S. 

officials in late 1974. This proposal coincided with Treasury’s desire to 

diminish gold’s role in the international monetary system. As a result, 

according to the IMF, U.S. Treasury officials proposed the sale of 25 million 

ounces of the Fund’s gold to establish a trust fund to finance balance of 

payment support to low-income countries. The restitution of an additional 

25 million ounces of gold to members was viewed as a necessary incentive 

for industrialized members to approve the sale of 25 million ounces to 

23 The analytical support for these governing principles is contained in a 1995 nonpublic IMF report. 

Significantly, this study cites the U.S. Gold Commission report of 1982 as partial justification for the 

Fund’s approach to holding gold as a reserve asset. U.S. Treasury officials confirmed that this 1982 

study remains the basis for U.S. gold policy and is similar in many respects to the Fund’s policies on 

gold. 
Page 16 GAO/T-NSIAD/AIMD-99-254

establish the trust fund. The gold sold on the open market netted

$5.7 billion in proceeds, of which $1.1 billion was deposited in the GRA as 

capital value (that is, the value at the price of SDR 35 per ounce). The 

remaining $4.6 billion was placed in the IMF trust fund for the benefit of 

developing countries. From this amount, $1.3 billion was distributed to 

developing countries in proportion to their IMF quotas, and the remaining 

$3.3 billion was made available for IMF trust fund concessionary lending.24 

Figure 6 shows changes to the IMF’s gold holdings since its inception. The 

steep rise in gold holdings in the early 1970s was due to the relatively large 

fifth general quota increase and the reacquisition of gold previously sold to 

the United States. Under this and earlier quota increases, member 

countries were generally required to pay up to 25 percent of their quota 

increase in gold.

24 As explained by an IMF official, the Executive Board made a key policy decision in 1980 to retain all 

trust fund repayments for future concessional lending programs. As a result, no loan repayments have 

been directed to the General Resource Account and no repayments have been forgiven. Subsequent 

repayments of trust fund loans have been used in different ways. They were used to establish a subsidy 

account for the Supplementary Financing Facility, to finance all Structural Adjustment Facility 

operations, and to finance the ESAF reserve account and a small amount of the ESAF subsidy account.
Page 17 GAO/T-NSIAD/AIMD-99-254

Figure 6: IMF Gold Holdings Since Inception

Source: IMF International Financial Statistics.

Recent Proposals to Sell 

Some of IMF’s Gold

Several proposals have been made in recent years to sell some of the IMF's 

gold. However, the U.S. Congress must approve a U.S. Executive Director 

vote in favor of the Fund’s sale of gold in certain circumstances.25 In 1993, 

the IMF’s Board of Governors agreed to, following the approval of the U.S. 

Congress, the contingent sale of up to 3 million fine ounces of gold to cover 

ESAF potential loan defaults. The gold would be sold if it were determined 

that the resources in the ESAF Trust Reserve Account (plus other available 

means of financing) were insufficient to meet payments to be made from 

that account to ESAF lenders. The IMF has since deemed it unlikely that 

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

19481950195219541956195819601962196419661968197019721974197619781980198219841986198819901992199419961998

Year

Ounces

25 Under U.S. law, the executive branch may not approve IMF dispositions of gold over 25 million 

ounces benefiting individual IMF member countries or particular segments of the IMF membership 

unless the Congress by law authorizes the disposition (22 U.S.C. 286c). According to a U.S. Treasury 

official, because 25 million ounces of gold were sold between 1976 and 1980 for the benefit of a 

particular segment of IMF membership, any further sale of gold for the benefit of a particular segment 

of IMF membership requires statutory approval. According to Treasury, congressional approval would 

not be required if the sale of gold were for restitution or to replenish IMF resources.
Page 18 GAO/T-NSIAD/AIMD-99-254

such a gold sale will be needed because sufficient balances exist in the 

ESAF Trust Reserve Account.26

In late 1996, the IMF proposed that if a financing gap remained in the ESAF 

and Heavily Indebted Poor Countries (HIPC) Debt Initiatives after all 

efforts had been made to obtain maximum bilateral contributions, the Fund 

would sell up to 5 million ounces of gold to make up the funding shortfall. 

According to an October 1996 Congressional Research Service report, the 

IMF had the requisite votes to adopt this proposal; however, reported 

opposition by Germany, Switzerland, and Italy led to an indefinite delay.

More recently, the IMF proposed to sell up to 10 million ounces of gold that 

was endorsed by the G-727 at Cologne, Germany, in response to growth in 

the level of debt relief anticipated for ESAF and HIPC. Figure 7 illustrates 

the proposed distribution of the gold sales.

26 Under 22 U.S.C. 286e-1, the Secretary of the Treasury is authorized to instruct the U. S. Executive 

Director of the IMF to vote to approve the Fund’s pledge to sell, if needed, up to 3,000,000 ounces of the 

Fund’s gold, to restore the resources of the reserve account of the ESAF Trust to a level that would be 

sufficient to meet ESAF obligations. 

27 The G-7 consists of seven major industrialized countries (Canada, France, Germany, Italy, Japan, the 

United Kingdom, and the United States) that consult on general, economic, and financial matters.
Page 19 GAO/T-NSIAD/AIMD-99-254

Figure 7: Proposed Distribution of Gold Sales

Source: IMF and the Treasury.

In contrast to the earlier sale of 25 million ounces of gold, the more recent 

proposals to sell gold earmark the interest on the investment of gold sale 

profits to help fund the IMF’s share of debt relief for poor countries. This 

approach is consistent with the IMF’s 1995 governing policy on gold that 

capital profits from gold sales should be retained and only the income 

resulting from the investment of these profits should be used for 

agreed-upon purposes.

Provisions in IMF’s Articles 

of Agreement Affecting the 

Sale or Management of Gold

The IMF’s Articles of Agreement detail how the IMF may sell gold and use 

the proceeds from such sales. The Articles specify that based on an 

85-percent majority vote of the total voting power of the Executive Board, 

the IMF may sell gold on the open market and may accept gold, at market 
Page 20 GAO/T-NSIAD/AIMD-99-254

prices, in discharge of a member’s obligations to the Fund. According to an 

IMF official, the IMF is not authorized to engage in any other gold 

transactions—including loans, leases, or use of gold as collateral—because 

they are not expressly allowed under the IMF’s Articles of Agreement. 

More specifically, IMF documents state that the Articles of Agreement 

permit only the transfer of ownership rights to the gold for a price. 

According to IMF officials, because loans, leases, swaps, or the use of gold 

as collateral do not require a permanent transfer of ownership rights, they 

are not permitted by the Articles of Agreement. Some central banks have 

increasingly decided to manage their gold reserves by loaning, leasing, or 

swapping their gold to earn a small profit. The World Gold Council 

estimates that 70 central banks currently manage their gold reserves in this 

manner. Although U.S. law does not preclude the loaning, leasing or 

swapping of its gold holdings, the United States has chosen only to 

monetize its gold.28

When gold is sold by the IMF, the original capital value of the gold of SDR 

35 per fine ounce is deposited in the GRA and becomes immediately 

available for the general operations of the Fund. Gold sale profits (that is, 

the sale price above the capital value of the gold) are generally deposited in 

a separate account called the Special Disbursement Account (SDA), which 

provides the primary financial framework for handling such profits. Gold 

sale profits in the SDA may be transferred to specialized accounts (such as 

the ESAF/HIPC Reserve Trust Account) or they may be transferred to the 

GRA for use in the Fund’s general operations.29 

Specifically, the Articles of Agreement state that based on majority votes by 

the Executive Board that assets held in the SDA may be used

• to make transfers to the GRA for immediate use in the Fund’s operations 

(70 percent of total voting power);

• for operations and transactions that are not authorized by other 

provisions of the articles but are consistent with the purposes of the 

Fund including balance of payments assistance to developing members 

(85 percent of total voting power);

28 The Secretary of the Treasury is authorized to issue gold certificates to the Federal Reserve which 

issues an equivalent credit (at the official price of gold) to a Treasury deposit account. The 1998 

Financial Report of the United States Government notes that $11 billion of the U.S. gold reserve has 

been monetized in this fashion.

29 Gold sale profits would be returned to the SDA when the specialized account is closed.
Page 21 GAO/T-NSIAD/AIMD-99-254

• for proportionate distribution of resources authorized for the purpose of 

providing balance of payments assistance to those developing members 

that were members on August 31, 1975, based on their respective quotas 

on that date (85 percent of total voting power); and

• to transfer SDA resources to the investment account (85 percent of total 

voting power).30

The IMF has determined that ownership rights to the Fund’s gold clearly 

reside with the IMF.31 Under the Fund’s Articles of Agreement, members 

may have residual rights to the gold in two instances: if the Fund elects to 

restitute gold to members or if it elects to liquidate the Fund. In the first 

instance, gold could be restituted to all countries that were members on 

August 31, 1975, based on their quotas at that time.32 In the latter case, gold 

may be restituted to members on the same basis after the Fund’s liabilities 

have been satisfied. If the IMF elected to restitute its current stock of over 

100 million ounces of gold, the United States would receive almost

24 million ounces of gold based on the formula described in the Articles. 

Mr. Chairman, that concludes our prepared remarks. We would be happy 

to respond to any questions you or other members of the Committee may 

have.

Contacts and 

Acknowledgments

For future contacts regarding this testimony please contact Mr. Harold J. 

Johnson at (202) 512-4128 or Gary T. Engel at (202) 512-8815. Individuals 

making key contributions to this testimony included Phyllis L. Anderson, 

Thomas Melito, Roger R. Stoltz, Bruce Kutnick, David T. Genser, Charles E. 

Norfleet, Barbara R. Shields, Michael Tenkate, Norman T. Thorpe, and Kate 

Woodward.

30 The IMF has never activated the investment account because, according to IMF officials, the Fund 

has not had the available excess liquidity allowing for the transfer of such resources to the investment 

account.

31 On May 20, 1947, an IMF Executive Board Decision No. 170-3 stated that “gold and currency 

subscribed to the Fund are clearly within its unrestricted ownership. They do not belong in any way to 

the subscriber.”

32 Art. V, sect. 12 (e).
Page 22 GAO/T-NSIAD/AIMD-99-254

Appendix I

IMF Members’ Reserve Tranche Positions ApendxIi

Each member of the IMF is assigned a quota. Twenty-five percent of the 

member’s quota subscription is normally payable in reserve assets 

(originally in gold, and since the second amendment of the Articles of 

Agreement in 1978, in SDRs or currencies of other members considered 

strong by the IMF), and the remainder is payable in the member’s own 

currency. These reserve assets are considered to be part of the member’s 

international reserves and can be withdrawn by the member upon 

representation of a balance of payments need. If withdrawn, members do 

not have to replenish their reserve asset drawings, but they must replace 

the withdrawn amount with their currency.

Reserve tranche positions are liquid claims of members on the IMF that 

arise in part from members’ reserve asset payments. In addition, reserve 

tranche positions arise from the sale by the IMF of the currencies of 

members considered to be in strong external positions. We reviewed each 

member’s reserve tranche position based upon data in IMF’s International 

Financial Statistics as of April 30, 1999, and separated IMF members into 

three categories: creditors, neutral, and borrowers 

• Creditors have the highest reserve tranche positions that exceed

25 percent of their quota. With a reserve tranche position of $23 billion 

and a quota of $50 billion, the United States had the largest reserve 

tranche position. Other G-10 members’ reserve tranche positions and 

quotas approximate $42 billion and $102 billion, respectively. During the 

past 20 years, the IMF has considered most of the G-10 members’ 

currency to be strong enough for use in IMF’s operations. As of April 30, 

1999, the reserve tranche positions and quotas of members considered 

in a strong position totaled about $81 billion and $189 billion, 

respectively. (see table I.1)

• Neutral members are those who may have drawn on all or part of their 

own reserve tranche positions but did not have IMF borrowings 

outstanding. The reserve tranche positions of these members are 

between zero to 25 percent of their quotas. About 60 percent of these 

members actually had zero reserve tranche positions, while those with 

partial reserve tranches balances totaled about $3 billion as of April 30, 

1999. Neutral members had quotas of $31 billion as of April 30, 1999. 

(see table I.2)

• Borrowing members are users of IMF credit. Most of these members do 

not have any reserve tranche positions, and all of these members have 

withdrawn at least part of their reserve assets. As of April 30, 1999, the 

reserve tranche positions and quotas of these members totaled $2 billion 

and $61 billion, respectively. (see table I.3)
Appendix I

IMF Members’ Reserve Tranche Positions

Page 23 GAO/T-NSIAD/AIMD-99-254

Table I.1: Creditor Members’ Reserve Tranche Positions and Quotas as of April 30, 

1999

In billions of dollars

Creditor Countriesa

Reserve

Tranche

Position Quota

Reserve Tranche

Position as

Percent of Quota

United States $23.05 $50.20 46

Japan 8.26 17.99 46

Germany 7.72 17.58 44

France 5.39 14.51 37

United Kingdom 5.30 14.51 37

Italy 3.99 9.53 42

China 3.38 6.33 53

Canada 3.00 8.61 35

Netherlands 2.94 6.98 42

Switzerland 2.10 4.67 45

Spain 1.90 4.12 46

Belgium 1.72 4.19 41

Australia 1.56 4.37 36

Sweden 1.30 3.24 40

Austria 1.09 2.53 43

Norway 1.03 2.26 46

Denmark 0.96 2.22 43

Malaysia 0.82 2.01 41

Finland 0.73 1.71 43

Colombia 0.57 1.05 55

Chile 0.55 1.16 48

Libya 0.53 1.52 35

Portugal 0.53 1.17 45

Ireland 0.48 1.13 43

Singapore 0.44 1.17 38

New Zealand 0.44 1.21 36

Greece 0.34 1.11 30

United Arab Emirates 0.26 0.53 48

Slovenia 0.09 0.31 30

Bahrain 0.08 0.18 45

Oman 0.07 0.26 26

Malta 0.05 0.14 39

(continued)
Appendix I

IMF Members’ Reserve Tranche Positions

Page 24 GAO/T-NSIAD/AIMD-99-254

a

GAO defines creditor countries as those members whose reserve tranche position in the Fund 

exceeds 25 percent according to IMF’s publicly available International Financial Statistics.

Table I.2: Neutral Members’ Reserve Tranche Positions and Quotas as of April 30, 

1999

Creditor Countriesa

Reserve

Tranche

Position Quota

Reserve Tranche

Position as

Percent of Quota

Botswana 0.04 0.09 44

Total $80.70 $188.57

In billions of dollars

Countries in Neutral Positiona

Reserve

Tranche

Position Quota

Reserve Tranche

Position as

Percent of Quota

Saudi Arabia $1.33 $9.44 14

Kuwait 0.45 1.87 24

Poland 0.23 1.85 13

Hungary 0.17 1.40 12

Egypt 0.16 1.28 13

Morocco 0.10 0.79 12

Israel 0.09 1.25 7

Cyprus 0.05 0.19 25

Brunei Darussalam 0.05 0.20 24

Qatar 0.04 0.26 14

Paraguay 0.03 0.13 21

Costa Rica 0.03 0.22 12

Lebanon 0.03 0.20 13

Iceland 0.03 0.16 16

Luxembourg 0.02 0.18 12

Fiji 0.02 0.09 21

Mauritius 0.02 0.14 14

Swaziland 0.01 0.07 13

Bahamas,The 0.01 0.13 7

Suriname 0.01 0.12 7

Afghanistan, I.S. of 0.01 0.16 4

Barbados 0.01 0.09 7

Belize 0.01 0.03 23

Vanuatu 0.00 0.02 15

San Marino 0.00 0.01 24

(continued)
Appendix I

IMF Members’ Reserve Tranche Positions

Page 25 GAO/T-NSIAD/AIMD-99-254

a

GAO defines countries in neutral positions as those members whose reserve tranche position in the 

Fund is 25 percent or less but did not have IMF borrowings outstanding according to IMF’s publicly 

available International Financial Statistics.

Countries in Neutral Positiona

Reserve

Tranche

Position Quota

Reserve Tranche

Position as

Percent of Quota

Tonga 0.00 0.01 25

Maldives 0.00 0.01 19

Bhutan 0.00 0.01 16

Samoa 0.00 0.02 6

Solomon Islands 0.00 0.01 5

St.Vincent and Grenadines 0.00 0.01 8

South Africa 0.00 2.52 0

Nigeria 0.00 2.37 0

Namibia 0.00 0.13 0

Trinidad and Tobago 0.00 0.45 0

Dominica 0.00 0.01 0

Syrian Arab Republic 0.00 0.40 0

Eritrea 0.00 0.02 0

Turkmenistan 0.00 0.06 0

Czech Republic 0.00 1.11 0

Antigua and Barbuda 0.00 0.02 0

Cape Verde 0.00 0.01 0

Palau 0.00 0.00 0

St. Lucia 0.00 0.02 0

Marshall Islands 0.00 0.00 0

Micronesia, Federated States of 0.00 0.00 0

Angola 0.00 0.39 0

El Salvador 0.00 0.23 0

Grenada 0.00 0.01 0

Guatemala 0.00 0.21 0

Iran, I.R. of 0.00 2.02 0

Iraq 0.00 0.68 0

Kiribati 0.00 0.01 0

Myanmar 0.00 0.35 0

Seychelles 0.00 0.01 0

Total $2.89 $31.42
Appendix I

IMF Members’ Reserve Tranche Positions

Page 26 GAO/T-NSIAD/AIMD-99-254

Table I.3: Borrower Members’ Reserve Tranche Positions and Quotas as of April 30, 

1999

In billions of dollars

Borrower Countriesa

Reserve

Tranche

Position Quota

Reserve Tranche

Position as

Percent of Quota

India $0.66 $5.62 12

Venezuela 0.43 3.59 12

Korea 0.28 2.21 13

Indonesia 0.20 2.81 7

Turkey 0.15 1.30 12

Philippines 0.12 1.19 10

Algeria 0.11 1.70 7

Sri Lanka 0.06 0.56 12

Ghana 0.06 0.50 11

Bulgaria 0.04 0.87 5

Tunisia 0.03 0.39 7

Ecuador 0.02 0.41 6

Uruguay 0.02 0.30 7

Kenya 0.02 0.37 5

Panama 0.02 0.28 6

Tanzania 0.01 0.27 5

Bolivia 0.01 0.23 5

Mali 0.01 0.13 9

Honduras 0.01 0.17 7

Niger 0.01 0.09 13

Burkina Faso 0.01 0.08 12

Ethiopia 0.01 0.18 5

Armenia 0.01 0.12 7

Burundi 0.01 0.10 8

Nepal 0.01 0.10 8

Lesotho 0.00 0.05 10

Albania 0.00 0.07 7

Malawi 0.00 0.09 3

Benin 0.00 0.08 4

Gambia, The 0.00 0.04 5

Senegal 0.00 0.22 1

(continued)
Appendix I

IMF Members’ Reserve Tranche Positions

Page 27 GAO/T-NSIAD/AIMD-99-254

Borrower Countriesa

Reserve

Tranche

Position Quota

Reserve Tranche

Position as

Percent of Quota

Djibouti 0.00 0.02 7

Russian Federation 0.00 8.03 0

Comoros 0.00 0.01 6

Congo, Republic of 0.00 0.11 1

Cameroon 0.00 0.25 0

Chad 0.00 0.08 1

Togo 0.00 0.10 0

Zimbabwe 0.00 0.48 0

Mexico 0.00 3.49 0

Cote d'Ivoire 0.00 0.44 0

Bangladesh 0.00 0.72 0

Croatia 0.00 0.49 0

Central African Republic 0.00 0.08 0

Guinea 0.00 0.14 0

Pakistan 0.00 1.40 0

St. Kitts and Nevis 0.00 0.01 1

Gabon 0.00 0.21 0

Papua New Guinea 0.00 0.18 0

Haiti 0.00 0.08 0

Liberia 0.00 0.10 0

Madagascar 0.00 0.17 0

Sierra Leone 0.00 0.14 0

Thailand 0.00 1.46 0

Belarus 0.00 0.52 0

Zambia 0.00 0.66 0

Lithuania 0.00 0.19 0

Yemen, Republic of 0.00 0.33 0

Sudan 0.00 0.23 0

Georgia 0.00 0.20 0

Azerbaijan 0.00 0.22 0

Ukraine 0.00 1.85 0

Mozambique 0.00 0.15 0

Estonia 0.00 0.06 0

Vietnam 0.00 0.44 0

Kazakhstan 0.00 0.49 0

Latvia 0.00 0.17 0

(continued)
Appendix I

IMF Members’ Reserve Tranche Positions

Page 28 GAO/T-NSIAD/AIMD-99-254

a

GAO defines borrower countries as those members whose reserve tranche position in the Fund is 25 

percent or less and had IMF borrowings outstanding according to IMF’s publicly available International 

Financial Statistics.

Lert

Borrower Countriesa

Reserve

Tranche

Position Quota

Reserve Tranche

Position as

Percent of Quota

Moldova 0.00 0.17 0

Uzbekistan 0.00 0.37 0

Kyrgyz Republic 0.00 0.12 0

Mongolia 0.00 0.07 0

Dominican Republic 0.00 0.30 0

Jordan 0.00 0.23 0

Tajikistan 0.00 0.12 0

Guinea-Bissau 0.00 0.02 0

Argentina 0.00 2.86 0

Bosnia & Herzegovina 0.00 0.23 0

Brazil 0.00 4.10 0

Cambodia 0.00 0.12 0

Congo, Dem. Rep. 0.00 0.39 0

Equatorial Guinea 0.00 0.04 0

Guyana 0.00 0.12 0

Jamaica 0.00 0.37 0

Lao P.D.R. 0.00 0.05 0

Macedonia,fmr.Yug.Rep. 0.00 0.09 0

Mauritania 0.00 0.09 0

Nicaragua 0.00 0.18 0

Peru 0.00 0.86 0

Romania 0.00 1.39 0

Rwanda 0.00 0.11 0

Sao Tomé and Príncipe 0.00 0.01 0

Slovak Republic 0.00 0.48 0

Somalia 0.00 0.06 0

Uganda 0.00 0.24 0

Total $2.36 $61.04

(711372) Lert
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