(dpa) - The executive board of the International Monetary Fund (IMF) approved the sale of 403.3 tons of gold from its reserves as part of a financial overhaul to close a projected budget gap of 400 million dollars over the next two to three years.
Under the plan approved Monday, the IMF said it would sell about 12 per cent of its gold reserves over several years to prevent market disruptions, raising an estimated 11 billion dollars.
The Washington-based institution has fallen into financial straits because it relies on lending to generate income. However, its income from interest payments has fallen sharply because many of the poorer and emerging countries that drew on its aid in the past have built up financial reserves of their own or are looking to other lenders - with fewer strings attached to their loans - to fund development.
To close the budget deficit, the IMF board approved the gold sale, budget cuts and an overhaul that would see it shift from its reliance on lending to one of income-generating investments. The gold sale, for instance, would, in part, be used to purchase government and corporate bonds.
"The fund's membership took a fundamental step that will enable the institution to remain an independent, astute, and dynamic international organization," IMF Managing Director Dominique Strauss-Kahn said.
"We agreed to replace an obsolete and unviable income model with a modern and more predictable model in line with other international financial institutions," he added. "We also agreed on a medium-term budget proposal with sharp spending cuts of 100 million US dollars over the next three years."
The gold sale would require the approval of the US Congress, and other elements of the reforms would require legislative action in most of the IMF's 185 member countries, the IMF said.