IMF gold windfall helps poor countries now but won’t break cycle of debt
By subsidising cheaper loans to low-income countries, the IMF will keep them trapped by debt repayments for years
The countries that run the International Monetary Fund (IMF) have decided to spend a $2.7bn (£1.7bn) windfall on subsidising cheaper loans to low-income countries. This will represent a small financial benefit for countries taking such loans, but leaves unchallenged what such loans and debt exist to do.
In the mid-2000s, the IMF faced a financial crisis as middle-income countries such as Argentina and Brazil paid off their debts to the institution. The fund’s $1bn costs are paid for by the interest it charges on loans, and its income dried up as countries got off lending programmes, scarred by two decades of austerity and liberalisation.
The IMF decided to sell off some gold, invest the money earned, and use the proceeds to run the institution. Then the financial crisis hit; a crisis the IMF had not only systematically failed to warn of but had helped to precipitate through its praise of light-touch regulation. Lending by the IMF has ballooned along with its income: this year a profit of $2.2bn has been made on loans to countries including Pakistan, Jamaica, Ireland and Greece. And with gold prices rising, far more money than predicted came in from the sell-off, leaving a $2.7bn windfall. Continue reading