WASHINGTON: The International Monetary Fund said its executive board on Friday endorsed the sale of 403 tons of gold, worth an estimated $13 billion, to boost its lending capacity to poor countries.

The IMF said in a statement the sales would be ‘in a volume strictly limited to 403.3 metric tons, with these sales to be conducted under modalities that safeguard against disruption of the gold market.The 186-nation institution said the decision was a core element of a new income model to make it less dependent on its lending revenue to cover expenses, such as surveillance of members’ economic and financial policies, that the board had approved in April 2008.

The Group of 20 key developed and developing countries, at their April summit in London, agreed the gold sales should allow the IMF to offer favourable conditions on loans to the poorest countries.

The IMF decision comes ahead of a two-day G20 summit in Pittsburgh, Pennsylvania, that opens next Thursday.

Hosted by US President Barack Obama, leaders are to discuss efforts to recover from the worst global recession in six decades and financial regulatory reform.

The new income model is designed to provide the fund with more diverse income sources that are better aligned with the variety of functions performed by the fund, with a central component being the funding of an endowment with the profits from these limited gold sales, the 186-nation institution said.

The IMF said the sales will also increase the fund’s resources for lending to low-income countries, a strategy that won board backing in July.

I am delighted that the executive board has given its overwhelming backing to a strictly limited sale of fund gold to put the financing of the IMF on a sound long-term footing, and enable us to step up much-needed concessional lending to the poorest countries, IMF managing director Dominique Strauss-Kahn said in the statement.

These sales will be conducted in a responsible and transparent manner that avoids disruption of the gold market, he said.

The amount of gold to be sold is one-eighth of the 3,217 tons of gold currently held by the Washington-based IMF, the third-largest official holder of gold after the United States and Germany.

Board approval required an 85 per cent majority of the total IMF voting power.

The United States, by far the largest stakeholder, gave its green light after Congress passed legislation authorizing the sale and President Barack Obama signed it into law on June 24.

The fund is required by its founding document to conduct all gold sales at market prices.

The IMF did not state the value of the gold to be sold but based on the current bullish near-record market price for the metal, it is estimated the sale would fetch $13 billion .

Under the approved plan, the IMF would offer to sell gold directly to central banks ‘or other official sector holders if there were to be interest from such holders. A prime candidate could be China, which is sitting on the world’s largest foreign exchange reserves, topping two trillion dollars, and has been seeking to diversify away from the dollar.—AFP