The board of governors of the International Monetary Fund (IMF) has approved the sale of 403.3 tonnes of the fund's gold reserves as part of a move to broaden its investment authority and find new revenue sources.
 
IMF would use the sale proceeds to create an "endowment", providing a steadier source of income to the international organisation. The programme, announced on April 7 (See: IMF plans to sell gold holdings to raise $6 billion), also calls for a 13.5 per cent cutback in IMF spending over the next three years.

The sale, amounting to some 12 per cent of IMF's gold reserves, could yield around $11 billion, IMF officials said last month. This would help finance a reorganisation of the institution as it seeks to survive a downturn in lending to troubled countries, its main income source.

"The new income and expenditure framework is expected to cover a $400 million shortfall projected in the medium term," the IMF said in a statement.

Once established, IMF plans to invest the funds to generate income while preserving the long-term real value of these resources.

Governors from 176 of the fund's 185 member countries cast their votes - all of them in favour of the resolution. The resolution needs backing of at least 85 per cent of the members to get through.

So far, the IMF has largely been dependent on income earned from lending to finance its operations. But the IMF's lending has fallen in recent years, reducing income earned.

The board of governors' approval of a broader investment strategy will enable the fund to increase the average expected return and adapt its investment strategy over time, IMF said in the statement.

"The new income model is predictable and in line with other financial institutions. In combination with sharp expenditure cuts, it will put the IMF's finances on sustainable footing," IMF managing director Strauss-Kahn said, adding, "Once fully implemented, we will have an integrated budget process that will enable the fund to work more efficiently and cost-effectively by focusing its resources and work on its areas of expertise."

IMF would ensure that its gold sales do not add to official sales and would try to avoid any risk of market disruption. The sale would need US congressional approval before the US executive director can vote in favor of gold sales.

The multilateral lending organisation that has drastically scaled back on lending of late is also in the process of sharply cutting back staff. Last week it said 591 had requested voluntary buyouts, or about one in five eligible employees, well above the number expected.

The institution, created over 60 years ago with a mission to foster global financial stability, is struggling to reinvent itself after many developing countries with increased economic clout moved out of its lending arm.