By Arun Kumar

Washington, Nov 3 (IANS) The International Monetary Fund has sold 200 tonnes of gold worth $6.7 billion to the Reserve Bank of India to shore up the Fund's finances to enable it to step up concessional lending to the world's poorest countries.

This sale to India announced Monday represents almost half of the total sales volume of 403.3 tonnes that was approved by the IMF Executive Board Sep 18.

The Washington-based IMF said the transaction, which is in the process of being settled, involved daily sales that were phased over a two-week period during Oct 19-30.

Each daily sale was conducted at a price set on the basis of market prices prevailing that day, it said, in accordance with the institution's founding document.

"I strongly welcome this transaction with the Reserve Bank of India," Managing Director Dominique Strauss-Kahn stated.

"This transaction is an important step toward achieving the objectives of the IMF's limited gold sales programme, which are to help put the Fund's finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries."

The IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the US and Germany.

The IMF has made gold sales a key element of its new income model aimed at lowering its dependence on lending revenue to cover expenses.

Under the Fund's Articles of Agreement, all gold sales must be conducted at prices based on market prices, including direct sales to official holders as in the case of this transaction with India, the IMF said.

In accordance with the guiding principle of avoiding disruption of the gold market, the IMF's Executive Board adopted modalities for the gold sales consistent with guidelines it had earlier established, it said.

In particular, the Fund is standing ready for an initial period to sell gold directly to central banks and other official holders that may be interested in such sales, the Fund said.

Thereafter, on-market sales of any amounts remaining from the 403.3 tonnes would be conducted in a phased manner over time, following the approach adopted successfully by central banks participating in the Central Bank Gold Agreement.

The Fund reiterated it will inform markets before any on-market sales commence, and will report regularly to the public on progress with the gold sales.