The International Monetary Fund (IMF) is proposing to sell 403.3 tonnes of its gold reserves, worth around $11 billion (£5.5 billion), as part of a financial overhaul of the international organisation.

Managing director Dominique Strauss-Kahn said that the IMF would use the funds to help shore up finances and create a new endowment with more diverse investments.

The reform plan, which requires approval by 85 per cent of the institution’s 185 member nations, has been under debate for months in the IMF, whose revenues are shrinking amid a decline in lending.

To proceed with the gold sale, the United States, the biggest stakeholder, also needs approval from the US Congress.

Mr Strauss-Kahn called the proposal “a landmark agreement that will put the institution on solid financial footing and modernize the IMF’s structure and operations."

“We have made difficult, but necessary choices to close the projected income shortfall and put the Fund’s finances on a sustainable basis, but in the end, it will make the Fund more focused, efficient, and cost-effective in serving the needs of our members,” he said.

Financially, the IMF is in trouble. Last year, it said that without reforms it expected to be in the red by $370 million (£189 million) a year by 2010. The reason is that its role in providing emergency foreign exchange to crisis-hit countries has been evaporating. Many potential client countries have built up big reserves to avoid having to turn to the IMF -a problem for the fund, since its money comes from interest on its loans.

But gold sales could run into heavy opposition from the US Congress, where some senators and representatives, especially among Republicans are hostile to the fund and its role. Washington's powerful sway over the IMF means that, in effect, gold sales could not go ahead without Congressional approval allowing the US director on the IMF board to agree to such a sale.

Tonight, the IMF said the executive board had agreed to revamp the institution’s income model from one that primarily relies on lending to one that “generates funds from various sources.”

At the same time, the board considered the institution’s medium-term budget for the financial years 2009-2011, which includes “deep spending cuts,” and approved the administrative budget for the 2009 financial year that begins May 1, 2008.

“With these measures the fund expects to close the projected income-expenditure gap of $400 million within a few years,” said IMF, whose mission is to promote global financial stability.

If approved, the new income model “could generate” an additional £300 million dollars in income within a few years, the IMF said.

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