Transcript of a Press Briefing by Thomas Dawson, Director, External Relations Department

June 8, 2001

External Relations Department
International Monetary Fund
Friday, June 8, 2001, 9:30 a.m.
Washington, D.C.

MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF. This is another of our regular press briefings.

Before I take questions, there are a few items I'd like to draw to your attention. This coming Monday at 10:30 local time in Berlin, Deputy Managing Director Sugisaki, Jack Boorman of PDR, Mohsin Khan of the IMF Institute, and a number of other Fund staff, will hold a press conference at the Intercontinental Hotel in Berlin. The press conference will be at the start of a two-day seminar designed to review conditionality issues as part of the review raised by the Managing Director.

This seminar is open to the press and will be the first of a series of seminars through July designed to air issues surrounding conditionality in IMF program design. You may recall we had solicited public comment on ideas on conditionality, and this is an aspect of our outreach program.

I'd also like to bring to your attention the document that we are releasing today: The statement by the Managing Director on the work program with the Executive Board, which was discussed by the Board on Wednesday. This is the first time that this document, which is prepared twice a year, has been released to the public. Over the last two years, we have issued a press release outlining the contents of the statement, but this is the first time we have released the Managing Director's actual report to the Board.

This is at first glance a somewhat dense and imposing document, written in the unique style of the Fund, when dealing with matters of Executive Board policy and process and procedures. And so I think it would be useful to spend a little bit of time going over the document. What we have here is essentially a road map and timetable of the workings of the Executive Board and its interaction with Fund staff and management. The paper serves as our guide to the policy matters that will come before the Board in the months running up to the fall meetings. It also maps some of the issues that will be addressed before next spring's meetings.

I draw your attention in particular to the charts which outline the relationship between various papers and their schedule for presentation to the Board. I should also note that this schedule is, of course, a tentative schedule. The statement also offers a snapshot of the ongoing implementation of the 'Vision of the International Financial System and the IMF' that was presented at the Prague Annual Meetings last year by the Managing Director. The vision was endorsed by the Fund membership and has provided the basis for the Fund's work since then.

The statement gives a clearer sense of how the intense focus on policy issues comes to fruition in the work flow of the Fund. It's a constant process of writing papers, reviewing papers, and discussing them in the Board. This in many respects is the heart of how the Fund works and how each member can make their views heard. The statement on the work program can also help give greater substance and detail to some of the more abstract themes that we spend a lot of time discussing, such as international financial architecture, reform of the Fund, or poverty reduction. These themes make up the main points of emphasis in the paper, and they are, as you will see, surveillance and crisis prevention, crisis resolution and private sector involvement, financial sector issues and money laundering, access, conditionality, and ownership, and poverty reduction, PRSPs, and HIPC/PRGF.

These are issues that have been part of our agenda for years, with the possible exception of money laundering, and as you can see, we are no longer dealing with broad principles but how these principles will be translated into action. For example, on poverty reduction, the Board is now at the phase of assessing the progress in implementing the PRSPs and financing the HIPC/PRGF initiatives, as well as delving into the key issue of debt management in the HIPC countries.

Similarly, on the topic of surveillance and crisis prevention, the Board will be considering very soon a paper on macro-prudential indicators and later papers on external vulnerability assessment and early-warning systems. On top of that, of course, is the 'regular work' of the Fund, the surveillance process covering the Article IV consultations and the WEO, and the all important work on Fund-supported programs. Many of the country discussions that will be undertaken during the coming months will be directly affected by the broader policies that are being put into action by the Board.

I'll leave my introductory remarks at that and take any questions you may have, and do feel free to ask me more about the work program. Thank you.

QUESTIONER: How satisfied is the Fund at this point that Turkey is implementing the reforms and the measures pledged under the latest program? And what's its assessment of the chances of Turkey pulling through and regaining confidence of international markets?

MR. DAWSON: I think we are quite pleased with progress and understand and believe that the authorities are committed to full implementation of their program, and I think the government team has been quite methodically pursuing the implementation.

QUESTIONER: Tom, when will Professor Krueger be confirmed as the First Deputy Managing Director by the Board?

MR. DAWSON: You are correct. Of the four appointments that were announced yesterday this is the one that requires Board approval, and I would expect it will be in the next few days. A formal nomination has to be submitted, and then the Board will vote on it.

QUESTIONER: Next few days? One week?

MR. DAWSON: I would say that's probably correct. There may be some legal issues that haven't been dealt with in terms of her own current status with her current employer. But my understanding is it is just a matter of within the next few days.

Now, that is in terms of the presentation of a contract and accepting the job. As we indicated yesterday, the transition both in her case as well as in the case of other appointments will be taking place over the course of this summer. We do not have precise dates for when the various new appointments will be taking office, but I think, broadly speaking, the way to describe that is for all four of them it will be over the summer. And we will, of course, let you know when the actual transitions take place.

QUESTIONER: Can you comment on the fact that all of the four appointees are outsiders?

MR. DAWSON: Indeed they are, although I would also note that Professor Rogoff did at one point work at the Fund in the Research Department. And as you go through them, each of the positions, the First Deputy Managing Director has traditionally come from outside.

The Economic Counsellor in the last several occasions has also come from outside. The Capital Markets Department, I think from its inception, was expected to be someone who had had market experience, public policy experience as well. So I think really the question then comes down to the PDR position, and a search internally and externally was performed, and the management team felt that Mr. Geithner was the strongest candidate for the position.

QUESTIONER: Tom, in terms of Thailand, there is continuing uncertainty about exactly what is going to happen there on the monetary policy side of things. We have the political change in the head of the central bank there, but some of the commercial banks seem to be resisting the government as well in terms of their desire to see higher interest rates. What's the IMF's perspective on all that's going on here at the moment? And given that it's in a post-program monitoring position, what on Earth can you do about it, even if you do disagree?

MR. DAWSON: Well, on the conduct of monetary policy, our views are unchanged from those that we expressed during the Article IV mission in late May. In the absence of inflationary pressures, we believe that low interest rates should be maintained to support the fragile recovery.
We emphasized these arguments during the recent mission, and we'll continue to press them with the Bank of Thailand and the government.

QUESTIONER: Although you said that Turkey is committed to fully implementing the program, your team, the IMF team, is still in Turkey and reviewing the program. And so far in the press we can see that they have a little bit raised concerns on grain prices and also the public workers' wage, that they were a little bit critical on the politicians. And there are also some statements that the program as already been violated. Are you saying that you do not share this understanding? What's your position?

MR. DAWSON: Well, we do, in fact, believe that the program is on track. Obviously, the government has had a number of measures that it has had to propose and get approved by the cabinet and the parliament.

QUESTIONER: Is it the first time a woman has been named to one of the four top jobs in the IMF?

MR. DAWSON: In terms of the management team. Of course, you have to remember that the Fund management is the Managing Director and the three Deputy Managing Directors, and so if one talks as that as being what the Management is, that is correct, although there are a number of women department heads as well.

QUESTIONER: In Indonesia, there has been some movement there today on the budget. What exactly does the government there need to do in order to get a resumption of their payments? And how can the IMF go back into Indonesia at this point given the political instability there? Are you concerned about that as a factor of resuming lending there?

MR. DAWSON: Well, obviously, we are in a continuous dialogue with the authorities and, of course, have a presence in Indonesia. And the parliament has been addressing the budget issue as far as I'm aware. I should also note that we are still awaiting resolution of the Bank of Indonesia issue, which is one that has concerned us as well. Obviously, the difficult political situation makes it hard for a number of these issues to be resolved, but this is just a fact of life and something we have to accept.

QUESTIONER: Two questions, Russia and Ukraine.
On Russia, I expect you probably won't be able to comment, but I wanted to ask anyway about the draft budget. It seems that the stabilization fund idea is dying, if not dead, because they set the oil price rather high, the threshold. So could you say anything about that?

MR. DAWSON: I think your introductory comment was correct. I don't have anything to say on the budget. We did have a discussion in late May on the authorities' policies, and we expect the next mission to discuss next year's budget to take place in mid-June. But we are in the sort of post-program monitoring situation at the moment.

QUESTIONER: And with Ukraine, has the Fund been in touch with the new government? And what are the prospects for renewing the program for them?

MR. DAWSON: We expect to be in touch with the new authorities in the near future and expect a mission to arrive in Kiev soon. The resident representative in Kiev did put out a statement the other day, which I will not repeat here but we can make available to you if you wish.

QUESTIONER: With the Brazilian energy crisis, is the Fund planning to do another assessment of the Brazilian economy and the South American economy in general? With the situation in Argentina still a little bit delicate and growth expected to slow in Brazil, is there any concerns there about the situation?

MR. DAWSON: Obviously, we are monitoring the situation. I don't have anything specific with regard to Brazil. I would note, however -- you mentioned Argentina -- that the market has continued to rally after the successful debt swap, and it looks like public finances are moving back on track. But obviously, in regard to the energy crisis in Brazil, the recent difficulties in Argentina, we are always vigilant, but on the specific initial question on Brazil, I don't have anything specific for you.

QUESTIONER: You mentioned money laundering as one of the new issues incorporated in the agenda for this year. And in the paper, it says that the IMF is going to strengthen the financial sector in member countries, and you point to especially offshore financial centers. I was wondering if you can elaborate about what the IMF plans to do not only in regard to offshore financial centers but also in some of the big countries like the U.S., because some of these offshore financial center countries have been saying that they have been pointed at wrongly and all the attention only point to them while most of this--or in some cases, part of this problem is also eradicated in some of the big countries.

MR. DAWSON: Well, certainly the Managing Director has indeed made precisely that point, that money laundering, it takes a launderer and a launderee, as it were, and they may be in very different countries. So simply looking at offshore financial centers as an example is clearly not sufficient. This is an issue that I think the Fund is particularly well positioned to discuss since we do have a universal membership, and in the context of the Board, you can look at the issue in a somewhat broader context in terms of the money-laundering issues, but also a broader context in terms of financial sector problems, abuse and strengthening.

So in terms of the discussion that will be taking place --that has taken place in the institution -- and will be taking place, I think precisely those concerns that you indicated -- that it be looked at in a somewhat broader picture -- is recognized and will be indeed part of our discussion.

I think we're about running out of questions. Maybe a couple more.

QUESTIONER: Do you have a date for a mission yet to Peru?

MR. DAWSON: We expect there will be a visit, a mission to Peru within the next few weeks, but I don't have a specific date for you.

QUESTIONER: In Mexico, do you have any update on the discussions with the Government of Mexico to this emergency credit line?

MR. DAWSON: On the CCL? No. No, I don't.
Two more. That's it.

QUESTIONER: Well, it's a follow-up on Peru. Would you please elaborate what is the mission going to Peru, what is the goal of this mission?

MR. DAWSON: Well, on March 12th, the Board approved a one-year stand-by. Indications are that the first-quarter performance criteria were achieved, and the program would normally-does provide for a mid-program review, midterm review to be completed by the end of September. But with a new government coming in, it is natural that our mission go down there to meet with the new authorities.

QUESTIONER: A question on the FATF and on money laundering. Can you describe to us the nature of the relationship between the IMF and the FATF, and on this issue, you are saying here that the FATF rules should be compatible with the IMF rules, more or less? The vision should be grown on views and experience of the entire membership. So I guess I'm trying to say that the FATF rules as such have been heavily criticized as being, first, rather narrow in scope in terms of criticizing specific countries; and, second, overall rather heavy on the police functions.

So how do you expect the Fund to safeguard against adopting similar practices in its own work?

MR. DAWSON: Well, given that we are a consensus-oriented, universal institution, I think that, as I said in response to the earlier question, I think we are well positioned to try to present this issue in a somewhat broader context. And you made a reference to the policeman. That is not the function of the Fund in this context.

But I think if you take a look at the description of it there, it's pretty clear that this is an attempt to sort of broaden it out and get the dialogue on a constructive basis, focus. I would direct you in particular to paragraph 16 (of the Work Program). I think that is it.

If there is more interest in some of these money-laundering issues or some of the issues that come up in this work program, we could perhaps arrange briefings with people who have been working on that area.

Thank you.


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