Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, International Monetary Fund

February 6, 2015

Washington, D.C.
Thursday, February 5, 2015
Webcast of the press briefing Webcast

Ms. LAGARDE: Good morning to all of you. It's my first time with you on this occasion and it's a pleasure. I'm participating in this press conference because yesterday we approved a new financial instrument, which is called the Catastrophe Containment and Relief Trust, also abbreviated as CCR. What will this Catastrophe and Containment Relief Trust do? It will provide grant aid to relieve debt service payments for two years. You will remember that back in Brisbane, at the G-20, I advocated a three-leg package. The first leg was concessional lending to the three countries that were hit by Ebola, Sierra Leone, Guinea, and Liberia. We promptly put in place $130 million. The beauty of what we do in that respect is that it is cash in the bank right away. Within the next few days, we will be proposing to the IMF’s Executive Board an additional package of concessional lending in the range of $160 million. That's leg number one.

Leg number two is exceptional grant support in this new trust, the CCR, which will be used as debt relief. It will be in the amount of $100 million.

With this initiative, that second leg of the three-leg program, the IMF becomes the first international institution to give debt relief to these three countries. So the IMF is giving debt relief to these three countries through the Catastrophe Containment and Relief Trust, which will provide grant aid used to relieve the debt for the next two years.

Now, the third leg is a call to official bilateral creditors because the debt of those three countries is not just to the IMF, but it's also to other bilateral donors. Back in Brisbane, and again today, and I will do that again in Istanbul on Monday, I'm calling on the international creditors to also consider debt relief for these three countries.

It's important because of the disaster suffered by those three countries, and because of the nature of the catastrophe, which is clearly life threatening. It's caused enough deaths so far, it is spreading, and there are potential spillover effects outside the borders of those countries.

On that third leg I have already received a commitment to provide additional funding from one major donor, and I hope that there will be more that follow suit. I hope more will be announced at the G-20 in Istanbul.

The final point I wanted to make is that the membership came together in a great move of solidarity on the occasion of this package. It was the case for the first package that was approved in September. It was the case again yesterday, and I hope that it will be the case for the additional $160 million that we will submit for approval later this month.

MR. RICE: Thank you very much, Madame Lagarde. I know you have questions, just one or two questions please.

QUESTIONNER: Can you give us an idea of how much more debt relief you're seeking from the G-20, and can you also put this new debt relief trust fund in context for the IMF? I understand it’s the first time ever. What's changed?

MS. LAGARDE: From the other creditors I don't have the exact breakdown of how much is owed, but suffice to say that there are Paris Club members and there are also non-Paris Club members. In the case of Guinea in particular, Russia is one of their creditors. So I hope that all of them will join forces to alleviate the burden of all three countries.

The IMF is the first international institution to grant debt relief to these three countries. The IMF is not in the business of giving grants. Why are we doing it this time? It's clearly because those three countries are going through a dramatic ordeal that combines pandemics, the risk of isolation, which is why I'm still wearing my ‘Isolate the virus, not the countries’ badge. And that virus has the potential to spread out in the country, in the neighboring countries, and elsewhere, which gives it a very broad scope and constitutes a significant threat. Those are the fundamental reasons why exceptionally we're moving out of our normal business, which is to give loans.

QUESTIONER: Could you clarify which country has already offered the debt relief, and also, in general, there's been some concern that some of the pledges for the three countries have not come in as quickly as promised, so what's your sense of that and what more is needed?

MS. LAGARDE: Well, I'm not going to disclose the country that has pledged confidentially because they will be announcing it shortly, and it's for them to do so.

In the spur of the moment there's always great emotion and support, but then it's a question of following up. I'm not going to pass judgment on what the others have done. I think everybody is struggling, everybody is trying to help. There is much better coordination now, and the work that we do links with the World Bank, in particular. We are in contact with the World Health Organization too.

But the beauty of what the IMF does, once again, is that once it's approved, within a matter of a few days cash is in the bank. You know, countries' authorities can use that public spending in the most effective way to deal with the issues. But it's the follow up that is always an issue. Thank you.

MR. RICE: Thank you very much, indeed, Madame Lagarde.

So let me just follow-up a little bit on that announcement. There has been a grant element in some of the assistance the IMF has offered before under the Post Catastrophe Debt Relief (PCDR). That's the old facility that you might recall was set up for the case of Haiti. There was a grant element in some of that assistance. The grant element under this new facility, the CCR, is much higher. To be confirmed, but it goes from a grant element under the PCDR, of 30 percent to a 70 percent grant element. But we can follow-up on the technicalities of that. I hope that helps in the interim.

QUESTIONER: I believe this trust can be used for any debt the countries owe the IMF, so it doesn't have to be used immediately, and it's only IMF debt?

MR. RICE: Yes. The grant assistance that we are offering now covers all IMF debt owed by these countries for the next two years.

QUESTIONER: It is my understanding that Haiti’s situation was a whole cancelling of the debt forever. Whereas, this is just a two year stay of execution, so it's just a two year holiday from the date. Whereas Haiti got rid of it all or have I misunderstood that?

MR. RICE: Yes, under the original PCDR, as I mentioned previously, set up in response to the Haiti earthquake, debt relief was provided in two parts: there were two years of relief on debt service, and full debt relief as part of a concerted international operation by the countries' official creditors to provide debt stop relief.

Madame Lagarde mentioned that we're now doing a fundraising effort to bring in the rest of the international community. I would say on the IMF part, since our loans to these countries are at zero interest rate, in providing debt service relief you are actually dealing with the stock of debt as well in these cases.

So back to business as usual. Christine Lagarde mentioned that she'll be in Istanbul February 9 and 10, Monday and Tuesday next week, for the first meeting of the Turkish G-20 Finance ministers and central bank governors. Our First Deputy Managing Director David Lipton will be there too. We will publish tomorrow the G-20 Surveillance Note that we prepare for the G-20 that gives an update on the status of the global economy.

David Lipton, right now, is in Beijing for official meetings and a discussion at Beijing University. You might have seen some press reports of that already. On February 14, Min Zhu, our other Deputy Managing Director, will speak about the global economy at the University of Warwick in the UK. Another Deputy Managing Director, Naoyuki Shinohara, is visiting Tokyo to attend the IMF JICA conference on frontier and developing Asia.

Let me now turn to your questions and if you have any online we'll try and take those as well. QUESTIONER: The Greek people almost two weeks ago sent a message, that they don't want any more austerity. They want growth. They want to see their lives change. We heard the same message, I can say, from President Obama. I wanted to know, since you are a part of the Troika, what is your answer? What is your message to the Greek people?

MR. RICE: Let me step back for those who don't follow it closely. As we have confirmed this week there was an introductory meeting with the authorities over the weekend. Greece's finance minister, Mr. Varoufakis, and our head of the European Department, Poul Thomsen, met to get acquainted, and to discuss the challenges facing Greece. Specific policy issues were not discussed in any detail. I can tell you there have not been other high-level contacts at this time.


MR. RICE: There have not been other high-level contacts at this time. However, we continue to exchange information at the technical level, mainly through our Resident Representative in Athens.

We look forward to discussing with the new government their economic plans. Until then, making any assessment of the country's economy and the status where it stands would be premature. We are looking forward to hearing from the authorities on their proposals, their ideas. We haven't had those discussions as yet. I think once we're able to do that we'd be able to be a bit more specific.

QUESTIONER: There are reports that they're saying that you want to get out of the Troika. Can you give us an answer on this question?

MR. RICE: We should not get ahead of ourselves here. We are waiting to hear from the Greek authorities as to how they would wish to engage and to go forward. The precise modalities are a subject for discussion.

QUESTIONER: We began the discussion by talking about debt relief for Ebola stricken countries. I mean, one of the hot topics of discussion on the Greece issue has been the idea of a debt write-down. I've heard varying descriptions of the IMF's position on this. Could you clarify? Would the IMF be, in any way, willing to accept some type of restructuring or debt write-down, some type of debt relief for Greece?

MR. RICE: There's an agreed framework in place for dealing with Greece's debt under the program. There has been no discussion with the authorities on a change in this framework.

I won't repeat the framework again. I can if people wish me to, but we've said many times at this podium and discussed it in this room, many, many times what that framework is, but I can repeat it if you like.

Under the program there's an agreed framework in place for ensuring debt sustainability with Greece's European partners agreeing to provide any additional debt relief as needed to help bring Greece's debt down to 124 percent of GDP by 2020, and to substantially below 110 percent of GDP by 2022, as long as Greece continues to deliver on its program commitments. That's the framework. It's been restated many times. It's a framework agreed by the Eurogroup and with Greece prior to the current administration.

QUESTIONER: You said that there have not been other high-level meetings with the Greek government up until now, but when are you planning to do so? And I'm not talking about introductory meetings at this time. I'm talking about meetings where, maybe, policies will be discussed?

MR. RICE: I don't have a date for you. I don't have a timeline for you on that. QUESTIONER: Is the IMF willing to consider a lowering of the target for the primary surplus for Greece as the Greek government would like?

MR. RICE: We have not had the policy discussions with the authorities as yet. We look forward to that, and until we have those discussions, we don't really get into the specifics.

QUESTIONER: Under what conditions would such a deal be made? Would it have to be combined with debt restructuring?

MR. RICE: It's all speculation and, I wouldn't be serving anyone to get into speculation. QUESTIONER: Can you please tell us what you think of the decision by the ECB to no longer accept Greek debt as collateral? Don't you feel it could worsen the economic situation of the country?

MR. RICE: We've not been in a position to make an assessment of where the Greek economy stands at this point, so we look forward to being able to do that at some point in the future. So it would be impossible for me to give an assessment of the decision. It should be taken up with the Greek authorities and with the ECB.

QUESTIONER: But most of the time you are in a position of commenting on the decision by ECB right after they're being announced. Why are you not in the same position today?

MR. RICE: We actually don't comment decision by decision on the ECB.

QUESTIONER: Yes, you do.

MR. RICE: No, we don't. Actually we don't. We comment on some of the major decisions that the ECB takes. We do not comment on every decision of the ECB, and in this case, we're not in a position to do it because we have not been able to make an assessment of exactly where the Greek economy stands.

QUESTIONER: So just to make it clear, you don't see that as a major decision, right?

MR. RICE: I'm going to move on.

QUESTIONER: I understand you cannot comment on the Greek economy as it currently stands nor the current bailout program. But speaking more philosophically, the Fund works with its members, so if Athens, as a member, requests to deal in isolation from the Troika the Fund would certainly respect and prioritize the members' desires over that of other members who might want something different for the country.he

MR. RICE: You're right in the sense that the IMF is here to serve our member countries in the best way that we possibly can. In order to do that, we need to have a substantive policy discussion. Including on the modalities, the modus operandi, the way in which the authorities would wish to engage and move forward. At this point it's speculative as to what the details of that would be.

QUESTIONER: Secondly, looking back at the creation of the program, the 2010 bailout, the IMF has said publicly, and documents have privately indicated that the program was built not just for Greece itself. The program was also built to help contagion throughout the rest of the Euro Zone.

That program did not include debt restructuring, and it did include what totaled out to $300 billion in loans. That required a specific fiscal adjustment that totaled, however many percentage points of GDP. Since that program was designed for the rest of Europe, philosophically, does the IMF not see an onus on the rest of Europe to help in the furthering of the financing of Greece since the Greek people bore the brunt of that adjustment?

MR. RICE: I mean, it's a bit of history. I wouldn’t accept your characterization of the program, that this was a program done for the rest of Europe only. This was a program, that was done, first and foremost, to help the Greek government and the Greek people address what was a major economic crisis. At the same time, to help the rest of Europe avoid any spillover, contagion risks that might emerge. So I'm just trying to clarify what we've also said on the record and probably in the same study on 2010 that you're thinking about. That this was also a program that was done, first and foremost, with the needs of Greece in mind.

On your other point, do we think that the rest of Europe and the European partners should support Greece? Of course, that's the mode we've been in now since the 2010 program. Over the last five years we've been completely in that mode of working with the rest of Europe, manifest through the Eurogroup and other means to help to support Greece. We want to continue in that mode, and to support Greece in a way that would be returning to the first point, beneficial to Greece, and beneficial to the rest of Europe. That's what the discussions will be going forward.

QUESTIONER: But the fiscal adjustment would have been different for Greece, would have been smaller for Greece if the contagion factor had not been there. Specifically, the IMF would have done a debt restructuring which would have reduced the fiscal adjustment requirements on the Greek people. It is that specific request that I'm talking about. Forgive me for belaboring the point, but it's an important one.

MR. RICE: I'm not going to debate the 2010. I will take one more.

QUESTIONER: On the Troika, at this point two of the three partners either want out of it or, want it dramatically changed. The ECB says there's a conflict of interest. Jean-Claude Juncker is saying there's no democratic control. Can you say anything? If two of the three want out, what does the IMF say about what its future is?

MR. RICE: I haven't heard those official statements from the ECB and the EC. I can only reiterate that we have not had the discussion with the new Greek authorities. We look forward to those discussions. We want to respect the new government, the issue is how they plan to move forward. How they wish to engage, and we look forward to that discussion.

QUESTIONER: A question on Ukraine. In the initial package in April, the IMF's funding accounted for about two-thirds of the international aid package. My understanding is that the IMF would like to retain that ratio and go no higher than two-thirds in the package currently being negotiated. What can you say about that? About the IMF's position on that?

MR. RICE: I don't think we have a specific ratio number in mind. When we go into programs, and this applies to Ukraine as well as others, we're looking for a number of things. We are looking at the country situation and the specific need, the financing need, and the policy requirement.

We are looking for the program to be fully financed. We will not put a program forward to our Board for a decision unless the program is fully financed. That's something that's explicit in the agreements and in the documents that go to the Board. It's an issue the Board looks at.

We always want our financing to be a catalyst to help bring to the country financing from other sources, official, non-official, it's in that way that the financing package comes together. So how is that playing out in Ukraine? We have a mission right there right now, which will finish their work soon.

This is one of the issues that they will be dealing with. The financing, the IMF’s role and part in that financing. This will all be fully laid out to you in excruciating detail in the program documents.

QUESTIONER: What do you mean by fully financed?

MR. RICE: We assess what is the financing need for the country to be able to undertake and implement effectively the program. We make an assessment of that. We state that very explicitly in our program documents, and that's part of the work that the mission does in any IMF program, and it's part of the work that the team will be doing in Kiev. So all will be revealed fairly soon.

QUESTIONER: In comments that Madame Lagarde made to Le Monde in France, she said, quote, no partner of the IMF can see that participating in a support program if there is a question mark over 20 percent of the GDP of Ukraine. Two days ago, the Minister of Finance of Ukraine, told us that Ukraine lost 20 percent of the GDP as a result of the country. What do these comments from Madame Lagarde mean in practical terms for the program?

MR. RICE: I will not get into specific percentages.

QUESTIONER: I understand that, but the connection between stabilization and then the program?

MR. RICE: The Fund has been very upfront about that connection. Not just the quote you're referring to, but in the previous program documents there were very explicit, candid discussions of the conflict and the relation between the conflict and the program.

The situation has been evolving and the team is in the field looking at the next program. Ukraine has recently requested a new program with the IMF and that is what is being designed right now. It will take into account the issue that you're raising, and there will be an assessment of that.

QUESTIONER: Many people have taken this to mean that until there is stabilization on the ground in the conflict a new program of assistance is basically impossible. Is that a fair assessment?

MR. RICE: I’m not going to speculate, but just say generally that the IMF works in difficult situations, tense situations, even conflict situations. It's something that the IMF has done over 70 years, and we have specific examples of that. The conflict which you're raising is something the team will be looking at in the field.

MR. RICE: I'm going to go online for questions: What's the process forward on Mongolia’s request for an IMF Stand-By Arrangement, and will there be a visit to the country? I can confirm that we have received a request from the Mongolian authorities to begin discussions about possible support to Mongolia. The IMF will be sending a team there soon to initiate discussions.

The second question is in relation to Ghana: The President says Ghana is committed to securing an IMF program, and we are confident we will reach an agreement with the IMF by the end of this quarter. What is the process and what is the timeline and status? The Ghanaian authorities and the IMF team are finalizing the details of the program to support Ghana's economic program which, as is usual, would be agreed at the staff level before being proposed to our Board for consideration.

I can furthermore say that we believe good progress has been achieved in recent weeks on the plan to clean up the payroll, finalize the remaining details of the government's medium-term reforms, as well as firm up financing assurances for the possible program. The IMF team and the Ghanaian authorities are also now discussing the policy response needed in view of the recent large decline in oil prices.

QUESTIONER: One question on Greece and a second on Ukraine. On Greece, the IMF in the past has released some staff notes about growth-linked bonds, GDP-linked bonds, and was generally supportive of them. As you may have seen, the Greek authorities have proposed, obviously not discussing with you, but in general, swapping up some of their IMF debt for growth-linked bonds. What's your opinion on that?

MR. RICE: I won't speculate because we've not discussed with the authorities any proposal. The broader issue is something that we may have looked at in terms of our research and analysis over time. So we can connect you with the Research Department after this or someone who might have something on that. Is that okay with you?

QUESTIONER: That sounds great. Then a follow-up on Ukraine. As you may have seen, the central bank today announced that they're no longer having these foreign exchange auctions, and the currency plunged a further 30 percent. What's your assessment of the government's move?

MR. RICE: On the central bank's announcement today, I can say this. The NBU's decision to cease foreign exchange auctions is appropriate, and should also help to eliminate multiple exchange rates. The increase of the NBU's policy rate would help contain inflation and support the currency.

QUESTIONER: On Greece, you're looking forward to start discussing with the government, and how they want to engage from now on. Does that mean that you are willing to listen to their proposals, and maybe that you are not insisting on the current framework on the Greek program?

MR. RICE: We are ready, willing, and looking forward to discussing the ideas, the proposals, the policy direction that the new government would wish to take, and that is absolutely something that we look forward to discussing with them. But we haven't yet.

QUESTIONER: Mr. Moghadam, former head of the IMF European Department, sent a letter to the Financial Times the day after the Greek elections on January 6th, and he said, and I quote, Europe should offer a substantial debt relief in Greece, halving Greece's debt and halving their required fiscal balance in exchange for reforms.

In the same letter he took responsibility for some of the mistakes. What is your comment on his letter? Do you believe that Europe should offer a substantial debt relief to Greece and reduce the pace of the fiscal adjustment?

MR. RICE: We don't comment on opinion pieces or letters in any newspaper.

On your second question, there's an agreed framework in place for dealing with Greece's debt in the current program, including commitments to debt relief provided that, the program remains on track. We have not had discussions with the authorities further to that, so I can't really say much more at this point.

So I'm going to wrap on that, but I have one more piece of news: Today the IMF Managing Director Christine Lagarde is proposing the appointment of a new Deputy Managing Director at the IMF, the appointment of Mr. Mitsuhiro Furusawa. He will be our new Deputy Managing Director as of March 2nd this year.

Mr. Furusawa is taking the place of Mr. Shinohara, whom we have previously announced to you is leaving the IMF at the end of his term to return to Japan. He is leaving at the end of February. Mr. Furusawa most recently has been serving as a special advisor to the Prime Minister in Japan as well as to the minister of finance.

He may be known to some of you because he was an Executive Director at the IMF from 2010 to 2012. Interesting footnote, he played a leading role in the Tokyo Annual Meetings and the success of those meetings.

QUESTIONER: Mr. Shinohara's role was largely administrative. Madame Lagarde has filled that administrative role with a different Deputy Managing Director. What will be Mr. Furusawa's role, and is he number two, three, four, five?

MR. RICE: Mr. Shinohara did not only have administrative duties. He also was charged with a large number of country responsibilities. We've had announcements of two new Deputy Managing Directors at the Fund in the last weeks, so there will be some realignment of portfolios and responsibilities amongst the new Deputy Managing Director team. That's something we'll be able to share with you soon.

Thank you.


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