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

May 22, 2003

Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, May 22, 2003
Washington, D.C.

View this press briefing using Media Player.

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

As usual, we are embargoed until approximately 15 minutes after the conclusion, and I will set the precise time then.

Before I take questions, I'd like to note that on Tuesday, May 27th, Economic Counsellor and Research Director Ken Rogoff will moderate an Economic Forum entitled "Is Financial Globalization Harmful for Developing Countries?" The forum will partially go over a paper produced jointly by Ken and a number of Fund economists, including Eswar Prasad and Shang-Jin Wei, on the implications of capital account liberalization.

This report, when it first came out, got a little bit of publicity and was characterized in at least one paper as a "rethinking" of th Fund's position on globalization in general. The paper is actually quite more narrowly focused than that in terms of looking at financial globalization, particularly the capital account, and presents, I think, quite a balanced view of the pros and cons and sequencing and timing issues.

I think there will be a lively discussion at the forum, which will include—the panel will include not only the authors but also Fred Bergsten of the Institute of International Economics; Jeff Frankel, a former White House CEA member, who's now at the Kennedy School at Harvard; Dan Tarullo, former Clinton administration White House official, who's now at Georgetown University. And I think it should be quite an interesting event. The forum will begin at 10 o'clock on the 27th. Further details are posted on the website. It's open to both the press and the public, and I believe there's actually a description of the forum down there in the pile to my right.

Now I'd be happy to take your questions. As usual, will you please identify yourself and your institutional affiliation.

QUESTION: It is on Argentina. And Mr. Lavagna, as you know, is back. Would you talk about—

MR. DAWSON: I'm not sure he's back. I think he's staying on.

QUESTION: Yes, he's staying on. You're right.


QUESTION: Would you have an update on Argentina? What are the IMF plans for the new government?

MR. DAWSON: Well, we certainly are looking forward to working with the new government, which, as you noted in your question, does have a number of familiar faces with whom we've developed a solid, good relationship.

On the economic front, we view recent macro developments as having been very encouraging, as I think we've gone through here in the past in terms of the strengthening of market sentiment, reserve accumulation, and growth and inflation being substantially better than projected. The financial program is on track. We've welcomed the progress in liberalizing bank deposits, exchange controls and so on, and the start of the redemption of the quasi-monies.

On the structural side—and I think we've noted before that our focus in the short term in this so-called transition, our rollover program has been on some of the traditional macro indicators. On the structural side, some actions have been delayed, and we are in close touch with the authorities and expect to be in touch with the new government to hear from them on their timing for moving forward with these actions.

One particular issue that I think is well known that has concerned us is the recent congressional action on the 90-day stay on mortgage foreclosures, and we're looking forward to hearing from the authorities what their next steps in this area will be. I believe the inauguration is this weekend, and I'm sure we will be in touch with the continued but new authorities in the coming weeks.

QUESTION: Two things: one, Iraq, and the other—I'll come to the other. It escapes me for the moment for some reason. Iraq—

MR. DAWSON: It's not sunflower seeds in Ukraine?

QUESTION: No, no, not Ukraine, not—it's actually about the U.S. It will come back to me. It's the weak dollar.

MR. DAWSON: Oh, okay.

QUESTION: The Iraqi—Iraq is—again, two parts. What's the update on the mission, technical mission to Iraq? And, secondly, I understand the U.S. wants the IMF to look into the Iraqi debt to the non-Paris Club members. When do you expect an estimate of that debt?

MR. DAWSON: We are certainly continuing our work, our fact finding and our information gathering, as well as discussions with other international agencies and other governments on Iraq. We do have, as you well know, a task force established, and it will be going to Iraq at the point when it seems to be useful and productive. We do not—that is not—we don't have any timing on that, so in that sense there has not been a further procedural development since we talked before. But the team is working and having lots of consultations with the relevant institutions and, as I say, governments.

In terms of the debt issue, yes, I think we are certainly aware of the—first of all, the fact of the outstanding debt and to some degree its nature, but I think a lot of fact finding is necessary. We've been in touch again with other institutions, including the Paris Club, other potential creditors. We do understand there is an interest in getting a better handle on the numbers, and the Fund stands ready to play its part in that.

I don't have a specific announcement. We certainly saw those reports over the weekend, and I think we would expect to play our traditional role, which is helping collect this sort of information and see how it can be, you know, improved in terms of quality so that good assessments can be made.

QUESTION: The second question about the, quote-unquote, weak dollar, which is being denied by the American government official, but everybody seems to be agreed that there is a weakening and the Treasury is not doing anything to stop it.

Is it in line with the recommendations that the IMF is giving the United States?

MR. DAWSON: Well, I mean, we do not comment on the short-term currency movements, and I don't think we'll change our position in that regard. I think if you go back and take a look at some comments by senior Fund staff, I would direct you in particular to Ken Rogoff in the meetings just a month or so ago, talking about his views on current account and the implications for the U.S. and for the dollar.

I think our institutional views, professional views are known, but we don't comment on the actual movements. And in terms of what—questions about the policy of the authorities, I think they're best directed to the authorities.

QUESTION: If I may follow up on the same items, the first question on Iraq. How the vote today at the United Nations can change the perspective for the IMF on Iraq? And the second question on the dollar. Is the situation of the dollar affecting, changing the outlook for the international economics of the IMF?

MR. DAWSON: In terms of the prospective UN resolution, I think we need to wait and see when the resolution is adopted. There have been a number of drafts, and I frankly have not been able to keep up with what's within each of the drafts. We certainly expect we will be going forward, you know, in a cooperative manner, and I think our own work is going forward and has not—as I've indicated before, has not been held up by any particular institutional actions.

With regard—could you repeat your question with regard to the dollar?

QUESTION: If there is an impact of the dollar on the outlook of the economic perspectives of the IMF, and if there are reasons to reinforce the preoccupations for a deflation not only in Japan but in other countries.

MR. DAWSON: Well, on the last part of your question, we did—I think it was last weekend—post a paper on—that was part of an informal seminar with the Executive Board, on a study of deflation and looking at its possible impact on a wide range of countries, and that's available on the website, and I would direct you to that.

In terms of the implications of recent market developments on the global outlook, we don't do updates. You know, we basically, as you know, I think are on a semi-annual basis. Occasionally we'll make observations. I don't think we have anything to say at this point.

I would keep an eye out going forward as to the next time any of our senior officials, Managing Director, First Deputy Managing Director, or Ken Rogoff may have press—public events. But I'm not steering you to a particular one at this point. But if interest continues to grow on this, I suspect that we might have something to say. But at this point, we're not revising our forecasts.

QUESTION: A question about the United States. The Bush administration is asking the Senate for, if I get it right, $984 billion in increase on the internal debt with the intention of releasing some titles(?) of the debt on the market next week. That would raise the internal debt of the United States I think to the highest level historically. Is there any comment from the IMF on that?

MR. DAWSON: I mean, these are measures planned because of legal requirements in the United States regarding how the debt ceiling is treated legally. I don't believe there are any changes in the expectations of funding. This is a legal question and a legislative question. I think you should best direct it toward the United States. Our forecast for the United States economy was established, and I think we have a sense of what the short- and medium-term budget prospects are, and we have already opined on that.

You're asking a question about the debt ceiling. That is a domestic U.S. concern because of the nature of the legal requirements for floating debt in the U.S.

QUESTION: Correct. The intention being one of raising the debt ceiling—

MR. DAWSON: That is—direct the question to the United States. The reality is the debt ceiling is a consequence of other actions, and we've already commented on the other actions. It's not appropriate for me to be commenting about the debt ceiling.

QUESTION: If I may follow up on this, you look at the global picture.

MR. DAWSON: We do.

QUESTION: So national authorities do whatever they think best. The Americans, if they are weakening the dollar, are doing that to improve their—

MR. DAWSON: I can't accept the premise of the question.

QUESTION: I understand.

MR. DAWSON: The markets are weakening the dollar.

QUESTION: Okay. The markets are weakening the dollar. It's good for the American trade. It's not good for American trade partners. So if I may ask you to kind of remind us, what's the general idea that Ken Rogoff or any other IMF experts may have as to how important and how—how it can influence the economy of the world, the same thing that Jean-Pierre just asked you.

MR. DAWSON: Well, I mean, I think—it's not my job to repeat Ken Rogoff's previous statements. The role of the U.S. economy within the global economy and the role that it has played in the last few years and its relationships both on the trade and on growth fronts, inflation and deflation, our views are well established, have not changed in recent time, and I would direct you again back to the WEO, which is only six weeks old. And I don't believe there have been changes fundamentally since that point.

QUESTION: I would like to know if the recent mission of IMF to Brazil has discussed the renewal of the agreement.

MR. DAWSON: No, it did not.


MR. DAWSON: Categorically, it did not.

QUESTION: You said that the IMF team would go to Iraq when it was—when it was deemed to be a useful and productive venture. It's hard to understand. I would think Iraq is facing extreme challenges at this time in a financial way. Wouldn't it be useful and productive for the IMF to send a team now—

MR. DAWSON: No, I think—

QUESTION: —what type of circumstances are necessary—

MR. DAWSON: There are a variety—there are a variety of issues. There are security concerns. There are questions of who you would be—who you would be talking with. There's a question of continued collection of data. A lot of this work can be done in terms of—the fact finding can be done externally. There's coordination needed with other agencies.

It's my understanding that there is a relatively limited number of international organization officials already in-country because in part of security reasons and need to find—to deal with counterparts. So I don't think it's been particularly—should be particularly surprising at all that the work is still being done here. And as I have said on a number of occasions, I don't believe we are in any sense losing time because of this.

QUESTION: I just have a follow-up if I can. On the structural questions for Argentina, beyond—

MR. DAWSON: That's not exactly a follow-up.

QUESTION: A follow-up to an earlier—

MR. DAWSON: That's a limping non sequitur.


QUESTION: No, a follow-up to an earlier question. Well, let me clarify for the record.


QUESTION: You mentioned a few structural changes that were necessary, that were preferred for Argentina, one being the mortgage legislation. What—

MR. DAWSON: That's an issue on which we publicly have expressed our concern, yes.

QUESTION: What are some of the others that—

MR. DAWSON: There are other issues regarding the financial sector and so on. We've gone through them before. These are the issues that have been in earlier—in the program earlier. In fact, they're even—a number of them are even discussed, are mentioned in the present program, but without having set forward a clear timetable because that didn't seem to be the most productive course during the pre-electoral time when we were, as we said, quite clearly trying to work on what is—in a very simple sense of the word, was a stabilization and maintenance program that I think has indeed worked reasonably well.

QUESTION: Also on Iraq, there have been some press reports about the proposal of the United States—in the United Nations about lifting the sanctions, and that eventually that for—I mean, Oil for Food Program. And some reports point that apparently United States wants to have some sort of an international supervision in the way those funds are managed. There have been some reports pointing that some of those international bodies could participate in this effort could be the IMF.

I wonder if at this point there has been any contact between the United States and the IMF in this matter.

MR. DAWSON: We are regularly in contact with the U.S. authorities. I think there have been—and we're aware of the draft resolution. What you're describing is a matter of public record. I think it's called an International Advisory Board, at least in one of the drafts that I've seen. But the reality is that it's—I said in my first answer to the question, this is a moving, you know, piece of art, and there are language changes. That's why I think it's best for us to refrain from commenting about a particular resolution until we have a particular resolution, which I gather may be rather soon, and then we'll be able to formulate a—to formulate a view.

QUESTION: Going back to Argentina, has the second review formally been approved by the Board? If not, when will it go before the Board? Has there been a delay towards that? Is the action taken by Congress to delay the mortgage execution, is that somehow delaying that? And following up on that, is Argentina—can it now sort of issue more pesos? I think it wants to issue three to four billion more pesos. Does it have the go-ahead from the IMF to do that?

MR. DAWSON: The review has not been concluded in either the sense of what you said about a Board action, which obviously has not taken place because we would have informed you about a Board action and it would have been publicly known in advance. But it also has not been concluded in the sense of prior to that, and I do not have a date for the—for a possible Board action. When—if and when I do, I would let you know.

And in terms of issues that are remaining, clearly, as I think I indicated, there are issues on the structural side. The mortgage bill is one of the issues that has concerned us. And then I think a specific part of your question has to do with the possible increase of the monetary targets. Actually, I don't—in a textbook sense, I do not know whether that is part of—I mean, I know that was as an issue of discussion in the mission. I'm not—I'm not quite sure whether there's a go-ahead or not under that. I did not believe that that was a particular issue of contention, however.

QUESTION: To clarify, then, this mortgage issue is then holding up the second review?

MR. DAWSON: No. It's one of the issues that's concerning us. When you're talking of these structural issues in the context of the program that we have now, there is no single issue, you know, that is the make or break. There's a pattern of issues, and we look at a number of them. That is the one that I think recently has gotten the most prominence, but there are other issues as well, and we've spoken about them. You can go back and trawl the transcripts.

QUESTION: Just to—because it's still not clear. Is that a structural issue, or is that part of the second review, the mortgage?

MR. DAWSON: Well, it could actually be both, I mean, because it has implications going forward. It certainly was discussed during—when the mission was down there, and it is an issue that is not yet resolved.

Two more questions, including this one.

QUESTION: Two weeks ago, you commented on the short-term movements of the Brazilian real, so why will you not comment on the dollar when it's going to have probably an impact—

MR. DAWSON: What were my comments on—

QUESTION: You said—

MR. DAWSON: I mean, I talked about—

QUESTION: —the strengthening of the real was a positive sign of the economy, the economy was doing well. So what does a weakening U.S. dollar mean for the U.S.?

MR. DAWSON: Well, I was actually asked quite a different question. It wasn't just about currency movements. It was about the impact on the economy and whether this was good news or bad news for the Brazilian economy, which, as you know, is under a Fund program, and we indicated that we thought that all the signs were positive, and what some people thought was bad news, the implication was this question of the appreciation was that it's bad news, and I was saying, no, it is not bad news.

QUESTION: So does the Fund think it's good news for the U.S. economy—

MR. DAWSON: We think with regard to the U.S. economy our views on the prospects for the U.S. economy and the role it's playing in the global economy are clear. And, you know, the context—and the Brazilian context was a very program-specific context, and I think it was quite an appropriate one, and it was not simply an exchange rate issue.

QUESTION: I've got a question on Turkey.

MR. DAWSON: Turkey. Well, now, that would take it away from the next question, but you can—I'll be nice. You can do Turkey.

QUESTION: The Turkish Government said yesterday they were behind on some of their reforms. Does that matter for the review?

MR. DAWSON: Well, the mission is in Ankara as we speak. Mr. Kahkonen is there for I guess his final mission and will be replaced by Reza Moghadam for the next mission, and I don't think it is appropriate for me to get in between the authorities and the mission when they are actually there.

We put out a statement a couple of days ago—maybe it was just yesterday—on the start of the mission, and as is the case in Turkey in particular, we will, I am sure, have a concluding statement from the mission when it is concluded.

QUESTION: I want to follow up on the question about the U.S. economy, and you're referring us back to the WEO from April.

MR. DAWSON: End of April.

QUESTION: Right. A question with respect to the dollar and Mr. Rogoff's statements. What I recollect is that the standard question—

MR. DAWSON: And I might say the Managing Director has addressed these issues in the last week to 10 days as well.

QUESTION: Okay. But it's always a reminder about how big the current account deficit is and how—

MR. DAWSON: No, no, no, no. Our statements on the—the Managing Director's statements on the U.S. economy are much broader than that. I was directing you toward Ken Rogoff on the current account because he has specifically had some rather direct discussion of his view on that. But in terms of the broader issue of the U.S. economy, the Managing Director has spoken quite a bit on that recently. I think the FDMD, First Deputy Managing Director, did, too, in a recent La Tribune article.

QUESTION: But what we were really asking is about the dollar, which is the one issue that you were sort of not saying that you didn't want to comment on currency movements. And I'm just trying to clarify the Fund's position in the WEO is the current account deficit is so big that, you know, it does pose a threat to the possibility that the dollar could, you know, really start falling very quickly. Is that pretty much what you were referring to in—

MR. DAWSON: Well, no, it was broader than that. That was—I mean, we had a whole range of options, a whole range of possibilities and concerns. It's our job to flag concerns. It is not to make predictions or to say that one particular scenario is the likely one.

I think we're running out of questions. We've done our two and a half more.

Thank you, and we will lift the embargo at 10 minutes after 10:00.


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