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

July 29, 2004

Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, July 29, 2004
Washington, D.C.

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MR. DAWSON: Good morning, ladies and gentlemen. I am Tom Dawson, Director of External Relations at the IMF, and this is another of our regular briefings. This briefing, though, is embargoed until 12:30 p.m., Washington time, 1630 GMT today. This is to coincide with the expiration of the embargo set by the IMF's Independent Evaluation Office (IEO) on its report regarding "The IMF's Role in Argentina, 1991- 2001".

You are welcome, of course, at this briefing to ask questions about the IEO's report, which will be released publicly, along with a summary of the Board's review of the IEO's findings and other supporting documents, again, at 12:30 today.

Before I take questions and whatever other topics you may have, I would just like to note the following:

With regard to management public engagements, the Managing Director will travel to Abuja, Nigeria, August 2nd and 3rd; Libreville, Gabon, August 3rd and 4th; and Kampala, Uganda, August 5th through 6th, for meetings with the authorities, and this will mark his first trip to Africa as the Managing Director.

In Kampala, he's also invited to participate in a roundtable with leaders in the East Africa region, and this will be an opportunity for him to listen to their ideas on how the Fund can better support deepening of poverty reduction efforts and how high-quality growth can be encouraged.

Media Relations issued a press release on this last week, and I would also note that there will be some press accompanying the Managing Director on this trip. And for those of you who represent organizations that may be interested in the future in participating accompanying the Managing Director on a trip, do let us know, and we will see what we can arrange.

I'd like to again remind you that the Executive Board will be in recess from August 9th to 20th and that my next briefing will take place sometime after the Board recess or during the week of August 22nd.

If I might, though, at this point, cover some management public engagements through the period until the next briefing:

First Deputy Managing Director Anne Krueger will be traveling from August 19th to 24th to Shanghai, China, to deliver a keynote address at Harvard's Project for Asian and International Relations.

And Deputy Managing Director Agustín Carstens plans to travel to Aspen, Colorado, August 18th and 19th, to speak to the Aspen Institute Conference.

Media Relations will advise later on the availability of text for these events, and at this point I will be happy to take whatever questions you have. I can ask please identify yourself and your institutional affiliation.

QUESTIONER: Regarding Argentina and the third review, Argentine Government has said it wants to complete this review and get it to the Board before the summer recess, which is actually right around the corner, so that looks increasingly unlikely. What are the consequences of not approving that review by that date and sort of pushing it off until late August or September, which actually would then seem to coincide with the fourth review. I mean, can you do two reviews together? How does this work?

MR. DAWSON: Some of that is a little on the, particularly when you start talking about fourth reviews, we certainly are a bit on the hypothetical side. Certainly, as I noted in my opening remarks, we are now I think seven working days from the Board recess.

However, I would repeat what I've said previously, that the reviews, while we have notional dates when programs are initiated as to when reviews will take place, the fact that they don't take place on the originally expected or indicated dates does not mean that they can't take place at a later point, and indeed, in the context of Argentina and others, that is quite often the experience.

Certainly, though discussions are continuing with the Argentines on trying to reach an understanding on the policies that would allow the completion of the third review and the objectives the authorities have set in their program.

The areas that are still under discussion are the areas that I indicated at the last briefing, including structural fiscal reform, banking sector measures, efforts to restructure debt, utility area and so on. I have no issue-by-issue update since then. Those are indeed simply still the issues that are on the table.

I would note, as I have previously, that the broad macro policy performance indicators and so on remain broadly on track. So I think, when we have something, whether with the Argentines, you will hear it, I am sure, either from us or from the authorities in terms of if there are specific next steps, mission meetings, other communications.

But I would stress, particularly for those who just walked in, the discussions are continuing, and we will, when we have something to report, the fact that we're on recess does not mean that we won't be letting you know what's going on.

QUESTIONER: Continuing on this subject, but also relating to the IEO report on Argentina. Lavagna, in his statement reacting to the report, said that there's got to be some shared burden here. He complains about that Argentina is being pressed on this reform issue, my recollection from the report is, in a way that it wasn't pressed in the 1990s, I think. And his conclusion seemed to be that sort of the IMF should show more flexibility on this reform issue.

What are the management conclusions that you are drawing from this report regarding the third review?

MR. DAWSON: The IEO report covered, as the title says, the period 1991 to 2001. The Fund staff prepared comments in response to the report, which you have. They are posted under this embargoed basis. Similarly, management had some brief comments in that regard, and of course there is the summing up by the Managing Director of the discussion of the Board.

And I will get to a little more specific answer for you, but those issues I think are addressed in a variety of ways, particularly in the summing up.

I would note also for the record that the Executive Board did have the benefit of Minister Lavagna's statement; in other words, it was on the record and had been presented to them when the Board discussion took place.

Certainly, the report provides and indicates lessons to be learned by the institution, as well as by others, but I am speaking in this capacity at this point in terms of the views of the management and the staff, although I can speak of the Board's reaction as well, and that there are lessons to be learned.

I would direct you, if it is not too painful for you, to the Managing Director's interview in a publication this morning--the one that comes out in the salmon-colored newsprint--in which he addresses some of these questions as well.

One of the lessons learned within the report was indeed that perhaps the Fund had been a little bit too flexible in some regards, in terms of the requirements necessary to support a currency regime. And so the lessons learned may depend on what the perspectives may be at the particular time.

Minister Lavagna, in talking about the present relationship, questions as to what he means and what was said in his statement are obviously best directed toward Minister Lavagna. I would note, however, that the elements that I cited, the structural elements that are in the program, that were in the program back in Dubai, when the program restarted, as well as in subsequent reviews, are the authorities' own goals and own desires. They are not imposed on them in any sense of the word. Progress has been--and I think the authorities would agree with this--slower than they had expected in terms of their own agenda.

Now, if I can turn briefly to the summing up of the discussion, the Board I think clearly did see lessons learned from it. There were some areas of which, to be frank, the Board did not completely agree with the IEO. If you read some of the language on precautionary reviews, for example, there are differences of view.

But I think there's a pretty broad consensus reflected in the summing up of the Board discussion of the lessons that the Fund should take away--Fund meaning staff, management, Executive Board and others--from the Argentine experience in the period 1991 to 2001. But our priority and our effort, at this point, is in looking forward. We certainly need to learn from the past, but we should not be captured by the past or held prisoner by the past.

QUESTIONER: Can I follow that up?

MR. DAWSON: You've already followed up once, you can follow up again.

QUESTIONER: [Off microphone.] If I could just follow up, I'll ask something else so you can [inaudible].

MR. DAWSON: No, you can follow up on the same subject. I just don't want the same person following up on the same subject.

QUESTIONER: Sorry I was late.

MR. DAWSON: We are too late.

QUESTIONER: I don't know if there has been a mention of Turkey. The thing is the Board will discuss Turkey tomorrow on two separate matters. My question is about something probably more interesting [?].

Has there been any progress in talks regarding the establishment of a relationship between Turkey and the IMF after February 2005, when the current program ends, and is there a deadline to finish that?

MR. DAWSON: To answer the last part of your two-part question, first, is they are not deadlines in this regard. To sort of confirm the first part of your statement and then to deal with the second part, which was more of a question. Indeed, tomorrow, July 30th, there will be a joint Article IV and Eighth Review Board meeting on Turkey and, as usual, we will issue a press release after the Board meeting.

As I think you know we usually issue it pretty promptly after the meeting, and we expect we may be able to schedule a press conference call for later in the day tomorrow. So I think you will be able to get a read-out from the discussion both on the Eighth Review, as well as on the Article IV at that point.

With regard to the relationship as it continues after the expiration of the program, that is fundamentally a decision the authorities will make in the first instance by themselves before the Fund would have a response. And it's my understanding--you probably know better than I--that the authorities have indicated that they expect to make a decision in this regard by September, and I believe that is still the case.

QUESTIONER: I'll ask a follow-up question. Actually, I have two questions. In terms of the lessons learned from the past, the IMF has already, you know had the report that was published last year, the staff report, and everything.

MR. DAWSON: Correct.

QUESTIONER: So one of the lessons seems to be that the IMF should be more strict in regards to fiscal reform and all those things. Is that why this review is being delayed? That's my first question, whether the IMF is more strict now than before on these issues.

And then the second, whether there would be any negative consequences of this delay in practical terms, whether the schedule for the future reviews or anything within the program will be delayed because of this delay here in this review or whether it doesn't really matter.

MR. DAWSON: Of course, everything matters.

I don't think it would be fair to say-- when we talk about "lessons learned," I think the lessons learned, as you read both the report that you referred to, the staff report that was prepared last fall, but released in March, I believe, as well as this IEO report, I don't think I would--you say the strictness is the, if the lesson is reduced to one word, that is not the word or the lesson that I would draw. It is rather more a consistency of whether we have a set of policies that leads to a sustainable outcome.

Clearly, as the Managing Director has indicated on a number of occasions, in the case of Argentina, what we want to do is to be able to support the authorities in developing the policies, particularly in the structural area, that will allow them to build on the very strong macroeconomic performance of the last year and a half or so, going forward, so that they can put behind them the problems of the era of the default and the problems of the difficulties in the economy.

So it is more a matter of assuring that the Fund keeps an eye on the sustainability of policies. There was a particular matrix of policies that turned out to be unsustainable in the context of a Currency Board arrangement in 2001, that the lesson of consistency is a lesson. I don't think it comes out to being strictness. Because, as I indicated, the policies that we're talking about are policies the authorities themselves want, that there have, for a variety of reasons, been difficulty in getting done in a timely fashion.

In terms of the consequences of the delay in having the third review, as I indicated earlier, this is what happens. It's premature to talk about, as I think one of the first questions had to do with what about collapsing a third or fourth review, it's premature for that. You only have to go to the website and look. That happens in some countries.

I mean, we're not focusing on what the consequences are going to be if we fail to get something done in a timely fashion. We're trying to work on getting something done. And we are still, as I indicated, still engaged with the authorities in trying to see how they and we can move forward.

I think it's a, even though you may think I didn't particularly answer the question, it's a perfectly fair question to continue asking, but at this point our concentration is on keeping our dialogue with the authorities and seeing how we can go forward.

QUESTIONER: I was late, too, so perhaps you already touched upon my subjects. My first question is on Iraq. Do you have any progress since last briefing on the relations between IMF and Iraq to tell us?

MR. DAWSON: Essentially, I don't have anything new beyond that point. We do continue to be involved in the discussions with the authorities on technical assistance and helping develop their program for an ultimate possible financial support in terms of post-conflict assistance. But since my last briefing, I know there have been contacts, but I don't have anything to report about particular meetings or anything in that regard.

QUESTIONER: And I have a second question on Italy. After the brief mission of IMF officials in Italy, do you have any comment on the Italian economic maneuver going on?

MR. DAWSON: Could you please expand on what the Italian economic maneuver is.

QUESTIONER: I think you know better than I am, but--

MR. DAWSON: I never presume that.


QUESTIONER: As the IMF I think knows, Italy is preparing a maneuver to reduce the deficit and increase some taxes, some form of taxation. Do you think this is the right way to address the Italian budget problems?

MR. DAWSON: Well, I think I'll take a step back from the--let me deal with that.

Indeed, we did have a short staff visit, the 14th to the 16th of July, that reviewed the economic and budget prospects and was laying the groundwork for the 2004 Article IV mission which is planned for October. And we certainly believe--and I think this is already on the record, but I would reiterate--that given Italy's high debt level, a breach of the 3-percent deficit ceiling would be especially damaging, both for the effectiveness of the EU's rules, but also for the country's own economic progress. And I think the authorities understand our views, and they are trying their best.

QUESTIONER: I'm sorry I was late too.

MR. DAWSON: We are too. We're keeping you all too busy today.


QUESTIONER: I will try to not be repetitive, but I want to ask you, obviously, things about Argentina.

Do you confirm the delay of the third review, the discussion of the Board, after August 23rd and in September, particularly, if you know? This is the first question.

The second question, today, there was an article in Financial Times about Managing Director, and it seems that he said that now we are discussing the goals of 2005 and 2006 about Argentina. Is it true? And that is the big issue that they are discussing now in third review or that's what will be discussed in the fourth review?

It seems also that Argentina will begin a new dialogue with creditors next week, with its banks and the creditors. Do you think that this is a good sign to the third review?

MR. DAWSON: Let me take the last question first.

Certainly, discussions, and conversations and progress between the authorities and their private external creditors is certainly welcome. And, indeed, one of the elements under discussion in the program is the status of the discussions with external creditors. So we basically believe in openness dialogue in negotiations.

I think your question started out in terms of a delay of the third review, as I did indicate earlier, originally, it was notionally scheduled for June. That has not happened. I don't have new information as to when a date would be scheduled. We remain in contact, regular contact, with the authorities. When we have something to report, in terms of progress, including in terms of a possible Board date, we would give that to you. It is certainly true that the Board recess starts a week from close of business tomorrow, and I would just leave it at that.

When we have a discussion--I will get to the last part of your question, though--when we do have something to report on Argentina, we will. Even though we're on recess, we will report. And, indeed, the authorities are pretty open, in terms of their approach and dealings on this, and the authorities may well, at some point, if something develops, would be reporting it.

With regard to the interview the Managing Director had with the Financial Times, there was indeed, yes, a reference to going forward looking at multi-year budget targets. That was in the context of a question: As the original program really only talked about 2004, when are you going to start talking about multi-year targets?

And the point is, as we are now looking forward, remember, the program restarted in Dubai. It was natural for starting the program just to focus on one year. Now, as we start looking forward, looking to the outyears to a multi-year program is natural in a Fund program.

Last year, we were in a lending into arrears case, where it was important to try to get things started. Precisely when that will be built into the program, whether it comes into a third review at some later point, I can't really tell you now. It's my understanding--you would know better than I--that the Argentine budget process is such that in the fall--September, I think--is when they start focusing on 2005 budget.

That was sort of the context in which the Managing Director mentioned it. But when it actually gets into the program will partly depend on the Argentine budget process as well as ours. Obviously, the longer it takes for a review to take place, the more likely that it will have a multi-year element.

Bluntly, had it taken place in June, it would have been less likely because their own budget process is not that far advanced--was not that far advanced.

QUESTIONER: Do you have something new about the negotiations with Ecuador and the new standby agreement?

MR. DAWSON: I don't think I do, but just let me check.


MR. DAWSON: No, I will have to get back to you on that.

QUESTIONER: I know the IMF is not intervening directly in the negotiations between the creditors and--

MR. DAWSON: Directly or indirectly--

QUESTIONER: Well, that's my question. What the Argentine authorities--

MR. DAWSON: And that's my answer.

QUESTIONER: --are saying is that, by withholding this third review, you are intervening because you make it harder for the bondholders to accept the offer they're making, and so that you should therefore approve this review.

What's your response to that argument?

MR. DAWSON: The program has in it, in terms of the structural elements, a number of conditions, of which one is progress in the debt negotiations, good-faith negotiations and so on. Others are other structural elements. They are all there, and I don't think the argument is seriously that four should be ignored in order for one to go forward. We have to make a judgment of the progress as a package. And at the moment, clearly, as a package, the elements are not there sufficiently to go forward.

Yes? And then I think we'll wrap up.

QUESTIONER: Secretary Taylor, a few days ago, talked about the point, made the point about utility sector. It seems like it's the big issue in the [inaudible] of the debt. What do you think about that?

MR. DAWSON: We have, there are, depending on how you choose to count, four or five issues in the structural area, of which one is, in fact, the utility sector. I would not--various of you have tried in the past to have me pick the flavor of the day or the flavor of the review. I won't do that. There are all elements. We have to take a look at it all as a package.

One last question.

QUESTIONER: I'm wondering if you have anything new on discussions about the results of the Brazil pilot project.

MR. DAWSON: No. I saw Teresa Ter-Minassian, who is back from the mission. I saw her yesterday. I know Joaquim Levy, the Treasury Secretary in Brazil, had made a statement I think--maybe it was an interview, but I think it was a statement--from Fazenda earlier this week. The work with Brazil is part of work with a number of countries, particularly in Latin America, that will be considered by the Board this fall, and I think we are making progress in that sense of the word, but nothing beyond that.

But I think you will--this is a subject of great interest not just in Latin America, but elsewhere, but particularly in Latin America, and it's something the Fund is, because our members want us to see what we can do, we are seeing what we can do. And my understanding from Teresa Ter-Minassian was that it was good discussions with Brazil. There are others with other countries. And we'll be presenting it to the Board for their consideration. On the particular issue in Brazil, it's an issue we've been familiar with for some time. President Lula, in particular, has asked that we see what more can be done, and we're looking at that, but in a broader context as well.

Thank you very much. Please do remember that the embargo does not get lifted until 12:30 to accommodate our friends from the IEO.

QUESTIONER: How long is the recess?

MR. DAWSON: The recess is two weeks, starting a week from tomorrow.

[Whereupon, the press briefing was concluded.]


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