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

January 13, 2005

Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
January 13, 2005
Washington, D.C.

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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. Our briefing is embargoed until 15 minutes after conclusion, and we will set the precise time at that point.

Before we begin, I'd like to repeat the Fund and staff's deepest sympathies and condolences for the people in the countries affected by the tsunami in Asia. We've been following and working with great concern on dealing with the tragic developments of the last several weeks.

As you may know, the Managing Director noted during his recent visit to Indonesia that up to around US$1 billion in possible financing is available for the most affected countries, which could be made available quickly without a program, IMF program, through our emergency natural disaster assistance mechanism. Sri Lanka has already requested assistance under this mechanism, and we hope to be able to provide this assistance on concessional terms. We will be discussing emergency assistance possibility with other eligible countries as well.

The Managing Director participated in the high-level meeting on humanitarian relief for countries affected by the tsunami on January 6th in Jakarta and visited the tsunami-affected and devastated Aceh area, a province of Indonesia, on the 7th of January.

I should also note that the Fund staff, as I think in many other institutions, have responded with a generous campaign to contribute assistance to the affected countries, supported by a matching program that we have at the Fund. And I know our colleagues at the Bank have also been very active and generous in that regard, too.

We remain in close contact with the authorities in the region and stand ready to help in whatever way we can.

First Deputy Managing Director Anne Krueger is now in Delhi, India, on a previously scheduled trip, and tomorrow will give a public lecture at the National Council of Applied Economic Research. She will then travel from there to Colombo, Sri Lanka, on January 18th and 19th and to Maldives on January 20th to discuss with the authorities how the Fund can help those countries. It is expected Ms. Krueger will hold a press conference in each country, and Media Relations will give you more information on that once plans are finalized.

Regarding other management travel and public engagements, the Managing Director will travel to Latin America in mid-February, this time to visit Colombia, Ecuador, Bolivia, and Peru. At this point I don't have the precise details of the itinerary or schedule, but we will get back to you closer to the time of the trip.

Deputy Managing Director Agustin Carstens is currently in Islamabad, Pakistan, for meetings with the authorities and to deliver a speech at the Pakistan Institute of Development Economics' annual 2005 conference. Mr. Carstens is traveling to Malabo, Equatorial Guinea, on January 26th and 27th to deliver the keynote address at a regional Fund-Bank workshop on transparency and accountability for resource management for parliamentarians from the regional grouping called CEMAC, which, for those who may not know it, includes Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, and Gabon. Media Relations has, I think, circulated a note to correspondents on this workshop.

And the last announcement for today is that the Fund's headquarters will be closed for business on Monday, January 17th, and Thursday, January 20th, for official holidays. However, Media Relations will have the usual duty officer set up, and press can contact the Fund for comment as may be necessary.

At this point I'll be happy to take any questions you may have.

QUESTIONER: Happy New Year.

MR. DAWSON: Happy New Year.

QUESTIONER: Do you have an update on Turkey? Do you think the Fund's Board could handle or discuss or take up Turkey's new stand-by arrangement before the end of this month? Thank you.

MR. DAWSON: At this point I don't have such a date. As I think people know, I think just as our last discussion was taking place, a Fund mission in December did finish discussions on the new program with the Government of Turkey. The authorities are requesting a three-year, $10 billion stand-by arrangement, which includes exceptional access to support their economic program, which aims at sustained growth, low inflation, and debt reduction.

The main elements of the program include a 6.5 percent of GNP primary fiscal surplus target, containing and reducing the social security deficit, improved tax administration, bringing banking supervision more closely in lines with EU standards, and encouraging foreign direct investments. The authorities still, though, need to take a number of steps in the above areas to make possible to facilitate Board discussion of the program. So I do not have a date, but we will let you know when we do.

QUESTIONER: Thank you. First, on Russia, the economic adviser to President Putin, Mr. Illarionov, recently suggested that Russia has basically changed the economic model of its development, that in his words it used to have an inertia, quote-unquote, inertia model, which he didn't like, which was not quite liberal, but he said it was tolerable. And now he says it's completely an interventionist model, which he doesn't like at all. Does the Fund have any opinion on that?

MR. DAWSON: Well, I don't think it's appropriate for us to make comments on that particular statement, which I was aware of, but it's—you know, he's a government official, and I think I'd leave it at that.

I would note, however, as we have done and indicated in the past, that we have expressed concern over the investment climate issues. In particular, we have stressed the importance of ensuring that regulatory law enforcement agencies act in an evenhanded and transparent manner and that the privatization process is open and fair.

In this regard, we've also noted a marked deceleration of economic growth since the middle of 2004, which reflects sluggish investment spending, which many have attributed to a worsening of business sentiment.

This gives added urgency, but it was a need that existed before, for reforms aimed at improving the investment climate, including public administration reform. But I would also note that President Putin assured the Managing Director during their recent meeting in Moscow that the Russian Government remains committed to market-oriented reforms and intends to push them ahead during the new—during the second term in office.

QUESTIONER: And if I might stay in the region, Ukraine and Uzbekistan both recently had elections, at least in the Ukrainian case somewhat disruptive to the economy. Still, in the Uzbek case, you had a mission recently and released a statement that to me was kind of surprising because of the rosy picture painted in it.

I guess my overall question on the two countries would be: Are they out of the woods economically in the IMF view?

MR. DAWSON: Well, remember, it is our job to worry about everything. Let me do comment on Uzbekistan first.

Growth did, in fact, picked up in 2004, aided by currency convertibility, initial steps toward agricultural reform, and good weather. But there are concerns that increasing trade restrictions, government arrears, shortages of cash, and continued imposition of non-market requirements on banks will undermine growth prospects going forward. And we are also concerned about an acceleration in inflation. So I think it is—those are concerns that we are following closely.

With regard to Ukraine, you know, as we also had stressed on previous occasions the new authorities, who are now in office, do need to tackle without delay several macroeconomic and structural policy challenges, including restoring sound public finances, lower inflation, and establishing an institutional basis for sustained longer-term growth.

Clearly, there were market pressures during December, during the political crisis, but indications are that the markets have accepted and—the resolution, the peaceful resolution, the new government, and things have certainly improved in terms of those pressures.

The most important immediate challenge for the new administration will be to put into place a revised and sound 2005 prudent budget. And, of course, we do stand ready to assist the authorities in their efforts to maintain the stability, as well as sustain growth.

In the front row? We'll just go back and forth. It's easier for me.

QUESTIONER: A couple of days ago, the Minister of Finance of Mexico, Gil Diaz, was here. He made a presentation at the CSIS. And among other things, he said that the fact that the fiscal, energy, and telecommunications reforms have been stopped by Congress, that has hampered the possibility for Mexico to have bigger economic growth this year. He also said that they don't see any risk that the inflationary pressures will in some way risk the economic stability of Mexico. I wonder if the IMF has the same assessment on those two issues.

MR. DAWSON: I'm not sure it—I mean, certainly the government has an ambitious agenda that they're trying to work with the Congress on. And obviously there have been some difficulties in getting the agenda forward, but they seem committed to sustaining it. And I don't have—I was vaguely aware of the Minister's speech, but I don't have anything to add to complement or, frankly, to contradict it. But there is an agenda of reform that the government has. The Fund broadly supports it, and we recognize that in a democratic system it is difficult to get things done as quickly as one wants. But I think that's one of the prices to pay for a democratic system.

QUESTIONER: The Brazilian Government has sent to the Congress the budget, with some of the infrastructure projects with kind of an asterisk on the side saying that its way of accounting will depend on approval by the Board of different accounting ways for these investments. So I would like to know when will the Board have a final opinion on the pilot project regarding this accounting and if the IMF has already had any sign from the Brazilian Government about the renewal of the agreement or not in March?

MR. DAWSON: The easiest question for me to answer is the last one. The authorities are still considering their course of action, and we're ready to work with them in whatever fashion they seem—they feel is appropriate.

I think it's important—with regard to the first question, the infrastructure question, there is a broad review going on by the Fund on the issue of treatment of public infrastructure investment and the accounting treatment of it.

That is not a review that questions that it can't—should not be accounted for. It's a question of where it is accounted for. So that requires—it maybe requires an adjustment in accounts, but it's not as if, for example, we're pretending the spending didn't take place. So it's not—so it is an accounting treatment issue. As far as—and I'm not quite sure it's quite accurate—I'd have to see what was actually said. It's not quite accurate to say that the Fund Board will be approving it. I mean, we will have some standards. The Brazilian Government, of course, had an existing program on which we had already made adjustments under that existing program. Our own review will be going forward.

So I'm not quite sure it's fair to say the Fund will be approving it because obviously it's a Brazilian Government, you know, decision and there may or may not be a program going forward. This is up to the Brazilians. But it will all be accounted for in a transparent fashion, and what we're trying to do is to develop rules that can be broadly applied. Brazil, in fact, was a country where we started allowing for in the budget treatment different accounting for certain kinds of expenditures, particularly public—particularly Petrogas originally, and then later on some of the, I think, sanitation investments. And that's a process that's going forward, and I think you can expect that it will continue to go forward. But it is not—I think it's not the right way to look at it as the Fund approving it.

QUESTIONER: The problem—

MR. DAWSON: Particularly since we don't know if we're going to have a program at that point, either.

QUESTIONER: Just to follow up, the problem is the projects are already in the budget, and we are starting to run the primary surplus for this year. And at a certain point there needs to be a definition of if these projects will be accounted for the primary surplus or not and when will this be reached.

MR. DAWSON: That will be reached in the context of the government's budget, of course, in the context of whether they go forward with the Fund program, and I think that's the better context in which to look at it instead of the broader review of the infrastructure issue, because that's a broad, multi-country issue which may not be resolved prior to the decision needing to be taken in the context of Brazil. And certainly as has been seen in the context of Brazil, we have worked closely and successfully with the Brazilian authorities to accommodate this in the past, and we will work with them in the future.

But, again, it also depends in a legalistic sense, back to what your question was, it does depend on whether there's a program or not. Because if there's no program, it wouldn't be part of our—there wouldn't be a Fund role in, as you say, quote-unquote, approving it.

QUESTIONER: As you know, Minister Lavagna presented yesterday the exchange—the debt exchange, and he said that a level of participation in 50 percent would be considered a success. What is the position of the IMF on this issue? And second is that he will be in contact in the next weeks with the IMF to negotiate again with the IMF.

MR. DAWSON: With regard to those comments, the first set of the question that you mentioned, I would simply reiterate, you know, that we are not commenting on the substance of the offer and that, you know, our view is that completion of a comprehensive and sustainable debt restructuring agreement with the creditors is essential, critical for Argentina's economic prospects. But we are not going into issues such as that one.

With regard to the Minister's indication that he would be in touch with the Fund, certainly that's expected and welcome. You know, the authorities, of course, had indicated that they had been and to this point still are focusing their efforts on completion of the debt offer, which launches I guess tomorrow. And we continue to expect the program discussions to resume. The ball in that sense is in the Minister's court as to when they want to resume them, and we will be, of course, responsive to him on that.

But, in any event, we are in contact and will continue to stay in close contact with the authorities on the full range of their policy concerns and issues in the program.

QUESTIONER: On Argentina as well—

MR. DAWSON: There seems to be a backlog of questions from December.

QUESTIONER: Yeah. If I remember correctly, the postponement of the non-mandatory payments was until January. So I wonder if this is an issue that has been addressed. I mean, there will be some payments that are due soon, I imagine. And also, changing countries, on Bolivia I wonder if you could give us an update. It seems that there has been an increase in social unrest in Bolivia and also in Peru, and I wonder if that's something that concerns the IMF.

MR. DAWSON: Let me get my notes here.

I don't have anything up to date or updated in that fashion on Bolivia or Peru, so I'll have to get back to you on that. Obviously, you know, as I indicated earlier in a different country context, this is—you know, this is one of the things that happens in, you know, democratic countries and the political process. So I think it's not completely unexpected. But as far as relationship with the Fund, I'm not up on any new developments in that regard.

With regard to what you referred to as the non-mandatory payments, that's definitely not Fund-speak. Fund-speak is payment expectations versus obligations which is—


MR. DAWSON: Which is even less perhaps comprehensible to people, but I think most people in this room are familiar with this issue. It has come up before in the context of Argentine payments. I don't have the date in mind precisely now. It's on the website. It is coming up again this month, and, you know, the Board does deal with this on a sort of case-by-case basis. So when we have something on that in terms of the Board to consider it, you will—we will let you know.

QUESTIONER: [inaudible].

MR. DAWSON: I am not—I mean, the last time I looked at the Board schedule, I did not see it there. But it is something that is—the shift from expectations to obligations is something that is, excuse the phrase, expected.

QUESTIONER: I have two questions.

First, how is it possible for the Fund to determine that the debt offer is complete without some kind of criteria for an acceptable acceptance rate? I mean, because it could be 40 percent, the offer, the acceptance rate—

MR. DAWSON: But that's not the only—that is not the only factor in the—the acceptance rate is not the only factor in a debt deal, so you have to see the entire package when it is—when it is done. And I think it's quite understandable for me to refrain from dealing with the numbers issue, although it's quite understandable for you to try to get me to.

QUESTIONER: But there has to be a ball park. You know, maybe it's a band, but—

MR. DAWSON: I think this is a mosaic, and we will look at it when it's concluded.

QUESTIONER: Okay. Secondly—

MR. DAWSON: Try your second one.

QUESTIONER: Secondly is assuming that there is completion of the debt offer, is it likely that Argentina is going to have to scrap the existing program and start a whole new program?

MR. DAWSON: That will be the subject of discussions. Obviously, it's been some time since the program was on track. But whether it's a—you know, first of all, it's the Argentines' decision whether to go forward, and to a degree it's the Argentine decision in terms of indicating to us the method in which they wish to go forward, assuming they continue with a program. So I think it's premature to say what it would be. There's not a constraint from our talking to them. Programs can be extended. Programs can be, you know, stopped and then renewed and it's not a big—that's not a big deal. The issue is the approach the Argentines want to take, and when they've decided what that is and when they want to do it, then they will approach us and we'll deal with that.

QUESTIONER: [inaudible] this program's off track?

MR. DAWSON: Well, it was off track—I mean, they agreed to suspend. They proposed, and their word is to suspend the program in August.

QUESTIONER: If there's no threshold, why does the—

MR. DAWSON: No one said there's no threshold. Oh, you mean a Fund-set threshold?


MR. DAWSON: We're looking at the deal as a whole.

QUESTIONER: But why then the [inaudible] representative in the IMF said that unless there's 75 percent of acceptance you can't say Argentina has solved the problem?

MR. DAWSON: Well, we have a Board of 24 Executive Directors who represent our 184 member countries, and each of them has views as to what does or doesn't constitute something that is acceptable, which would then be considered in the context of whatever may come to the Board at some time, which is another reason why I would have some difficulty specifying what the, quote-unquote, threshold would be because I would suspect that out of our 184 member countries we have a substantial difference of opinion in that regard, and the staff and the management need to make a judgment as well and come to a conclusion.

QUESTIONER: There can be another division in the Board just as it was some time ago regarding the fiscal—

MR. DAWSON: Let's wait and see. But, you know, I think it is—you know, Board members do speak on views. They represent their countries, and this is understandable. I have to say initially in looking at the story, it made it sound like this was an official Fund pronouncement. But, once again, since I love all of you journalists, I know it was simply the headline problem and not the text itself.

QUESTIONER: I also have two questions.

I guess the first one is this morning former IMF official and now President of the New York Fed Tim Geithner gave a speech, and he talked about the risks of a shock to financial markets is growing given the global imbalances, the U.S. current account deficit, and related issues. I know the IMF is worried about everything, but are you more worried about everything at the moment?

MR. DAWSON: We're always worried about everything.

QUESTIONER: Do you see—

MR. DAWSON: Your second question?

QUESTIONER: So there's no—

MR. DAWSON: No, I mean, we are. The Managing Director has made it clear that the pattern of global imbalances needs to be addressed. This is a view the Fund has had for some time, most recently and most formally in the World Economic Outlook in September. It is a—the problem of global imbalances is a global problem which requires a number of the major actors to take measures, and this is clear. I haven't seen the text of Tim's speech, but, you know, in terms of is it on our agenda? Yes, it has been there. We've been talking about it clearly and strongly, and so it's there. More or less depends on a scaling that I'm not really quite capable of doing, but it certainly is a concern and it's a responsibility of the Fund to be concerned.

QUESTIONER: Thank you. Second question, is there any update on China? And is it the IMF's view that right now the conditions are in place for China to move to some more flexibility in exchange rate?

MR. DAWSON: As far as the Chinese, the issue regarding the Chinese exchange rate system, I mean, we have for some time believed that a more flexible exchange rate arrangement would be in China's best interest. More flexibility would allow for a more autonomous monetary policy and help cushion against shocks.

The authorities have a number of items on their economic policy agenda. We've been in close contact with them on that issue and on the exchange rate issue, but also on issues such as banking sector reform. And our view—as I say, our views are clear on that. The Chinese authorities understand our views, and I think they are trying to find out how to—the approach and the timing which to take. But it's something that they—the views are clear. The authorities are considering how to proceed, and that's where it is. And, frankly, that's the issue that's been—I mean, it's been high on our agenda for some time.

QUESTIONER: But are the conditions in place now?

MR. DAWSON: That's not a judgment—I mean, that's a judgment the authorities have to make. We express our views in terms of the pros, the cons, the considerations, and ultimately this is a judgment for the authorities to make. You know, and that's where I would leave it.

QUESTIONER: Do we know at this point who will be representing the IMF at the Davos World Economic Forum at the end of this month?

MR. DAWSON: First Deputy Managing Director Anne Krueger will be there.

QUESTIONER: A couple of questions. My first is back to Argentina. Has Argentina officially asked the Fund to—that it wants to pay off its debts and how it's going to go about that?


QUESTIONER: Okay. The other question I have is on Sri Lanka. When is that coming to the Board as far as its debt payments?

MR. DAWSON: I do not have—let me just make sure I don't have—I don't have a date. It is—it will be as soon as the request can be formalized. This is a process that is intended to be a quick—emergency assistance is a short time fuse. It's not a matter of, you know, months or even very many weeks for it to be presented to the Board. I would note they did already ask for an extension in some of the repayments owed to the Fund, and that is being discussed tomorrow—no, today. Today. It's being discussed today.

In terms of the—is that right? Today's the 13th, right? Yeah, today.

Then with regard to the emergency assistance, it's the near future. It's a couple of weeks, but precisely when, I don't know.

QUESTIONER: Just to follow up on the tsunami, the Paris Club said they were waiting for financial—refinancing needs assessments from the IMF and the World Bank. We heard from Wolfensohn yesterday it could take a while. But from the IMF's point of view, when is an assessment coming out?

MR. DAWSON: I don't know precisely when the assessment will be done. As soon as we can do it. But, of course, that doesn't mean someone's forcing these countries to make payments in the meantime. I mean, it is—the Paris Club needs this so they can look at the slightly longer period. There's absolutely no doubt that the international community, the Paris Club, bilateral creditors, and the Fund and Bank are committed to providing them with the assistance that is necessary and the relief that's appropriate, and our needs assessment will be done on an urgent basis. But it is in no way holding up anything with regard to the shorter-term humanitarian and other assistance going forward. But clearly there's a major reconstruction effort needed going forward. The Bank has obviously the lead on reconstruction issues, but we are working with them because the Paris Club is a body that we do a lot of work with. And we do needs assessments. I mean, as you know, we did that sort of an effort with Iraq as well.

Just a couple more questions.

QUESTIONER: To follow up on Leslie's question, are you going to have some things that are preliminary though for the G-7 meeting to present to—

MR. DAWSON: I'm sure the G-7 will be asking us to discuss that, and I'm sure we will discuss it with our Board. Whether we will have something in a public fashion at that point, I'm not sure. You know, we'll see. I would suspect we would try to have it. You know, there's nothing—should not be anything secret about this. This is a question when we have something in a reasonable fashion that doesn't get changed massively later on because we hadn't, you know, done a good enough job to start with.

QUESTIONER: What's the latest on Indonesia's repayments? Have they asked for anything?

MR. DAWSON: Not—let me just check. I do not believe so, but let me just check.

No, the—I mean, we're ready to help them in whatever way we can, and they—and I know we've been in close contact with them. I know that some of our staff are about to head out to Indonesia again for a conference, but I'm not aware of any request. I'm certain there hasn't been one at this point.

QUESTIONER: Did the Board decide when it will discuss the Article IV for Italy?

MR. DAWSON: I do not have a date. Early February is all I have.


QUESTIONER: I'm sorry. I arrived late so I missed the part on Argentina.

MR. DAWSON: I was brilliant, answered every question.


QUESTIONER: There is one that I wanted to get your answer. I'm sure you spoke about the 50 percent, 75 percent, but I would like—

MR. DAWSON: No, actually, I didn't.


QUESTIONER: I'm sure my colleagues are good. But I wanted to know, Lavagna said that he has in his schedule a meeting with someone from the IMF, and I would like to know—

MR. DAWSON: I was aware that he had indicated that he would be doing that shortly. I wasn't aware that a meeting had actually been scheduled.

QUESTIONER: But he said that during the press conference, so I wanted to know with whom and when and the subject.

MR. DAWSON: We'll have to—I mean, we're obviously in regular contact with him. John Dodsworth is—

QUESTIONER: No, but this seems a little bit more formal.

MR. DAWSON: I do not have anything on that. We'll have to get back to you. But it wouldn't be surprising because we are, in fact, in regular contact with him, but I'm not aware of a scheduled meeting.

All right. We can lift the embargo at 20 minutes after 11:00, and I look forward to seeing you in a couple of weeks.

[Inaudible comment.]

MR. DAWSON: Oh, and the GMT time will be 1620 GMT.

[Whereupon, the press briefing was concluded.]


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