Transcript of a Press Briefing by William Murray, Adviser, Communications Department, International Monetary Fund, Washington, D.C.

July 24, 2014

Thursday, July 24, 2014
Webcast of the press briefing Webcast

MR. MURRAY: Good day. I'm William Murray of the Communication's Department at the IMF. This is one of our regular biweekly press briefings. We're embargoed until 10:30 a.m. Washington Time. That's 3:30 p.m. GMT.

Before we go into questions here from the journalists here at IMF Headquarters in Washington and from those online let me just run through a couple items.

Deputy Managing Director Min Zhu is currently in Peru. He's been there for a few days where he's had meetings with authorities and various other activities. He will also be holding a town hall meeting with university students in Lima, and he'll be visiting the site of the 2015 annual meeting of the World Bank Group and the IMF which will be held in Lima, Peru next year. So Min Zhu is currently in Peru and conducting some various public events down there.

Coming up on July 31st, the Managing Director along with our Fiscal Affairs Department Director, Vitor Gaspar, will present the findings of an IMF book entitled Getting Energy Prices Right: From Principle to Practice. This will be a panel discussion with Nancy Birdsall who head the Center for Global Development here in Washington. Additionally, the New York Times columnist Thomas Freedman will moderate that event on July 31st here in Washington 10:30 to 12:00 local time. Again, media relations will be coming out with more detailed information closer to that event.

IMF Economic Counsellor and Director of Research Olivier Blanchard is holding a press conference today in Mexico City at 10:00 a.m. Mexico City time, 15:00 GMT. The press conference will be webcast live in English and in Spanish.

Additionally, we will have our Executive Board recess. That's when the 24 member Board of the IMF takes a formal recess. That's August 4th through August 15th. There will be IMF staff working during that time, including the press office, so you will be able to reach media relations and other IMF staff as necessary. But the Board, in terms of taking formal actions, go into official recess August 4th through 15th.

Prior to that you're going to be hit with quite a few publications from the Fund. I did mention the book that the Managing Director will be launching with Vitor Gaspar, and also, of course, today's World Economic Outlook. But let me run through a couple of other important reports that we will have coming up. This is in chronological order.

On Monday, July 28th you'll likely receive the UK Article IV Staff Report and related documents. Tuesday, July 29th you'll receive -- these are under embargo for the press, the Spillover and External Sector Reports. Those are a compendium of multilateral surveillance findings.

The China Article IV Staff Report is tentatively expected to be published on Wednesday, July 30th. Then Japan's Article IV Annual Review, Article IV Staff Report is expected to be published on July 31st. So the Article IV Reports that I just referred to are viewed as currently systematically important economies in the world. The Spillover Report and the External Sector Report take on board some of the findings of those bilateral reviews as well.

So you're going to have quite a bit of information to digest over the course of the next two weeks. Again, media relations will send out appropriate advisories to help you plan your schedules accordingly.

Last bit before I take questions. The next briefing here at IMF Headquarters, next Communication Department briefing will be held here on August 28th. So we'll take a recess on these briefings which we typically hold every two weeks. The next one will be August 28th.

With that, I will take your questions.

QUESTIONER: A couple of things on Russia and Ukraine. On Russia, I guess the question is -- a lot of people are worried that sanctions or the potential sanctions could derail the recovery basically. Not only in Russia, but in the region, and potentially in the whole world. So how big is the risk in the IMF view of that of a downturn?

MR. MURRAY: Okay. Thank you. As you well know, back in April we published the Russia Article IV findings, and in that we had already noted that Russia was under economic pressure and that growth in 2014 is expected to be around .2 percent.

Obviously, there's recent sanctions that have been put in train against Russia, especially those that have been posed by the United States, signal an escalation of geopolitical tensions, and could have a substantial adverse impact on the Russian economy.

In addition to the direct impact of the exit of risk-adverse investor, the confidence channel, there may also be larger indirect impact as well from deteriorating confidence. But again, we have to wait and see.

QUESTIONER: Yes, but I was asking about the regional and the global impact.

MR. MURRAY: Well, from a regional and global perspective that's still under assessment, but clearly you would anticipate through trade channels that there would be an impact. I would expect that Olivier would be better positioned to give the global view in any case. But certainly on a regional level there is bound to be some of that.

A little early at this stage to really assess what that impact is. Don't forget Russia has, as I noted earlier, has been under some economic pressure this year already not related to recent current events. Just a general trend. So to disaggregate what that effect is the general trends in Russia from the recent events we're still working on that, Andrei.

QUESTIONER: On the Ukraine, obviously, you just put out a statement about the program which, to me, sounded a bit ambiguous. On the one hand, they seem to be doing fine. They only missed one criterion. By the way, which one was that? On the other hand, the money's not forthcoming. So what's next on the Ukrainian program? Specifically, do you expect any action at all before the summer recess for the Fund?

MR. MURRAY: Let me clarify a couple things. One, the review, we've just completed the review, you know, a few days ago. We released a press released summarizing the findings of the review mission and the agreement that was reached at the staff level. There was also a press briefing in Kiev where the mission chief elaborated on the statement.

I anticipate the Board meeting to convene sometime in late August, so after the recess not before the recess. But that review, if completed by the Board, would mean money under this tranche would be disbursed to Ukraine.

I’m not aware of any significant delay. It's just the mission just concluded. So there's a normal process in terms of getting to the Board and have the Board review the program.

QUESTIONER: Do you mean the tranche is scheduled as planned originally? In other words, the program is not being reviewed, reworked, rewritten, corrected, whatever you may want to use in light of the events, and in light of their own assertions, the Ukrainian government's assertions, that they need much more money?

MR. MURRAY: We have a program, as you know. The program is a two year standby arrangement. The mission has reached a staff level agreement with the authorities last week. Ukraine received a disbursement at the approval of the program. That disbursement was about $3.2 billion. Now, you know, they'll be coming up for another disbursement.

But in terms of changing the program I can't really get into that. But I can refer you back to the press statement which was issued by the mission which was fairly detailed. The mission stated there that the policies have generally been implemented as planned, and that all but one of the performance criteria for end May has been met.

All structural benchmarks for the first review have been met as well, though some of them with a delay. This is a notable achievement as the intensification of the conflict in the East means that the program has been implemented in an environment that is considerably more difficult than anticipated when it was launched.

QUESTIONER: As of now the augmentation of the program is not in the works as far as you know?

MR. MURRAY: I have to refer you back to the statement.

The email system is not working, is that correct? We cannot receive emails. Sorry. I think they can see and hear us though. I've just been informed we're having technical problems receiving questions from our viewers. I would recommend as a failsafe to send emails to and maybe they can get me the questions during the course of this briefing. I've just been handed one.

Let's go back to your questions. The statement was also very blunt in saying that the conflict is putting strain on the program, and a number of key elements of the macroeconomic framework have had to be revised. So there were, you know, revisions and the statement touches upon that. We'll have to see what happens going forward.

We never prejudge changes or how things are going. But certainly the point of the program is to restore macroeconomic and financial stability with being sensitive to the needs of the most vulnerable in Ukraine. That's the program goals, and that will continue to be the program goals.

QUESTIONER: You know, since you mentioned this, the statement says that while the authorities determined the implementation so far is so good a significant prolongation of the crisis would seriously strain their ability to do so without a substantial increase in external support or (inaudible) terms. What does it mean?

MR. MURRAY: It's a good question, let me just step back a bit. Don't forget that this is a concluding mission statement. We take the Staff Report to the Executive Board. The Executive Board reviews the staff findings, and then we publish the Staff Report, and will certainly have more fulsome responses to these questions.

I don't want to get ahead of the process at this stage. But you'll see in the Staff Report, all Staff Reports, not just for Ukraine, but everything we publish shows you how we expect to finance our programs or the economics programs that we support. So you'll see a fairly substantial public accounting of how the Ukraine economic program is funded in that Staff Report. I expect it will be published, but again, it's going to be after the Executive Board meeting which we anticipate will be in late August.

QUESTIONER: Staying on Russia, your report discussed a potential 0.8 decline in the U.S. economy as a result of the conflict in Ukraine and Iraq. I'd like you to discuss how further U.S. sanctions on Russia could impact that factor?

MR. MURRAY: Meaning of the .8? I'm not familiar with that figure, first of all. I may have to get back to you on that.

QUESTIONER: It's something like .2 to .8 percent.

MR. MURRAY: As a drag from activity in Iraq? I'm going to have to follow-up with you.

QUESTIONER: Just a result of commodity prices, commodity price increases, safe haven capital flows, U.S. dollar would appreciate and growth could fall by .2 to .8 percent over 2014 to 2015.

MR. MURRAY: Okay. I think that was a reference to a whole host of factors not just Russia, Ukraine, Iraq. I think it's much more beyond those three countries or the developments. I think it's a broader sort of impact. I don't --

QUESTIONER: So how could the sanctions on Russia impact U.S. economic growth?

MR. MURRAY: I don't have any answer for you there. That's a good question. I'll have to go back to our economists and ask them for -- you know, my guess is they're not going to be able to ascribe a specific cost by country to sanctions against any country.

I think it's going to be more -- unless, you know, except for the target of the sanctions. We're going to have to follow-up on that question. I don't really have any answer for you on that.

QUESTIONER: All right. I guess in more general terms, how the U.S. sanctions and pressure on our European partners could impact that overall Trans-Atlantic --

MR. MURRAY: Right now we're in the process of making an assessment of the impact, the broader impact of the sanctions that have been imposed.

Now, we can't analyze sanctions that might happen because they haven't happened, so this is really on those that have been implemented. Until we make that assessment, we have not completed that assessment, it's very difficult to be precise.

There is, obviously, a direct impact on the slowdown in Russian economic activity that we've seen over the course of this year, it didn't just start, on regional economies that have very active and direct trade links with Russia, particularly in Eastern and Central Europe and Central Asia. Beyond that, I can't really be precise.

I mean, I understand why you're asking the question. Certainly follow-up. When we can be more precise we will, but right now this is an evolving issue and story. It's clearly something that we're watching, that everybody's watching, and we're keeping a close eye on it because of potential ramifications. But right now I'm not prepared to give you a precise number.

QUESTIONER: Okay. Then also the U.S. Commerce Department launched a pretty aggressive campaign calling on the United States government not to enact further sanctions because it would harm U.S. growth and jobs. Then there was a further report that in May there was an increase of -- it was up to $1.25 billion in U.S. exports to Russia which was a significant jump, even considering the sanctions. So how could that be impacted?

MR. MURRAY: You really should be back to Commerce. Commerce is not part of the IMF. It's a U.S. government agency. Really that's something for the U.S. Department of Commerce to explain. I'm not familiar with that number. Thanks for asking though.

I'll take another. We can come back to these later, but I think I've tapped out.

QUESTIONER: Good morning. My question is the Prime Minister of Italy, and I quote him, said Greece was saved in order to save for the interest of large European Banks. I wanted your comment on that.

MR. MURRAY: I have no comment on that. Ask the Italian authorities to elaborate, but I don't have anything to add to that, Michael. I have nothing.

QUESTIONER: Can you take this question and answer it later?

MR. MURRAY: No. I mean, I can't comment on it. I have no basis to offer a comment. No basis.

QUESTIONER: Another question. The IMF has called many times for changes in the funding of Greek political parties. I'm wondering the IMF insists on this issue, and if this issue is a matter of corruption.

MR. MURRAY: If I heard you correctly you're saying why do we want political support for the economic program. Is that the question?

MR. IGNATIOU: No. The Fund called many times for changes to the funding of Greek political parties. As you maybe know, the Greek government gives money to these parties. As I understand, Mr. Thomson, the IMF insists, they insist on this issue. I'm wondering if it's a matter of corruption? That's why they are?

MR. MURRAY: Sorry, didn't quite hear the context. I'm going to have to consult with Paul on this. I have no idea what he's said repeatedly or if that characterization's correct. I will get back to you and we'll answer that question, but I don't have anything.

QUESTIONER: Thank you for taking my question.

MR. MURRAY: Thank you for asking.

QUESTIONER: So lately some economists, Greek and otherwise and foreign, predict that the Greek debt is sustainable as is. Does the IMF still see the need for the further easing of the Greek debt? For what purpose? When would you like to see such an agreement reached?

MR. MURRAY: Okay. Thanks. Let me check something here. I'll get to your question, so everybody's clear on this. Our Greek journalist friends really know the program well, but this is for those who don't. I just want to make it clear.

There is a negotiating sixth review is expected in Athens in the second half of September. The intention, as always, is to reach an agreement as quickly as possible. Okay? So that's a mission that involves the European Union Commission and the IMF, so that's a negotiating mission for the sixth review, second half of September.

Now, in terms of your question on debt situation, debt sustainability. 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.

With Greece having achieved a fiscal primary surplus these issues are expected to be discussed with the European partners in the context of the sixth review, which I noted is expected to get underway in late September.

QUESTIONER: So does the IMF still see the need for further raising of the Greek debt because there are some economists that will argue that it's not needed?

MR. MURRAY: My answer before was there is an agreed framework in place for ensuring debt sustainability. That's my answer.

QUESTIONER: So on Ukraine, do I understand you will say nothing beyond the statement because we've all read the statement. What I'd like to understand -- oops, sorry. I'm not on, Sandrine Rastello with Bloomberg.

On Ukraine, can you say anything beyond the statement because on these potential needs for further financing the way the statement is worded seems to imply that the IMF will count on other external contributors to fill any gap?

I have a second question, completely different. Could you just let us know if anyone from the Fund is expected to go to Jackson Hole and speak?

MR. MURRAY: Okay. I'll get to Jackson Hole second. Let's deal with Ukraine because it's come up quite a bit. I feel somewhat uncomfortable dealing with the detailed questions before the Executive Board reviews the staff findings. It's our standard practice. It's important that the Executive Board have a chance to -- which is all of our member countries, and has a chance to question the staff on the findings.

The statement that we issued on July 18th is fairly substantial. It is fairly elaborate and blunt. So I think if you go back and look at that you'll see that. A program has to be fully funded no matter what country it is. So certainly external support, not just from the IMF, but from others is important. That's been made clear since the program was undertaken.

Where it stands, who's done what. I'm not prepared today to get into that. But it's a legitimate question that you're welcome to bring up again once we get through the Board review which, as I mentioned, is expected roughly late August. So that's where we stand there.

Jackson Hole. My expectation is that there will not be any IMF officials attending Jackson Hole this year. Now, I know you may have a follow-up question because I saw Bloomberg wrote a story about Jackson Hole attendance a few days ago. It's not related to the story that you published. It's just confluence of events. Our officials have to be elsewhere this year.

QUESTIONER: Thank you. Follow-up on Greece. An IMF working paper that was released on Tuesday shows that the Greek productivity gains may not be sustainable as they depend on falling wages and higher unemployment. Given this finding, I'm wondering will the IMF insist on more layoffs in the public sector or further pay cuts in the private one? Thank you.

MR. MURRAY: Thanks for the question. A couple reminders. I mean, this is, again, familiar to many of our talented Greek journalists we have here at the IMF.

Greece has made enormous progress in restoring fiscal sustainability. We expect the 2014 fiscal target to be met, and we do not see the need for additional measures for 2014. The thing to keep in mind is that we support the authorities' desire to avoid across the board cuts in wages and pensions. Okay?

We support the authorities' desires to avoid across the board cuts on wages and pensions. This is why it is important to press ahead with fiscal structural reforms to modernize Greece's fiscal institutions. Such as strengthening tax administration, where progress continues to lag, so that everyone pays their fair share of taxes.

So there's other things, but I don't have anything further to add specifically to your question.

Let me read this email. Again, I apologize for the system being down today. We'll work on that and try to make sure it's up and running. Particularly, with Olivier Blanchard's World Economic Outlook Press Conference coming up as well.

QUESTIONER: On Ukraine, what is the IMF's estimate or thoughts on the impact of the downing in Malaysia Airlines Flight MH17 in Eastern Ukraine, and its impact, if any, on the IMF's program?

MR. MURRAY: You know, we're concerned about conflict in the region and a statement we issued the other day addresses that issue.

QUESTIONER: Does the IMF have any estimate of the economic impact of the fighting, of decisions impacting access to Ben Gurion Airport?

Definitely don't have anything to offer on the closure. Although, I saw some news saying the airport is reopened or flights have restarted. But we don't respond to that. We don't have any analysis.

MR. MURRAY: On Gaza and Israel let me give you some on Gaza and Israel. With the conflict ongoing, this is more specific to Gaza, but with the conflict ongoing it's too soon to make an accurate assessment of the impact which is focused on Gaza and will ultimately depend on the conflict's duration.

Heavy damage to buildings, water, and electricity infrastructure is already apparent. Aggravating an already critical humanitarian situation. Post-conflict reconstruction poses risks to the Palestinian Authority's finances. Absent additional donor financing the PA does not have fiscal room to take on this additional burden. The exact economic impact would, obviously, have to be determined later. We don't have a handle on that.

As for Israel, Israeli financial markets have thus far remained stable with the shekel steadily appreciating, and the Tel Aviv 100, the key stock price index, little changed over the past two weeks. However, based on the reported numbers from various sources the fiscal cost of the conflict over the past two weeks is estimated at around .2 percent of GDP.

The impact on economic activity, especially the tourism industry, and activity among small and medium sized enterprises in the south of Israel has already been felt. A further deceleration of GDP growth could be likely in the third quarter. However, need to make clear, that once the conflict ends we expect growth in Israel to rebound relatively quickly.

QUESTIONER: On Liberia. Is Ecobank estimates that the Liberian dollar will weaken a further 7.5 percent by year end as the withdraw of United Nation troops and companies and organizations that used to bring in funds are no longer bringing in the volumes they used to. Does the IMF concur in this analysis or have a view on the impact of the UN pull-up on Liberia's economy?

MR. MURRAY: I have no specific knowledge of the Ecobank estimates, so I'm not commenting on that. I really can't. But guidance from our staff is as follows. The staff assessment is that the recent depreciation pressures mainly reflect the widening of Liberia's current account deficit.

The United Nation's mission in Liberia drawdown, together with the downsizing of operations by various non-governmental organizations could possibly be associated with the lower U.S. dollar supply. This is something that staff will continue to work with the authorities on and will address as appropriate.

I think that's it for online emailed questions. Maybe we'll take a couple more here and then clear the decks for -- actually, I'd like to take just two mores questions and then clear the decks for Olivier.

QUESTIONER: Andrei Sitov, yes, again, from Tass. Wanted to ask, what was that criterion that was the exception in the Ukraine report?

MR. MURRAY: I'm going to have to get back to you on that. I don't have any guidance on what the one exception one, but I will follow-up with you. It's a good question. Let me just --

MR. SITOV: (inaudible) details.

MR. MURRAY: You know, we'll follow-up up. We mentioned that we should have that for you. Go ahead.

QUESTIONER: There are reports that the Prime Minister of Greece asked to meet with Madame Lagarde when she's in Europe in August. Can you find out and tell us?

MR. MURRAY: I don't have anything on that. I will get back to you on that, Michael. Thanks. Last question. Thank you.

QUESTIONER: The last question that I have is the recent data of the Greek Statistical Office show that one in three Greeks, and I quote from the report, live below the poverty line, and that Greece ranks in the fourth position at the European Union level in the levels of poverty.

According to this report, this happened after the adoption of the adjustment program. Do you see any way out of this situation for the Greek people?

MR. MURRAY: Thanks. I'm not familiar with the specific report that you just cited. However, when you go back and you look, I would encourage people to go back and look at the Staff Report on the fifth review of the program, poverty was a front and center issue. The increase in the amount of people in poverty was an issue that was cited.

Your colleague asked about wage pressures and things of that nature. One of the reasons why Greece needs to push forward on structural reforms is to partly address the underpinnings of what brings people into an impoverished state. So we're certainly aware of the need to address poverty in Greece and anywhere.

But it's an issue that is clearly cited in the context of the fifth review, and I'm sure it's going to be part of the discussions going forward.

With that, again, thank you all for coming. Again, our newest person here from RIA Novosi, thank you for coming. This is embargoed until 10:30 a.m. Washington time, 3:30 p.m. GMT. We'll see you on August 28th. Have a good summer. Thank you.


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