Transcript of IMF Press Briefing

June 22, 2017

MR. RICE: Well, good morning, everyone and welcome to this press briefing on behalf of the International Monetary Fund. I am Gerry Rice of the Communications Department. I will start with a few events that are upcoming, and then we will turn to questions in the room and take some online as well.

Earlier today in Valencia, Spain, the Managing Director of the IMF, Christine Lagarde, delivered a speech at the Plenary of the Financial Action Task Force. The speech was made available to you online and focuses on supporting countries build defenses against money laundering and the financing of terrorism, including by harnessing the power of financial technology, fintech, as it's called. So, that was earlier this morning. The speech is on the website if you would like to take a look at that.

On July 6, Christine Lagarde will participate in a conference hosted by Die Zeit in Hamburg on global cooperation. Madame Lagarde will take part in a conversation with German Finance Minister Wolfgang Schäuble. This is on the eve of the G-20 summit, literally. That’s July 6. On July 7 and 8 in Hamburg, Madame Lagarde and our First Deputy Managing Director David Lipton will be there for the G-20 summit heads of state and government.

Then on July 11, Madame Lagarde will represent the IMF at the IMF-Croatian National Bank conference, and she will be participating in that conference on reaccelerating convergence in Central, Eastern and Southeastern Europe. That’s July 11 in Croatia.

Let me talk a little bit about our Deputy Managing Directors. On June 27, our Deputy Managing Director Tao Zhangwill travel to Dalian, China, to participate in the World Economic Forum’s annual meeting, known as Summer Davos, in China. And on June 29 and 30 at the Joint Vienna Institute, our Deputy Managing Director Mitsuhiro Furusawa will be representing the Fund on the occasion of the 25th anniversary of the Joint Vienna Institute, which as you may know is our regional training center serving our member countries in Central Eastern and Southeastern Europe, as well as Caucasus and central Asia.

Then on July 12 and 13, the IMF and the Ministry of Finance of Indonesia will hold a high-level conference in Jakarta on issues related to international tax reforms, and again the IMF will be principally represented in Jakarta at that conference on international tax by Mr. Fukazawa. I should mention that on July 24, and I know you will mark your calendars for this one, it will be our WEO update, the update on the World Economic Outlook, July 24, led by our Economic Counsellor and Director of the Research Department Maury Obstfeld. That’s going to be launched in Malaysia, actually, Kuala Lumper, July 24.

Let me just mention one other thing. Next week June 27, we will be back here for a briefing on the U.S. Article IV concluding statement - Tuesday. Details will be forthcoming to you. As you know, those of you who follow the Fund, we are in the middle right now of our systemic, what we call our systemic Article IV process, so you have seen recently concluding statements on China, Japan, the Euro area, Germany, and as I just mentioned, the U.S. will be upcoming on Tuesday the 27, next week.

So, one more logistical detail before I turn to your questions. Due to the July 4 holiday, here in the U.S., we won't hold a briefing on July 6. We will not, but we will resume service the week after that, and that's because of the holiday. Okay. I will turn to your questions. If there are any. If there no questions --

QUESTIONER: We have a lot of questions.

MR. RICE: I thought you might have some questions.

QUESTIONER: Yes. Gerry, there are all these reports that Madame Lagarde is going to visit Greece. Do you have anything to tell us on this? Also, I wanted to ask you, what is your answer to the criticism that by giving Greece an agreement in principle, you are helping Mr. Schäuble, especially to build his political future, and they accuse you of ignoring your role as an independent organization that puts above all else its member countries.

MR. RICE: Okay. Should I take more on Greece?

Questioner: I have more but --

MR. RICE: You have more. Okay. Let's hear from him, and then maybe we try and cluster them a bit.

QUESTIONER: Thank you, good morning, Gerry, how are you doing?


QUESTIONER: Let me first ask your forgiveness for any way I might have been too aggressive in my last reporting engagement.

MR. RICE: Never.

QUESTIONER: I was after the truth.

MR. RICE: Never.

QUESTIONER: Great. So Zettelmeyer over at the Peterson Institute has done an analysis, a simple analysis of the Euro group agreement that the IMF has put its preliminary rubber stamp on. And that analysis says that it is unrealistic to presume that Greece will be able to hit the fiscal targets that the Euro group has said. It has historically never been done by any advanced economy. And I just want to hear whether the IMF thinks that this Euro group agreement, as it is laid out, is realistic, because it has been calling for that for some time.

MR. RICE: Okay. Yes, good morning.

QUESTIONER: I'll add a couple Greece questions. Mohamed El-Erian, who as you know follows the Fund quite closely, had a piece yesterday, and he characterized the deal as another extend and pretend. Wondering if you have thoughts on that, and more broadly just wondering why, as kind of the expert in current account balances around the world, why or is the Fund willing to put a little more pressure on Germany to take some policy steps that might perhaps even out the imbalances with periphery countries like Greece. I mean, it seems like that's a big issue as well. Is that something that the Fund will be considering?

MR. RICE: Okay.

QUESTIONER: Just one other short one and in El-Erian’s 's piece he also did suggest as you know Mohamed El-Erian is a former senior IMF official --

MR. RICE: As is Mr. Zettelmeyer.

QUESTIONER: I wasn’t actually aware of that. So, where he suggested that in order for the in-principle program to work that it would need some sort of timeline, deadline. Wondering if you can address that as well.

MR. RICE: Do you want to wrap in your others, and then I'm just going to take Greece and answer these and move on; try and move on from Greece, okay.

MR. RICE: Got that. Yes, yes. Oh, okay, the Board, yes.

MR. RICE: Yes.

MR. RICE: So it's the same as his question, right?

MR. RICE: Sure, okay.

QUESTIONER: We want to know if you are going to put a specific debt plan to Europeans to Greece.

MR. RICE: Okay. Let me take that clutch of questions, thank you very much. So, let me just say it in context, and then I will take each of these questions specifically. So, it was a week ago in Luxembourg that we think an important step was taken to help Greece return to the path of stability and sustainable growth, so we reached an agreement with the Euro group and the European institutions for IMF participation in the Greek program.

Consequently, the Managing Director took part in the press conference there, and she announced that she would propose to the IMF's Executive Board the Approval in Principle of a new precautionary standby arrangement for Greece. Okay. So, those were the facts. So, she explained at that time why are we taking this step. And she said that in the context of the IMF having often spoken of the need for these two legs of the Greek program to be in place, reforms and debt relief. So, the context here was that the package of reforms, very recently approved by the Greek parliament, we believe represent important progress on that first leg of what we think is required. And we think that progress on reform deserves to be supported.

There has also been some progress on the second leg, the debt relief, but the IMF believes more needs to be done, and more time is needed for the negotiation. So, the Approval in Principle, allows us to maintain the support for the gains made by Greece in its reforms, and allows for more time for negotiation on what we think is the required debt relief.

Now this approval, in principle, again for those who don't follow this just as closely as I know you do here in the room; the Approval in Principle, is an IMF procedure. It's been used many times in the past. When the IMF and a member country had agreed on the package of policy reforms, but agreement with creditors on debt relieve had not yet been reached. It has proven effective in the past in catalyzing financing and debt relief, and fostering coordination among the creditors. So, that's a little bit of the history.

Now, an important point, he was referring to this, the Executive Board of the IMF will approve the program and its modalities. And another important point, financial disbursement from the IMF will be contingent on an agreement on debt relief and debt sustainability.

Assessment of such debt sustainability will be guided solely by the IMF's own DSA, debt sustainability analysis. And as Madame Lagarde mentioned last week, it's expected that the loan amount would be well below the IMF's exceptional access threshold.

She had mentioned that she hoped to complete the process with the Board before the 27th of July. So, that's all I have for you on that particular point, on the date. And the Board, of course, at that point would be discussing the various modalities. But let me come back to your specific question.

So, how does this benefit the member country, because that's always the IMF's main focus. How does it benefit Greece? Madame Lagarde last week pointed to three factors that she thought was important.

Number one, it preserves these major reform efforts by the government, and the sacrifices of the Greek people, and ensures that there will be continued support by Greece's European partners and the IMF. So, that's number one. It preserves these reforms. That's very important.

Secondly, it helps to ensure Greece's financial stability, and remember, this is a core mandate of the IMF - financial stability - and the agreement helps to ensure that for Greece by avoiding a potential payments crisis this summer, it would have been upcoming quite shortly. And with the agreement, Greece's European partners, as you know, have agreed to make a timely disbursement based on the agreement reached last week.

The third point, an important point for the IMF. The agreement upholds the continued promise of debt relief for Greece, that second leg, and the Fund has made it very clear that our financial participation, disbursement, will be contingent on that debt relief, the type and the scope of debt measures, being specified.

And we hope that the discussions on those specific measures can be going on soon, and more than that can be concluded at an early stage.

Now, one other point just on context that the Managing Director made last week. She was fairly candid in saying that nobody is claiming that this is the first-best solution, and clearly the IMF would have preferred an agreement whereby there would have been agreement on reforms, and agreement on debt relief, and we move forward with outright approval.

That was not possible at this point, but everyone has contributed to this outcome, and for the IMF, we see it as a constructive, indeed, a principled approach with, again, the objective of helping the member country as much as we can.

So, with that context, let me touch on your specific questions. Maybe I'll take the fiscal, the realism of the fiscal target, because I think that's -- they are all important questions, but that's a very important question. And I think he had asked that, and I think he was interested in that too.

So, our view on the realistic path for growth and fiscal balances is well known. We've talked about it many times. And again, I want to reiterate this point that our assessment of any proposed debt relief package will be based on the IMF DSA, on the IMF debt sustainability assessment, and hence guided by our own assumptions.

So, we are not in agreement, yet, with all of the assumptions made under the European program, and we will be making that assessment at the time of our DSA. What I can say is that, again, Greece has legislated a strong package of fiscal reforms, we acknowledge that, and we think that this can help underpin a surplus of 3.5 percent of GDP in the medium term until 2022. Okay? We've said that before.

Over the long term, however, I guess to his point, we are of the view that the primary surplus target should be, at most, 1.5 percent, and again we have stated that publicly in the past. Because we think that fiscal space is necessary, the lower primary surplus target is necessary to create and to be used to support growth, to support investment, capital spending, lower tax rates, and the creation of a modern social safety net system.

So, that's my sense of where we are on the growth assumptions, growth forecast assumptions, primary surplus assumptions, and a realistic fiscal path.

On his question, and his question, about was this a political -- somehow a political agreement? The way I would characterize this is, as I've said, we see this very much as a constructive and a principled approach, the IMF is sticking to its principles, and sticking to what it has said all along on Greece, in terms of these two legs of the program.

Let me put it this way, this Approval in Principle does not in any way signal that the work on debt relief is going by the wayside or on a slower track - not at all. The Managing Director, as I mentioned, urged the creditors to redouble their efforts, to reach convergence as quickly as possible.

We have made some progress on debt relief, but we don't think we are there yet - it's not enough. And we certainly expect that this process, that's the discussions on the debt relief, would lead to a defining of the debt relief and a clarity of the ways in which it can happen. And again, we expect this to be brought to an early conclusion.

It's an important point. If we did not think that we had a good chance of getting agreement on the debt relief, then we would not go ahead in this way. So, we think the IMF arrangement will become effective. That completing the program next summer, Greece will be in a sustainable debt position and ready to go back to the markets and stand on its own feet, financially; which is, again, the ultimate objective; and, otherwise, we would not go down this road. So, I don't see this as some extend and pretend. You refer to the Mohammed El-Erian piece. He also said in that piece that this was an elegant solution that had benefits for all those involved. And, again, the member country, in particular, is who we are looking at here, and we think this benefits Greece, given the circumstances, not the first-best solution, as I said, but given the circumstances, we think this is a constructive approach.

Let me speak a bit about the other questions you asked related to the Board role -- the modalities and the deadline. So, staff is preparing, as we always do, the report for the Board. I mentioned that the Managing Director indicated discussion to be completed by July 27. The amount is not finalized yet, but the Managing Director gave orders of magnitude last week. Staff has not made a recommendation on the issue of the deadline, but we are looking at the issue, and the Board will discuss the modalities and decide on the details of the Approval in Principle.

As you know -- and we did a fairly intensive briefing on this last week -- in the past with this Approval in Principle, sometimes, in many cases actually, there was a 30-day deadline; in other cases there was a longer deadline; and in other cases, yet again, there was no deadline. So, again, we need to look at what we think is in the best interest of the member country in this case, and that's something that the Board will certainly be discussing when they meet to look at the Approval in Principle.

Two other things. You had asked about Athens. What I can tell you is that President Pavlopoulos has invited Madam Lagarde to visit Greece, and the Managing Director was very grateful for the invitation and is looking forward to visiting Greece when both their schedules allow.

And you had asked about Germany. We just issued our concluding statement the week before last on Germany, and I think our position on some of the things that we think Germany needs to do are pretty clear, and we'll be issuing a full staff report on that Article IV once the Board has met, which is later this month, and then we'll be issuing the full staff report; but, I think, our position is pretty clear on that.

Okay, thank you very much. I'm going to move on from Greece and take a few questions online. There's one question on Zambia, where it's reported that Finance Minister Felix Mutati disclosed the shocking statistics in Parliament on Wednesday when he said Zambia's external debt alone is U.S. $17.2 billion. What's the IMF comment on the debt reports and prospects, and steps for the program? I would just -- number one, on Zambia, I'd like to clarify that number because it's not correct. I think, the actual statement delivered by the minister in terms of the external debt stock at the end of May 20, 2017 is $7.2 billion, not $17.2. That's an important clarification. We did issue a press release recently on Zambia, so I won't get into the whole description of prospects and so on, but what I would just say is that implementation of the remaining actions in the next few weeks will enable us to present the authority's request for an Extended Credit Facility arrangement to the Board, and we expect that to be in August of this year.

There's one other thing I want to say on Zambia, and it's not a question. But I've seen some news reports over the last 24 hours that have an outrageous allegation relating to a bribe being taken by an IMF staff member. It's an outrageous allegation, as I say. It's utterly false. It's rubbish, actually.

There is a question on Ukraine, which I will take. You know President Poroshenko was here at the IMF on Tuesday. So, let me take that question. Does the IMF believe that the recent visit to the Fund by President Poroshenko will bring this country closer to the needed pension reform and land reform? What I can say on that is we issued a short statement on Tuesday, which referred, indeed, to the progress and what more needs to be done on the pension reform and land reform. So, I'm going to just not repeat that ad nauseam. I'll let people refer to the statement.

There's one more question. Gerry, is the Fund close to coming up with a proposal to allow emergency access to foreign currency and liquidity in the event of a crisis? How will it work and without conditions? I guess she's asking for the details. What I can say to on this issue is that as part of its global stability mandate, and in line with the latest IMFC Communique, the IMF is continuing to work on options to strengthen the global financial safety net and improve the resilience of the global financial system. The Board has had some discussions of this issue over the past year, and we will be continuing those discussions in the coming weeks. We've published some papers on this in the past -- March 2016, for example -- which talked about important gaps in the architectural of the global financial safety net; and, in that respect and in line with the IMF’s mandate, we continue to explore options for reform and review of existing IMF policies and operations. Again, all with the aim of strengthening the resilience of the global financial system. I don't have further specifics at this stage, but as I said, the Board will be having a discussion in the coming weeks.


Questioner: On Ukraine, the last review, the disbursement was due in May, I think it was. What more needs to be done before the IMF is comfortable to recommend that the Board approve this latest disbursement?

MR. RICE: It's a range of issues, I think we've talked about them here before, and we've touched on them in that statement from Madam Lagarde the other day. I don't have anything specific that I can give to you, but the discussions are ongoing with the Ukrainian authority. President Poroshenko was here. He and Madam Lagarde discussed it, but I don't have a specific touch point for you.

Questioner: So, there's no scheduled date for this review for the Board -- it's open ended?

MR. RICE: Correct.

Questioner: Great, correct; right now?

MR. RICE: Right now, yes. Okay, I'm going give you the last word.

SPEAKER: Yeah, Gerry, do you have a date or a rough timeline for the External Report?

MR. RICE: It's going to be in the latter part of July. I'm looking at my team -- is that correct -- latter part of July? Okay. To the Board in the latter part of July, and then we would publish soon thereafter; and, in fact, I can tell you that we're expecting, I think, Maury Obstfeld is going to do a little blog next week, early next week, on the External Sector Report. So, it'll be kind of a preview in the sense of explaining what the process is and all of that, but that's broadly the timeline, the second-half of July, and then we will publish as soon as we can.

Thanks very much everyone. We'll see you; I think it will be July 13. See you then.

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