Transcript of a press briefing by Thomas Dawson, Director IMF External Relations Department, December 1, 2000
December 1, 2000
By Mr. Thomas Dawson
IMF External Relations Department
Friday, December 1, 2000
MR. DAWSON: Good morning, everyone. Welcome to the regular IMF press briefing. I'm Tom Dawson, the Director of External Relations at the IMF. As is our tradition, this briefing is on the record with an embargo 10 or 15 minutes after conclusion, and we will set the precise time at the conclusion. I ask that you follow the proper IMF etiquette and identify yourself and your organizations when asking questions.
I presume you all have seen the press release that we put out last evening on Turkey, and I think that's the release I wish to draw to your attention. In addition, we do have one pending personnel change that I thought we should announce since the Managing Director has consulted with the Board and has expressed his intention to make a department head position appointment.
As of, I think, yesterday, Vito Tanzi, the Director of the Fiscal Affairs Department, retired and the Managing Director has announced his intention to appoint Mrs. Teresa Ter-Minassian, currently Deputy Director in the Western Hemisphere Department, to the position of the Director of the Fiscal Affairs Department effective January 2nd 2001.
As I say, this notice has been circulated within the Fund, and so I thought we would make it known to you at this point. We hopefully will have a formal release with biographical data later today.
I think that is all I have for initial commentary, and I'll be happy to take any questions. If you don't have any, we can just leave early.
QUESTIONER: Who is going to replace Ms. Ter-Minassian?
MR. DAWSON: As I noted, the appointment is effective January 2nd, so there is clearly a transition period. I don't have anything for you in that regard. Of course, Teresa is presently Deputy Director in the Western Hemisphere Department and works with Claudio Loser, and there are other staff in the department. So I think that's the sort of assignment that will obviously become known in the Argentine context. It's--and I know you are interested in it, and it will become quite apparent. But it does not affect the present negotiations. As I'm sure you are aware, Teresa is in Buenos Aires at the moment, and we're all very, very happy for her for this appointment. Vito Tanzi is a very distinguished, successful individual, well-known, actually, in Argentina as well. So this, I think has a particular attraction and interest there, as it does for all of us.
QUESTIONER: Two questions, one stemming from the statement last night: did that actually say that there were two missions going to Turkey? And if that's so, why?
MR. DAWSON: Yes. I mean, the Fund is organized, as you probably know, on sort of an area department as well as a functional department specialty, so there is both a Monetary Affairs and Exchange Affairs Department mission going to Turkey as well as a European I Department mission.
QUESTIONER: And, secondly, obviously the markets this morning have reacted to that in a rather spectacular way. Well, interest rates have gone through the roof, basically. They're well over a thousand percent. What's the sort of strategy for today? Because obviously this is developing minute by minute. Is there any sort of further reassurance that you can give?
MR. DAWSON: I think the statement stands on its own and I think, you know, the question you ask is really probably better addressed in the Turkish context. The authorities have a program which they are implementing, and I'm not sure that I would note that those market reactions are necessarily surprising.
QUESTIONER: Just a follow-up. In the statement that the IMF made about Argentina three weeks ago, you used the word "quickly" in terms of getting a new agreement, and you mentioned specifically at that time that you're negotiating an SRF. In the Turkish statement, there was no reference to any kind of time frame or speed, and there was no reference to a separate SRF, which is widely expected. So is one being negotiated?
MR. DAWSON: I think it is premature to say the precise nature of what kind of vehicle would be used. I think it is quite clear that this is on a very fast time track; I mean, the mention of the mission going this weekend, and I draw your attention to the last sentence of the statement that talks about additional resources. To clarify that--I had a couple calls on that--that is net additional beyond the existing arrangement. Precisely the form which that takes, we don't have anything for you at this point because it relates, of course, to the program negotiations. But I don't think it should be at all surprising that we don't have it at this point.
But this is something we are working on, you know, very actively, and I think you can expect in the next few days you will be hearing more from us on Turkey.
QUESTIONER: Could you say anything about the order of magnitude about the additional resources?
MR. DAWSON: Sorry. I'm sorry, we cannot.
QUESTIONER: Anything at all?
MR. DAWSON: We cannot. We are well aware there is market and other speculation on that, as I might add, your Argentine colleagues will note there is in the Argentine case as well. And it is not surprising that we are not at this point indicating funding because it does relate to the program discussions.
QUESTIONER: Is there any truth to rumors that the Board might approve as early as next week the two tranches that are up for discussion in the middle of December for Turkey, $600 million?
MR. DAWSON: I have not heard any such discussion. You are correct, though, in noting that there has been penciled in a review for the Turkish program that would be coming up in, I think, a little bit later in the month, before the Board recess. But I don't have anything in terms of accelerating that discussion.
QUESTIONER: Turkey has indicated that it would like the money from this new loan before the end of the year. You're sending a mission. It's going to take a few weeks. Is that timetable at all possible for Turkey?
MR. DAWSON: We are certainly acting on a very rapid time frame, and the idea of--you know, assuming that negotiations can go forward, be concluded, the idea of a Board meeting, which would be the vehicle for a program, before the end of the year is certainly in the cards. You know, no commitments, but that is certainly the timetable on which we are working.
QUESTIONER: Did you say before the end of the year?
MR. DAWSON: I'll go back to the statement. It could be presented to the Board, you know, prior to the end of the year--prior to the Christmas recess.
QUESTIONER: The Argentine officials and Mr. Machinea have expressed concern that the Turkey crisis might overlap with the Argentinean crisis and may affect the course of the negotiations. Could you comment on that? And also, could you describe the present status of the negotiations?
MR. DAWSON: I don't see the overlap question. I mean, we certainly are very encouraged by the way the legislative process is working its way forward in Buenos Aires. The mission is working hard and making very good progress and is expecting to finish its work fairly soon. So I think we're broadly on the same sort of scheduling that we had indicated I think at the last press briefing.
QUESTIONER: The Governor of the Bank of Mexico, Guillermo Ortiz, was here a couple of days ago, and he expressed some concern that the crisis in Argentina will have an impact on some regional economies. And a couple of days ago, some economists in Mexico expressed the same concern. Could you comment on that?
MR. DAWSON: I did not see those comments, so I'm not sure I am in a position to do that, but I think we see it, you know, the way the authorities in the major countries have been addressing quite effectively their own situations. So we have a degree of comfort and confidence with the way the authorities are dealing with the problems generally.
Your mention of the Governor's visit, which actually I had not particularly been aware of, there were questions the last couple of days, rumors, et cetera, about varying officials visiting and so on. I think it came up in the Turkish context. This is a general comment for you. Washington is a popular destination. The World Bank in particular, IDB as well in the Latin American context, hosts lots and lots of conferences. It is not at all surprising when officials, when they're up in Washington, come by and visit the Fund. I would caution people against reading too much into the fact that they may come by. Particularly the questions came up earlier about possible negotiations going on in the building. The negotiations, you know, tend to go on with the mission.
So it's perfectly fair game for people to be interested in visits that are happening, you know, happening here, and to the extent that we can, we'll be happy to check and confirm them. But don't think that the fact that someone may be coming in to see members of the department or of management is necessarily a particularly shocking or revealing fact. I mean, every time we get these questions, my first reaction is who's having a conference this week, because there are always these officials coming to town for that. So I'm not complaining about any coverage, but I think, in fact, the stories have been very, very responsible, but we get a lot of calls, people asking about it. And I think you can read a little bit too much into the fact that a particular official may be coming by to visit.
QUESTIONER: So does that mean--I think the Turkish Under Secretary of the Treasury is actually here in Washington for a World Bank conference. Does that mean that he's not meeting with the IMF?
MR. DAWSON: That's a good example. The fact that they may be meeting is not the idea that there has been a sudden trip in order to have a negotiation. In fact, there was a meeting with that individual a couple of days ago.
QUESTIONER: With the IMF?
MR. DAWSON: Yeah. That was something people were not aware of. That's one reason why I wanted to bring this up. But it's not by nature of negotiations. It is by nature of the fact of someone being around and obviously, you know, program issues are discussed, but I would caution against reading too much into that.
QUESTIONER: A couple of obligatory things on Russia. First off, can you point out to me, please, the issues that prevented the recent mission from achieving agreement?
MR. DAWSON: For those who may not follow it as close as Andrei does, the mission visited Moscow November 8th to the 20th, and, you know, the context was to discuss what would likely be a precautionary arrangement given the strong balance of payments situation.
These discussions focused on the macro policies required in the short term to prevent the exceptionally strong balance of payments situation from leading to excessive real appreciation of the currency and thereby jeopardizing the continued growth; and, secondly, on the structural reform priorities needed to sustain the recovery and preserve the stabilization gains.
Progress was made on a number of these issues, and outstanding issues were clarified, but work is now going to continue in preparation for the next round. And when that next round will be I do not have anything for you on that. So this is my guidance for you, which I'm sure you are not completely satisfied with, but you are entitled to a follow-up.
QUESTIONER: No, it's quite all right.
MR. DAWSON: Thank you.
QUESTIONER: I did not expect much here, anyway. Can you tell us a little bit what the Fund might think, if it does think anything, about the monetary union, the merger between Russia and Belarus, with the Belarussians pegging their currency to the Russian ruble and they're getting a loan from Russia to support their currency in this transition period.
MR. DAWSON: I'm sorry, I don't have anything for you on that. I am aware--I am aware of that, and I promise we will get back to you with a reaction on that.
QUESTIONER: Mr. Machinea said yesterday that the date for the agreement to be signed with Argentina could be between 11th and 12th of December. Is that correct?
MR. DAWSON: I don't think we scheduled it in that fashion, you know, in terms of setting it that far in advance. I'd have to check to see what one means by what a signing is. Is it the ad referendum in Buenos Aires or is it something, you know, sent back up here or whatever. But we're operating on a time frame that would allow consideration by the Board, prior to the Christmas recess, which indicates that would be plausible.
QUESTION: The agreement itself?
MR. DAWSON: That's quite plausible. It could be a day or two earlier. It could be a day or two later. As I indicated, you know, very good progress is being made, so I do not expect that we are going to have delays that are going to cause a problem.
QUESTIONER: I had a question about Argentina and pension reform. Is pension reform necessary, at least a presidential decree, before this program can go forward?
MR. DAWSON: That certainly is one of the issues that they are discussing, but I think, you know, it's all done as a package. I don't know if I have any more than that. I think that it's well understood that pension reform is one of the issues being discussed, and so presumably some sort of a resolution is needed.
QUESTIONER: Can you clarify, then, whether you're concerned about contagion of the Argentine and Turkish problems to other countries?
MR. DAWSON: I think I already dealt with that question, indicating that we are actually quite impressed with the dedication of the authorities in those particular cases, but also in other cases to deal with their own situations. But the quick determination of the authorities to deal with their problems I think should have the right results. But it is our job to always be concerned.
QUESTIONER: Yesterday the Federal Reserve Bank of New York released an annual report where it says basically that the IMF has been demanding too much in terms of burden sharing with the private investors. Can you respond to that?
MR. DAWSON: I'm aware of a paper put out by a staff member and a private sector individual on the Federal Reserve of New York website. That is not, however, an official position of the New York Fed, so I think I'll just duck, particularly since both authors are friends of mine.
QUESTIONER: Can I just clarify? I think Mr. Machinea has been saying that they would announce a package next week, as early as Wednesday.
MR. DAWSON: I mean, it is entirely possible, but it depends on what's going on down in Buenos Aires. You know, as I said, I think the previous question, which was trying to identify the week after next, that's why I said it could be a day or two before, it could be a day or two after. So, I mean, yes, it is entirely possible. It depends on the negotiations.
We don't set the date before we conclude the negotiations.
QUESTIONER: Well, the question--I think what Mr. Machinea was talking about was the announcement of the size of the package and the details of it.
MR. DAWSON: Well, that would need to be reviewed with management and discussed with the Board. But we are talking--remember, we're talking about a process that would be--you know, if all goes well, would be concluded prior to the Board recess. So that would imply an agreement, you know, some days, ten days or so before then, if it all works according to schedule.
QUESTIONER: But there can't be any actual announcement, though, of the size of the package until the Board has agreed to it?
MR. DAWSON: No, there could well be an indication of what the program would be once the letter of intent and so on are published. But that's not coming right now. When that comes, it would be before the meeting but it would have to be reviewed up here.
QUESTIONER: It was said in Buenos Aires that Argentina will withdraw two billion dollars from the existing program in December. I wanted to know if they have showed the official intention of doing that.
MR. DAWSON: I'm not aware of that. I'll have to get back to you. I've not heard anything about that.
QUESTIONER: But on another matter of South America, Ecuador is also in the policy slippage state at the moment. The situation seems to be dragging on. Is there any sort of momentum here at the IMF to advance things in any way to deal with that particular situation?
MR. DAWSON: Staff were in Quito last week to take a look at the measures needed to conclude the second review on the program. And among the outstanding issues that were reviewed, was the content of tax reform to be sent to the congress to stabilize or put the public finances on a sustainable basis, reduction of certain subsidies, and some measures in the financial sector.
I don't have anything in terms of answering your more pointed aspect of that, but, we do view them as making progress, and we are talking to them about the review.
QUESTIONER: Back to Turkey again. In Russia, most people say that, well, the problem is the lack of reform. The recommendations for reforms were right, but the reforms were not carried out.
When the reform package for Turkey was announced, some of the people here said that basically this is a model of how and what should be done, that Turkey and the IMF will show the world, Turkey how to do things right. Ultimately, the Russians and the Turks seem to share a fate that is less than spectacular. How do you explain that?
MR. DAWSON: We have to start with premises and go all the way through. I think there clearly have been problems in the banking sector in Turkey in the last couple of weeks that have become apparent. They had been identified, you know, earlier. They are important and that's why the missions are heading out. But I think it would be a mistake not to acknowledge, it would be a mistake to overlook, to put it in the positive sense, the substantial achievements that were achieved under this program--the disinflation efforts, the fiscal side, and the government's reaffirmation of their commitment on the privatization of Turkish Telecom which came out yesterday. But obviously they're in difficulties. That is why the Fund has expressed its willingness to work with them to strengthen the program and to provide additional support. So I think it's something which we need to understand--what is the nature of their particular problem which has become quite serious in the banking sector.
But, again, even in the banking sector there's been substantial reform, particularly in the regulatory side of it. And I don't think we have time to go over the analogies with Russia, particularly since, as I'm sure you're aware, in my comments noted earlier the very strong balance of payments situation in Russia, which is a distinguishing factor as well.
QUESTIONER: You said at the beginning that you were encouraged in Argentina by the way the legislature is going forward, which I assume you mean you're encouraged by the approval of the budget. And then you indicated that resolution is needed on pension reforms. I was wondering whether there are more points in which you consider that resolution is needed.
MR. DAWSON: I was not trying to be either exhaustive or indicating necessarily priorities. I was just responding to a particular question as to whether pension reform is still on the table, and obviously it is.
QUESTIONER: If I can go back to the issue of the two missions going to Turkey, how does that work, exactly? How do the missions work together? Are they looking at two different parts of the economy? Do they negotiate together?
MR. DAWSON: Well, they obviously closely coordinate, but as I indicated at the beginning, there are two missions because, you know, the Monetary and Exchange Affairs Department mission is a specialized mission dealing with the financial sector. The European I mission will deal with some of those same issues as well, but the MAE--to use our acronym, the MAE people are specialists. So this is not at all unusual. It's very common that multiple missions are in countries in a program or in a non-program sense. The European I mission is the one that has the overall responsibility for the program, but they also obviously are interested in the financial sector. But there are specialists. I mean, all IMF people, despite the impression, are not entirely fungible. The Monetary Affairs, MAE people, or in some cases Fiscal Affairs, are highly specialized people who go in to deal on particular areas. The European I, or whatever the area department in a case may be, their people go in to negotiate the program, and when there is a particular sector, particular issue that requires additional attention, they may bring along a specialist in that particular field, which quite often happens, or if particular work is needed, there will be fielded a separate mission from that particular department.
QUESTIONER: You're doing Zambia's debt relief today at the Board, and we have sort of an advance reaction from Jubilee 2000 complaining that it's not enough, that they'll actually end up having higher debt service payments in the coming year than they would last, despite the debt relief. So if you could just sort of give us an advance reaction?
MR. DAWSON: I cannot give you an advance reaction if the Board has not yet discussed the program. I would caution, however, that many of the analyses that I have seen from groups on the debt relief issue tend to focus on gross flows as opposed to net flows. Their before and after characterizations are not necessarily the same way in which we would like to look at things. I mean, we think that there is under this HIPC process generally, and for Zambia in particular, you know, substantial debt relief that will be taking place, and that net flows are very important. If you only look at one side of the equation, you know, gross flows will go in one direction. I think it's important to look at the net flows. And it's quite clear that the net flows for Zambia broadly, but as well as from the Fund, are going to be positive.
So the Board is discussing this today, and as and when we have a conclusion, we certainly will let you know about it.
QUESTIONER: First of all, is there consideration by the IMF of making sure that next year total debt service payments are lower than they are this year? Is that being considered by the Board?
MR. DAWSON: Again, debt service payments is a gross number. The important number to look at is the net flows.
QUESTION: Will you be providing data on the net flows?
MR. DAWSON: Yes, we will.
QUESTIONER: Okay. And looking back, is this an example of a loan that perhaps wasn't well thought through? I mean, five years ago, Zambia signed an agreement to borrow $1.5 billion from the IMF with a five-and-a-half-year grace period. It's come due and they can't pay it.
MR. DAWSON: Well, I mean, actually, it was even more than five and a half years ago, because I happen to have been on the Executive Board at the time when the so-called rights program was developed, and I think maybe the Zambia program was signed at that point, but the rights program itself was intended to deal with serious arrears issues. The particular consequences Zambia has now with this so-called hump in payments is something that was, frankly, not anticipated at that time, and it had to be, what, seven or eight years ago that the rights program was designed because I left the Executive Board more than seven years ago.
So in that sense of the word, it is an unintended consequence. We understand that fully, and that's why we are looking at seeing what can be done about it. But you know, as I say, it was quite a while ago, and at the time what the Fund was trying to do was to provide assistance to Zambia to get them back into the international financial community. And I think, in fact, that was quite a successful effort, and now at this point we need to deal with the next level of the problem. And we are dealing with it.
QUESTIONER: Could you give us some of the IMF opinions regarding the elections in Romania and the future discussions that you'll have with the future government?
MR. DAWSON: I don't have any comments on the election per se. Obviously, you know, we look forward to dealing with the new government as we have in the past, and I think that's all I can say. We certainly don't get into discussing election results.
QUESTIONER: Do you have any concerns regarding the results of the elections?
MR. DAWSON: No, I have no comment.
QUESTIONER: Staying in the region, more or less, is there any news on Yugoslavia?
MR. DAWSON: No, I mean, in terms of acceding to the membership, no. As far as I know, we've had missions discussing it with them, discussing the potential bridge loan and so on, and as far as I know, it is going forward, but I don't have a date as to when it might come to the Board.
We'll let you know if there's a problem, but my understanding is we're still on track.
QUESTIONER: How would you characterize how those discussions have gone? Has there been any particular areas of concern?
MR. DAWSON: I'm not aware of any. It's a process of trying to normalize relations in order to have them be able to assume the membership under the terms of the Board resolution from 1992. This does involve the need for a bridge loan to clear the arrears. And as far as I know, that is progressing.
QUESTIONER: You said that one of the missions to Turkey is from Monetary Affairs and Exchange Affairs Department. Do you think the sustainability of currency regime in Turkey is on the agenda in talks with Turkish authorities?
MR. DAWSON: We're talking about working with them to strengthen their program under the framework that they have, and that's the basis on which we're acting. The MAE mission is very much a technical, specialized mission.
That's it? Okay. We can lift the embargo at 10:15. Thank you very much.
[Whereupon, the press briefing was concluded.]