Argentina and the IMF

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Transcript of a Press Briefing by Thomas Dawson
External Relations Department
International Monetary Fund
Tuesday, April 10, 2001, 9:30 a.m.
Washington, D.C.

MR. DAWSON: Good morning. I'm Tom Dawson, the Director of External Relations at the IMF, and this is another in our series of regular press briefings. Contrary to some inquiries we received from some Washington television stations yesterday, this has not been convened to talk about the Spring Meetings. But as always, questions are not limited.

The agenda for the Spring Meetings is still being developed, and it is a bit early to get into specifics, but, of course, you can try.

Let me remind you that the deadline for the Spring Meetings press accreditation is April 16th, and you should contact Media Relations if you have questions about accreditation. Media Relations can also provide you with access to the advanced text of the WEO, which will be released publicly on April 26th.

In terms of upcoming events in the near future, it is a bit sparse. We do have on this Friday, the 13th, a panel sponsored by the Research Department on macroeconomic policies and poverty reduction that will be chaired by Stan Fischer. It is open to the public, and it is 3:30 until 5 o'clock. You can get more information on the Web if you wish.

I have nothing further other than the normal announcement that the briefing will be embargoed until about 10 minutes after the conclusion, and we will set the time at that point, which may be sooner rather than later given competing press events this morning.

Again, for good decorum, please use the microphones and identify yourself.

QUESTIONER: Now that your negotiating team is in Turkey, do you have anything to tell us this morning about what's happening there. And one specific question: Have you been advising the Turks to reduce their defense spending? Thank you.

MR. DAWSON: I don't have anything new in terms of the mission. They began discussions on Sunday and are continuing probably through this week, and I don't have any specifics on that item on spending that you mentioned. You know, it would be likely that the mission will make a statement when they conclude, as is normally the case. And our own David Hawley is there with the mission, so people may want to try to reach him there.

I should also note, since the question may come up—I know we had some inquiries yesterday—that this mission is led by Carlo Cottarelli but also includes Mr. Juha Kahkonen, who will become the mission chief in mid-May. This is a move that was planned for some time, and this is the actual sort of transition. Both of them are on the mission, but the next mission would be led by Mr. Kahkonen.

QUESTIONER: On Argentina, the situation there, could you give us some sort of update on how things are progressing? And, secondly, back to Turkey just for a quick second for follow-up, there is still lingering speculation about the fact that they need a lot more money. Has that been raised in the early discussions with the team?

MR. DAWSON: To take the last question first, clearly what happens when you go in and you look at a program, one of the items that falls out when a program is agreed is what the financing requirements are. So, clearly, people are aware that this is an issue. They're aware of the nature of the already indicated level of Fund support, and what sort of financing gap remains after the development of the program and the plugging in of the Fund numbers is yet to be seen. But that certainly is an issue that everyone is aware of that will be coming up.

With regard to Argentina, the authorities have introduced a number of measures on the fiscal side, and they have introduced or are preparing to introduce a number of measures to strengthen competitiveness and enhance growth. They have, I think, had a good deal of progress with local investors on a financing package worth around $3.5 billion to help cover, to ensure covering the financing needs for 2001. And we would—it can be expected that this combination of improved prospects on the fiscal and debt side, on the competitiveness side, and for the financing requirements should boost confidence and result in recovery of economic activity.

So I think that's where the state of play is, and if you have any—I'm not sure what more I have on that because it is, as expected, I would say, a continuation from where we were a couple weeks ago.

QUESTIONER: I think you're aware that in Toronto there has been, like, two versions making the rounds: one version that there could be a change in the phasing of disbursements for Argentina, and the second version that there will be no change and the disbursements are going to be on schedule. What is the situation?

MR. DAWSON: I think there is a difference between what legally can happen and what is expected. Legally, you could get a change in the phasing of disbursements, but we don't expect it. And that's the distinction that I would make.

QUESTIONER: I just wanted to follow up. In Toronto last week, Mr. Köhler is reported to have said that that a rephasing might happen. Was he was just referring to the legal possibility rather than a actual decision to do so?

MR. DAWSON: That is something that can be done, but at this point we don't expect it.

QUESTIONER: And, also, just to take up your offer in your opening statement to explore, you know, what kinds of themes or goals there are for the Annual Meetings, I know there were a number of things that were in train from last year in terms of reports and IMF reform efforts and so on. Could you just review what are the likely things that are going to come to fruition and be discussed at the Spring Meetings?

MR. DAWSON: Again, I don't want to go into great detail, but clearly the IMF in the process of change, IMF reform is a major item on the agenda. And there have been a number of elements of that which we have publicly discussed, such as streamlining of conditionality, the changes made late last year in a number of our lending facilities, including the CCL, the contingent credit line. I think those are all items one could expect to come up. In addition, a progress report on the HIPC debt reduction effort could also be expected. So we will have more details on that, but I think broadly speaking, those are the agenda items that are sort of Fund or Bank, in the case of HIPC, also specific.

I would also note that as is always true and perhaps even more true this year, there will be considerable attention paid to the state of the world economy. So that will obviously be not only an agenda item, but in some sense the lead item which provides the background for the rest of the discussions.

QUESTIONER: There is a lot of material about the new conditionalities. Is it possible to state in layman's terms what's the difference between the old conditionality and the new conditionality? We obviously have got to balance two factors. One is to make sure that the money is well spent, and the second, that they are not so onerous that the country collapses.

MR. DAWSON: Well, I think without necessarily accepting that as the paradigm by which the evolution of conditionality is judged. We did a briefing a couple weeks ago on the issue and I would direct you to the transcript.

I would say, you know, a point that was not in the paradigm you set up that I think is quite important is that we've used streamlining conditionality as very important for ownership as well. It is essential that countries develop programs to the extent that they can with our assistance and have a sense of ownership. And that is sort of the philosophical cap of it, but in terms of the other details, we have published a fair amount of material, plus that briefing.

So I'd suggest you take a look at that. If you have other questions, give me a call, and I'll be happy to answer them. But I think we've got a lot there on the record.

QUESTIONER: You also mentioned the review of the facilities from last year, but what's left to be done with that? I thought that was sort of finished up.

MR. DAWSON: Well, no, I mean, that was an action of the Executive Board that was done basically around Christmas time. But the IMFC Committee has not had an opportunity to review that because they only meet twice a year. So remember, this is what the format and the structure of the IMFC meeting is. It is a forum in which the management and Boards of the institutions report to the IMFC in the case of the Fund and the Development Committee in the case of the Bank and Fund.

QUESTIONER: I have two quick questions. I have inquiries as to whether Mr. Köhler is going to travel to Egypt, if there are any plans for that.

Also, if you can update us on the hopes for the mission to Indonesia and, in particular, if you could let us know how important the central bank issue is.

MR. DAWSON: With regard to travel plans, we do always announce the travel of the Managing Director in sufficient time for you to make appropriate notifications and arrangements. But I don't have anything for you at this point, but when we are—so that also should hint to you as to what the time frame of such a trip might be.

But once we do have it, we will, you know, have an announcement.

QUESTIONER: And Indonesia.

MR. DAWSON: Oh, Indonesia, yes. We are sending a mission to Jakarta this week, and the main objective of the mission will be first to have an overall assessment of the economic situation and then deal with the issues of central bank autonomy, IBRA , and fiscal decentralization. The central bank issue remains a very important one to the Fund, and I think you know that the authorities have established an international panel to examine the issue. And I think over the next month or so we can expect, you know, to see how that develops. But it remains an important issue.

QUESTIONER: I have a question about the Japanese economy. Last week, Japanese Government announced an emergency economic package which includes some measures to encourage banks to dispose of bad loans. How does IMF evaluate this package? And how do you view the current Japanese economic situation? If possible, I want to ask about the IMF prospect of Japan's growth rate this year.

MR. DAWSON: Well, the last part of the question first, you know, we have had a number of reports on our growth estimates leaked initially through the WEO and then some comments that we have made on our own, and we do expect, you know, further adjustments in our forecast that will be coming out when the WEO does come out in a couple of weeks.

With regard to the reactions to the initiatives taken by the government over the last several weeks, including last week, you know, we do take note of those. I don't have any specific response in terms of qualitative response at this point. You know, we welcome the government's efforts to deal with their difficult economic situation. I would note that the Japan Article IV consultation will be coming up next month, so there will be a Fund mission going to Japan at that point. But I don't have any specific reactions to the package, but it clearly is a recognition on the part of the authorities of the need for action on a number of fronts.

I would suggest, as we get closer to the Spring Meetings, you will have the opportunity to ask those questions of some of the senior Fund staff, who I think will have been in a position to have analyzed it a little more carefully.

QUESTIONER: Just my routine question. Do you expect any disturbances and demonstrations at the Spring Meeting at this time?

MR. DAWSON: At this point, you know, caution is always the word, preparedness is always the word. But we don't have any indication of any large-scale demonstrations. I think there is a matter of record that a couple of groups have requested permits for demonstrations. But we don't have a sense of overwhelming interest. The press interest is less than last year at this time, but more than previous years. But as I say, we don't have a particular indication of a groundswell of interest.

I would note that last year we had a number of events, call them demonstrations if you wish, that were happening around the time of the Spring Meetings, including the week before. This year, to the extent there is an interest, it seems to have been separated a bit in distance from the Spring Meetings. I think a number of you will be rushing out shortly to the "Drop the Debt" event, and that is now taking place now, whereas sort of the comparable event last year was on the fringes of the meeting. So I think that the meeting itself may not be quite the magnet that it was in the past. And, you know, we are disappointed about that, of course.

QUESTIONER: If I can just follow up on two of the countries you already talked about. For Argentina, Mr. Cavallo has talked about changing the foreign exchange arrangement to a basket. Is that something that would undercut the IMF program, and is that something that you're supportive of? I know, of course, that foreign exchange is outside of the Fund, but clearly, it comes into play with these programs.

And for Indonesia, I talked to an IMF Board member yesterday who said that in his assessment, Indonesia had met the three basic requirements that we've talked about or that you've talked about for their program. Is that your assessment also?

MR. DAWSON: On the first question, the question of adjusting the exchange rate peg to a basket, this is an idea that Minister Cavallo has been mentioning as a possibility, but he also indicates it's not for implementation anytime soon, and moving in that direction would probably also require the attainment of a more balanced situation between the dollar and the euro. But it is an issue he has raised, but it's not one that is being teed up for action at this point.

And the other question was on the state of play in Indonesia. Well, the mission is going there precisely to review what have been the issues in the past, and it is not my understanding that all of these issues have been resolved. But that, of course, is the reason that you have a mission, to see whether they can be.

QUESTIONER: You're saying that Mr. Cavallo's saying that the basket shouldn't happen at this point. Is that your assessment also that it shouldn't happen?

MR. DAWSON: Yes, yes. We agree with the authorities.

QUESTIONER: To go back to the Spring Meetings, is any meeting planned between Mr. Köhler and the NGOs during the meeting and in the course of the meetings?

MR. DAWSON: I'm not aware of any, nor, in fact, am I aware of any such request.

QUESTIONER: Do you have a possible date in mind when the IMF Executive Board could take up Turkey's economic program?

MR. DAWSON: No, we really don't. It really depends on when the mission is concluded. It obviously is an important issue, and if the mission does conclude, then as we have said in the past, you know, three weeks or so, you know, to that point when the mission is concluded. So if you can tell me when the mission is concluded, I can tell you when there might be a Board date.

QUESTIONER: The question I have is about Belarus. Do you now have a date for that monitoring project?

MR. DAWSON: Yes. I mean, there have been discussions about a staff-monitored program of some sort, but I don't have any more information for you. That's not to say there's a change. It's just that I don't have any.

QUESTIONER: But the Minsk authorities at that point were saying that they were ready to comply with all the requirements, and their position was that the project would start immediately. So if it hasn't started, then why?

MR. DAWSON: This is indeed something that has been discussed with the authorities,and it's at present being reviewed here at headquarters, and also it's an issue that we also need to consult with the Executive Board on. So the process is going forward.

QUESTIONER: Going back to the next meeting and the purpose, is there something IMF could do or either something the IMF is thinking of doing to ease the tension from the protestors? Because it seems like this protests are going to follow you every time that you meet, so—I mean, we saw what happened in Prague. We saw what happened here in Washington last year. So I don't know, you know, even when at this point there is nothing official, you are considering an option that maybe to look for an approach with this group and try to ease tensions.

MR. DAWSON: Well, we do, in fact, have a very active outreach program in terms of trying to approach, talk with, listen to NGOs and other concerned groupings. And for example, in the review of conditionality, we have posted on the Web and made a release about, in effect, a public appeal to people, and particularly NGOs, to comment on sort of our approaches in streamlining conditionality. So we clearly have an effort to have a dialogue, a more active dialogue with them.

And I'd say this is an issue that a number of international organizations are grappling with. It is not just the Fund or the Bank, and it's not just international organizations. You see this coming up, I understand from reading the press, the upcoming Summit of the Americas meeting in Quebec where there are number of groupings that are concerned. So I think this is an issue that governments and international organizations are having to grapple with, and I think we are all trying to find our own ways of reaching out.

I think it's probably unrealistic to expect that we will be able to satisfy all of our critics, but we do—we are trying to have what we think is a fruitful dialogue and one in which we can actually learn.

QUESTIONER: On the weekend, the Ministers, leading up to the FTAA meeting in Quebec in a couple of weeks, said that they are going to release the texts of their negotiations. Do you have any comments on that? And do you think that puts pressure on the IMF to be more open?

MR. DAWSON: Oh, I would turn that question around. I'd be curious to know what texts we don't release. I mean, we release virtually all of our policy papers now, close to a majority of the Article IV's, which is a discretionary item on the part of the countries involved. The papers for the IMFC meeting will be available. So I think, you should just surf the website, and I think you'll see we have released a lot of material. In fact, we are occasionally getting complaints that there's too much material on the Web, which is, I think, more of an organizational issue.

But I think transparency and openness is something that we warmly embrace, and we're occasionally even somewhat amused to see that we are on occasion by some NGOs cited as an example as compared with some other bodies, which is certainly not something we're used to.

QUESTIONER: Another question on Argentina. I would like to know if you think if the measures that Cavallo has taken up to now are sufficient to compensate the deviation on the fiscal targets that took place in the first trimester.

MR. DAWSON: Well, my understanding is that the Minister has presented and developed this with that intention. I believe I saw him quoted the other day as indicating that by the end of the year they would be back on track with the original full year targets, and that's his goal, and from everything that I understand, that is on track. But, you know, it is still a process where there are still details to be concluded.

QUESTION: Sorry, a follow-up. When is the mission going to Buenos Aires? Do we have a date?

MR. DAWSON: I don't, no. We'll have to get back to you. I think we can probably wrap up. Thank you very much.


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