Argentina and the IMF
Ecuador and the IMF
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Transcript of a Press Briefing by Thomas Dawson|
External Relations Department
International Monetary Fund
Thursday, May 10, 2001, 9:30 a.m.
MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the Fund, and welcome to another of our regular press briefings. The regular ground rules are in effect. This is on the record, but the briefing will be embargoed until 15 minutes after conclusion, and I will set a precise time at the conclusion.
Before taking questions, I'd like to first mention that the IMF Research Department's latest quarterly report on emerging market financing will be released at 10:30 this morning. It covers the first quarter of the year. The report takes into account the impact of recent official rate moves by the Fed. So it should be an interesting read. If you need further background, the Media Relations Division can help you, including possibly putting you in touch with one of the authors, if you are interested.
Could I remind you to use microphones and identify yourselves and affiliations? We will be posting a transcript of this briefing on the external website later today, and if the technology is working correctly, this is the first day in which this press briefing will also be web cast internally on what I understand is called streaming media.
QUESTIONER: My question has to do with the contingent credit line. There has been a lot of talk about whether Mexico is going to accept that credit line. There have been new developments in Mexico. President Fox said yesterday that there will be broader cuts in the spending by the government, and that economic growth this year will be 3 percent instead of 3.5 percent.
I wonder if at this point there has been any indication by Mexican authorities that they are considering to accept this credit line. And also I would like you to comment on these new developments on Mexico.
MR. DAWSON: Well, I don't think it's appropriate at this short notice after his statement to comment on the announcements of yesterday. On the CCL, the authorities have noted that they are interested in exploring the possibility of signing up for the contingent credit line.
This is a discussion that's been going on for a while. It is not affected particularly by, you know, any recent developments. We are in contact with a number of countries on that, and when we have additional news in that regard, I am sure you will hear either from this end or from the Mexican authorities. So I don't think that there's any necessary relationship to draw between the two statements. The Mexican Government's interest in the facility has been known and has been public for some time.
QUESTIONER: Now that the telecom dispute is resolved in the Turkish Government, would you like to say anything on the latest IMF position regarding Turkey?
MR. DAWSON: We are expecting the Board meeting next week, and I don't think I have anything beyond that. The government has made good progress on the measures that they've announced as part of their program. And I think that it has received and has deserved to receive the strong support of the international community.
QUESTIONER: We just had news from Zimbabwe this morning that they've stopped their loan payments. It's, I guess, a breaking story. Is there's any sort of background or information you can fill us in on.
MR. DAWSON: This information is correct that they are in arrears to the Fund. I think you would have actually found this has been posted on the website of the Fund for some time now. Yes, in the spirit of transparency, we talk about, for example, overdue loans. So not to say that we have any other hidden gems for you hidden there, but by regular checking you might have been able to break the story.
There is a process established for the handling of arrears situations, which we could perhaps go over. I'm not really prepared to do it right now, but there is a process by which the Executive Board is informed and the Executive Board decides what to do. But those facts and numbers are available on the website.
QUESTIONER: After many appeals by the IMF, finally the ECB has cut rates this morning. So do you think this is enough?
MR. DAWSON: The views of the Fund have been made clear in terms of what we think the arguments were for action on the ECB. But, of course, it is their decision that they make under their authority because it is their responsibility. I did inform Mr. Mussa this morning.
QUESTIONER: Was Mr. Mussa happy when you told him?
MR. DAWSON: I have found in the 15 years that I've known Mr. Mussa, I've always found it better to let him speak for himself. There are risks with that at times.
QUESTIONER: I have two questions. One is if we have the date when the letter of intent is going to go to the Board. And, second, what is the IMF position on the debt swap? Apparently Mr. Cavallo is having trouble to put it together. If he doesn't do it quickly, is the IMF program in danger?
MR. DAWSON: Your question was when is the letter of intent going to the board?
MR. DAWSON: The program is expected to be presented to the Board on the 21st. The LOI was published by the Argentines on the Web. There is a separate question which maybe you were intending to ask, which is the staff paper that's presented to the Board for the approval of the stand-by, and that will be going to the Board shortly because that's what the Board needs. I think that may be what you meant instead of the LOI.
As far as the voluntary debt exchange, the authorities are working on it. We are, you know, trying to understand it. But I gather that the terms of the operation are still under discussion. So I don't think I can have any assessment as to the operation itself or as to the consequences of it, because it's just, I think, a bit of a moving target.
QUESTIONER: To follow up on that, is there any possibility of some sort of an IMF guarantee or some sort of IMF implicit support for the swap?
MR. DAWSON: The Fund does not engage in operations of that sort, and I know there are occasionally with different countries references to IMF guarantees and so on. That's just not in the cards and not the way that the Fund works, to the disappointment of investment bankers.
QUESTIONER: A follow-up on both Argentina and Turkey. On Turkey, are the measures you've seen so far on banking and telecoms sufficient to go forward next week?
And on Argentina, if the Board meets on the 21st and, just speaking not that hypothetically, it's approved since management's already approved the letter of intent, when would the soonest be that the money might be disbursed from the next drawing?
MR. DAWSON: On the progress of the Turkish program, I mean, the Turkish program is itself quite specific, and it is one that the Fund has endorsed happily. And so it's hard to understand quite how to answer the question whether we're happy with the program, because we were happy with the program when it was approved by the government. And the progress in terms of implementing it seems to be going well as well. So, I mean, things are on track in that sense of the word.
On the question when a disbursement would take place for Argentina. It's usually a couple of days after the Board meeting. It would be eligible to draw—they may choose not to draw, you know, or draw, depending on their cash management and asset management.
QUESTIONER: Is it fair to say by the end of the week, that begins with the 21st?
MR. DAWSON: The 21st is a Monday. I mean, they would be eligible to draw at that point, but whether they draw or not is really—that's a separate decision.
QUESTIONER: If the IMF Board of Executive Directors approves the Turkey program and the finance package, when would the first installment reach Turkey? Within a couple of days?
MR. DAWSON: Again, that's the normal practice. But, again, it isn't automatic because countries decide when and whether they wish to draw under a program, and there can be reasons for cash management not to necessarily draw.
QUESTIONER: The Joint Economic Committee is presenting today new proposals on the IMF programs or bailouts. I just wanted to know if there was any reaction on the IMF side to this?
MR. DAWSON: Well, we have seen a description of this proposal, and I've read a couple of other descriptions that seem to have slipped out. And we, of course, will take a look at it. We know well both Professor Meltzer and Adam Lerrick, one of the many distinguished students of Stanley Fischer, I might add—and we will take a look at it and have a reaction back to you. But I've looked at this—as a number of you may know, I was in investment banking for a while. I'm familiar with proposals like this, and at the moment I will withhold my assessment of its fly-ability.
QUESTIONER: Will it be an official reaction, or do we have to call you to know about the reaction?
MR. DAWSON: Those are the same. I think we will take a look at the proposal. I mean, both Mr. Lerrick and Professor Meltzer are serious people, and we will take a look at that and find a way to respond to it. And we will—and we will do that reasonably promptly. But I think we will want to take a look at this in a little more detail than at least from the release that I have. But I have known Adam for a couple years, and he's a very imaginative investment banker. Retired, I might add.
QUESTIONER: About that contingency credit line, there has been a lot of talking about the precise amount. Agustin Carstens said that it could be between 15 and 20 billion dollars. I wonder if you have a more precise number.
MR. DAWSON: I don't have any information on that at all. I'm sorry.
QUESTIONER: A follow-up on the Meltzer suggestions. The premise there is that right now the IMF is forced into bailouts because there's this choice between creating a worldwide financial panic and going ahead with the money. And the goal there was to create another route. Does the IMF agree that that can happen, that on occasion it's forced into bailouts or provides bailouts which might not be deserved by the countries?
MR. DAWSON: I don't think I want to bite on that. Thank you. And in my initial looking at it, I mean, you're right, they've set forward sort of a spectrum. But I think life's a little more complicated than the spectrum that they set forward.
QUESTIONER: On Georgia, yesterday AFP had a story saying that that loan had been interrupted. Can you say what's happened and why?
MR. DAWSON: It is true that we have not concluded the review under the program because of poor revenue collections during the first part of this year. We had a delay of a few months as the authorities tried to demonstrate improved revenue performance. The mission, I guess, that was there made a comment in the press yesterday, and it was reported both in Reuters and I think on AFP. So I think, you know, that is the case, that the review has not been concluded, which means the program in that sense of the word is interrupted.
QUESTIONER: Just briefly, if there was any changes in the situation with either Indonesia or Ecuador since we last spoke.
MR. DAWSON: With Indonesia, we've been in very close touch with the authorities since our mission returned in late April. And last week, the Finance Minister informed us of the elements of a fiscal package that would broadly restore the budget deficit target of 3.7 percent of GDP that had been approved by parliament late last year.
The package represents a good basis for resolving this problem, although it has to still be agreed by the cabinet, and once an appropriate package is approved by the cabinet and submitted to the parliament and we also resolve a few other key issues, we would be able to resume the discussions for the third review.
On Ecuador, I mean, the mission returned from Ecuador last week after having reached agreement on the 2001 program. It has prior actions, including actions to strengthen the banking system and the passage of the tax reform bill, which includes the VAT. And I think there is some ambiguity at this point as to the precise status of the VAT increase. But if all prior actions are completed, we would be able to proceed to the Fund Board for the second review in late this month.
QUESTIONER: On Ecuador, I wasn't clear on what you meant. Does this mean you're going to wait to see what happens in the courts on the VAT increase? And if there is no further resolution on that, does that mean they are cut up as of June 30th? And, finally, let's say, on Meltzer, the other thing he said is that IMF bailouts prop up emerging markets' securities values, and I was just wondering if the IMF has a response to that allegation.
MR. DAWSON: I mean, I said we will be responding to that report once we have a chance to review it. On the VAT increase for Ecuador, this is the prior action for the program, so I think that's pretty straightforward.
That's it? Okay. Thank you very much.
IMF EXTERNAL RELATIONS DEPARTMENT