Transcript of a Press Briefing by Thomas Dawson, Director, External Relations Department, IMF
May 23, 2001
External Relations Department
International Monetary Fund
Wednesday, May 23, 2001, 9:00 a.m.
QUESTIONER: [In Progress] -- and the Ecuador Finance Minister, and is the Board meeting still going to be held on Friday?
MR. DAWSON: Yes. I mean, your premise is correct. The First Deputy Managing Director and staff did meet with the Finance Minister yesterday, and we do still expect the Board meeting to take place on Friday.
There are some issues regarding Filanbanco that need to be resolved by then, but we expect that they will be. So that at this point we do believe that the meeting is on track.
QUESTIONER: A follow-up on Ecuador. Do you feel then that the VAT tax issue has been satisfied? And has how important has that been for the resumption of payments to Ecuador?
MR. DAWSON: Well, we do understand that the VAT rate will be implemented from June 1st, and while there could be legal challenges, they will take some time to be heard, and the authorities do believe that their legal position is sound. But the VAT was an important--is an important part of the package, yes.
QUESTIONER: The Turkish Government is altering its composition of its domestic debt stock by asking commercial banks if they'll voluntarily switch part of their government papers into foreign currency-denominated bills, and this is effectively debt restructuring. Do you have any comments on this?
MR. DAWSON: This is not an unexpected approach. Other countries follow similar approaches, and a voluntary market-related approach is certainly something that the authorities have every right to consider and to pursue. Debt management is something that is an important aspect of the program.
QUESTIONER: A question on Argentina and a question on Thailand. On Argentina, how important is it in terms of meeting the revised targets that Argentina grow at least 2 to 2.5 percent? How low can growth go before the fourth quarter [inaudible] is unrealistic in your view?
And then, secondly, on Thailand, is the government asking for a new schedule for repaying the IMF loan, or is that an option?
MR. DAWSON: On the Thai question, we have had a mission there, and there's actually statements from both the mission as well as from the authorities this morning indicating that the talks went quite well. The mission indicated that the issue of timing of payments did not come up. It was not an issue that the authorities raised.
And the first question again?
QUESTIONER: Is Argentina...
MR. DAWSON: Oh, on growth. I'm sorry. On growth, yes.
QUESTIONER: The new letter of intent calls for growth of between 2 and 2.5 percent. Independent forecasts say that growth could be below 1 percent, and even IMF staff have indicated it could be much lower than 2.5 percent.
MR. DAWSON: Well, growth is obviously an important aspect of the program, and what we've been trying to do is find an approach that meets their budget requirements under the procedures established by the convertibility law, but at the same time tries as much as possible to encourage growth. So growth is indeed an important aspect of the program, but I can't get into an exercise of trying to say how low can you go. We're rather go higher than lower.
QUESTIONER: Do you have anything to add, does the IMF have anything to add, about the World Bank's caution to Bulgaria about maintaining reforms even if a new party comes into power next month?
MR. DAWSON: I did note that statement on the Bank's part, and staying the course in reforms in good times and bad is always good advice. So I think that we would certainly associate ourselves with that.
QUESTIONER: Yesterday the Turkish Government announced pay raises for government employees. Is it within the program's rudiments? Any comment on that?
And, secondly, when would the next IMF mission travel to Turkey for the next round of reviewing issues?
MR. DAWSON: A mission is scheduled to be led by the new mission chief, Mr. Kahkonen, in early June for the review of the program. I have not heard anything about the pay raise that you indicated. I do recall that something had been anticipated, so as far as I'm aware, this is consistent with the program.
QUESTIONER: Would you talk to us about the advance in talks between the IMF and Mexico and that special CCL?
MR. DAWSON: This I believe came up in the last briefing. It's come up a number of times, and the Mexican authorities have publicly indicated an interest in the CCL. But I'm not aware of any developments in the course of the last couple of weeks, and as I believe I indicated previously, this is not something that you can expect imminent announcements on. We are in discussions with a number of other countries on their possible interest in signing up for the new and improved CCL.
QUESTIONER: There are reports out of Ivory Coast that the government is saying its new budget was made in line with discussions with the IMF earlier this year, and I was wondering if there's any prospect for some kind of accord with Ivory Coast, where the status is.
MR. DAWSON: I will confess I have not an update on Ivory Coast. We'll have to get back to you.
QUESTIONER: Is there any reaction from the Fund to (U.S. Treasury) Secretary O'Neill's testimony yesterday on the Hill about the IMF and the World Bank? And is there any news on Indonesia?
MR. DAWSON: In terms of Secretary O'Neill's testimony yesterday, we certainly read it with interest, and I think on the comments he made regarding the Bank, we certainly understand his views and think that we are basically on the same track.
With regard to Indonesia, yes, there actually is a mini-announcement I could perhaps make for you that the Indonesian authorities have released the independent review of the central bank.
And in terms of other developments, we are still awaiting the clarification of the government's position regarding the recommendations of that independent panel, because central bank independence is an important part of the program. And to sort of recap and update slightly, the government has reached agreement on a fiscal package, and parliament is expected to consider that shortly. And it's a package that we think represents a good basis for resolving their budget difficulties. And, also, I would note that the Finance Minister has announced that the government is not going ahead with plans to issue a securitized bond, which had attracted some controversy from a number of major creditors.
And I guess I should also note, because I know this has been something of an issue in the region, that the fiscal package which the Ministry of Finance developed is a package fully owned by them. There has been some controversy about the timing and phasing of fuel price increases and the impact possibly on the poor. The government, as well as the Fund, strongly believe that strong compensation actions are necessary to help protect the poor, and we have indicated our readiness to help the authorities in any way we can as they finalize these measures to provide compensation support for those most adversely affected so that a fuel price increase that the government has decided on could be smoothly implemented.
QUESTIONER: Yesterday also during Secretary O'Neill's testimony before Congress, there were several calls from members of Congress in the sense that it will be better to have a cancellation of debt instead of a reduction. I wonder if you have a comment on that. And, also, could you give us an update in the HIPC Initiative?
MR. DAWSON: I was going to note that, from my understanding that testimony, the debt cancellation was in regard to HIPC and the debt of the poorest countries. This is an issue that we know that a number in the Congress, a number of parliamentarians, a number of nongovernmental organizations feel very strongly.
We are making good progress on the HIPC Initiative. I would note that the debt--the next step was reached yesterday for Chad, so that adds another one to our list.
In terms of calls for the Fund and Bank to go further in terms of debt relief, we are very much in the hands of our shareholders. It is our view that we have done as much as we can afford to do, and I think generally speaking this is the view of our shareholders as well.
QUESTIONER: Yesterday Secretary O'Neill said that regarding IMF programs, policy actions by governments should precede IMF programs and loans. And that was exactly the case for Turkey. There were a number of very strict conditions and reform actions before loans were approved.
Is Turkey's case becoming a kind of model for future IMF loans for other countries?
MR. DAWSON: Prior actions have always been an element in programs. I think if one did a survey of developments, one might see the prior actions are perhaps having a bit more prominence now. It's certainly understandable that prior actions have a particular prominence when you have programs of the size and extent that the Turkish program was, and I might add for the Argentine program as well.
But, of course, programs are also dealing with more medium-term issues as well, so you will still have conditionality and benchmarks throughout the program. But I think for the programs that get the international attention of the sort that the Turkish and Argentine programs, yes, I think prior actions are getting more attention. And this is something that is quite understandable. The shareholders, major shareholders, would be interested in that.
QUESTIONER: In the Managing Director's trip to Hong Kong, is he planning any bilateral meetings with either Hong Kong authorities or other authorities of governments in the region?
MR. DAWSON: Yeah, I expect there will be a meeting with HKMA, the Hong Kong Monetary Authority. That's the only one that...
QUESTIONER: Anything with the Japanese?
MR. DAWSON: I'm not aware of that. Certainly not in Hong Kong, no. The session he's going for is largely a private sector session, although there are a number of government officials who attend the IIF meetings as well.
QUESTIONER: A few follow-ups. How much specifically would it cost the IMF to do full debt cancellation? You said that you've done everything you can afford to do.
And then on Indonesia, publishing the report was seen the other day as a major step towards fulfilling this last requirement. So are they now ready to resume negotiations for resuming payments from their IMF loan?
MR. DAWSON: You mean receipts. In terms of how much debt relief would cost, I'll see if we have some material on that. I think we do, and I think the Bank does as well.
I think I answered that question on Indonesia. I mean, it certainly is a step forward for the independent panel's report to have been released. But we do still need to clarify what the government's position on this is, and it's my understanding there are discussions going on within the parliament and with the government on precisely that issue. So, in that sense of the word, this is a strong basis for moving ahead, and we have indicated that we believe that full acceptance of the recommendations of the panel are appropriate. And there also are issues still regarding IBRA and asset recoveries -- loan loss recoveries.
I think maybe the last question.
QUESTIONER: On the replacements of Mr. Mussa and Mr. Fischer, is there any development in the procedures? Have applications also already been introduced and when we can expect a decision from the Board?
MR. DAWSON: We did, in fact, advertise the Mike Mussa vacancy. We did receive a number of indications of interest, and that process is going along. I'd say it's well advanced.
In terms of the announcement of the intention of Stan Fischer to step down, we're not advertising that vacancy, but that is a process that the Managing Director obviously is personally involved with. And as soon as we have any developments in that regard, we will certainly let you know.
I think that was it. Thank you very much. We will lift the embargo at 9:30.