Brazil and the IMF
Japan and the IMF
Pakistan and the IMF
Russian Federation and the IMF
Turkey and the IMF
Ukraine and the IMF
United States and the IMF
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Transcript of a Briefing with Journalists
By Anne Krueger
First Deputy Managing Director
International Monetary Fund
Monday, September 24, 2001
MS. KRUEGER: [In progress] -- by the demand for its exports from the U.S., but their underlying economic policies are sound, and we would expect the growth to accelerate there as soon as the American turnaround or resumption of growth is realized. So, in that sense, I don't think there's great concern there.
You asked about Argentina. There have been no new developments in financing, although discussions are continuing. As you know, the IMF passed its package, and at the moment we are waiting and seeing on that.
QUESTION: Emily Schwartz from Bloomberg News. I was wondering if you could comment a little bit on what the IMF might be able to do to respond to some of the new uncertainty. It has a very large amount of resources available for lending, something close to $100 billion. And is there any thought or discussion about loosening restrictions and conditions on disbursing that money in light of this situation?
And, finally, the U.S. Government's just announced a whole bunch of restrictions on bank accounts in an effort to clamp down on money laundering by terrorists. What is the IMF going to do to increase its efforts to clamp down on money laundering or what should be done?
MS. KRUEGER: Okay. Let me take that in two parts. The first part, of course, we are looking--as I said, the hard thing about this is it's a wider range of uncertainties and, therefore, it's difficult to sort of say here is what we're going to do. But what we are doing in each--what we're doing is several things, including looking at, you know, what is the downside scenario, what are the things that could come up, et cetera, and pretty much going through country by country and asking where are the vulnerabilities, who's most exposed, and that sort of thing.
At the same time, of course, there is thought as to some degree of contingency planning, but this is very hard when, you know, your worst-case scenario is worst case. It isn't what you expect to happen. And so there is a range of issues here, and, yes, we are addressing it. There are meetings--I'm meeting on this on different issues, and there are lots of memos going forth. But part of it is simply let's be prepared for whatever happens.
Now, I don't think it would be wise for us to say, well, we're just going to be handing out more money. After all, as we've--all of us have discovered, a large part of what happens to individual countries is a function of their own economic policy. And so for the most part, we would, I think, be looking at--hoping and expecting that countries will maintain their individual improvements in policy, maintain the things they were trying to do, and perhaps even strengthen them. And if in doing that there still appears to be a need for our financing at that stage it could be addressed. But at the moment, the thought is certainly not that we're just going to become more of an open window and that more money is going to solve the problems. We don't think so.
On money laundering, of course, there has already been the Financial Action Task Force. That's an ongoing effort that involves the Fund and, of course, also the member governments. We are not a law enforcement agency and, as such, are not going to be directly, quote, Doing anything, unquote. But on the other hand, we are participating in the discussions.
QUESTION: Andrei Sitov from Tass, from Russia. Since this is our first acquaintance, first [inaudible] would like to if you have any personal experience of working with the region, with Russia or the former Soviet countries. Obviously I'm interested in your opinion on their outlook among the emerging markets.
Also, I have a broader question as far as the globalization process and what the events of the last few years tell us [inaudible] in a way the anti-globalization movement and the horrible tragedies can be tied together like -- [blank spot on tape] -- developing world almost like the conflict of civilization that--civilization as some people are talking about.
I wanted maybe to ask you whether you would give us your views on why the globalization is good for the developing world.
MS. KRUEGER: Happily, I probably don't have enough time. But let me start with your first question.
My personal contact with Russia and CIS countries is, well, I guess, confined to Russia and Ukraine. I was in Russia I think last December and spent a very interesting ten days there with the Institute on Transition Economies and had very nice hospitality and basically learned and saw a fair amount at that time. So that's one.
Ukraine, I was there I guess about just over a year ago, spent a week teaching at their undergraduate program in economics. So those are the only two.
As to the outlook there, it's interesting that you should ask because, if I look around the world right now, countries that are going relatively better than they have done in the past--there aren't that many because, well, first off, some have done so well they couldn't keep it up; some have gone through the rapid phases. The two that are doing much better to most people's--I think, as of three years ago, anyway--surprise are Russia and Ukraine. We all know that Russia had very sound economic growth last year. It looks good for this year as far as we've gone, and so at least in the short term since, there's a lot there. Obviously, for Russia to sustain that will take further reforms, but I think that's widely accepted, and so it looks to me as if there's a fair amount of determination to do them so that it may be a part of the world, which one need not say that the uncertainties, at least right now, necessarily reduce the outlook very much. And, of course, I'd bear in mind also that Russia exports oil and things like that.
And if the downside of the uncertainties comes to pass, so, too, it's likely that the oil price would go up as part of that. So Russia does look very well positioned to withstand this better than others, even if it's the downside that is realized.
And, of course, Ukraine this year is realizing positive growth in per capita income for the first time. So, once again, the outlook there is better than it has been, certainly, although, of course, again, there's a lot more reform to do. And in Ukraine's case, there is beginning to start, I think, in the process of perhaps turning things around.
Now turning to your anti-globalization and the horrible tragedies --I am absolutely bewildered, I guess is the way to say it. Two or three hundred years ago, almost everybody in the world was poor, had a short life, was ill part of the time, anyway, undernourished. The average Frenchman was, I believe, four-foot-six inches high. And, you know, basically a third of the world died in the Black Plague and so on and so forth. I mean, we come out of a very poor heritage, and for whatever reason, come about 200 years ago, part of the world was able to break out, which delivered better living standards for many people, and the gap between the industrialized countries and the rest of the world really only opened up about then or started opening up about then.
Then I look at statistics since 1950, and I think of things like Indian male life expectancy going from 32 to 64 in the interim, women from 28 to 66, and I look at life expectancies, literacy, and other things around the world, and I have to conclude that even though there are a lot of people who should have benefited and who could benefit more than they have, that on the whole it's been positive. Some people have been left behind, and we need to bring those in, there is no doubt. Some people I think have--I keep being told some people aren't as well off as a result of--certainly I think of cultural and other ways--you know, there is a transition process that is not entirely welcome and easy.
But, on the other hand, people vote with their feet, and people vote time and time again to choose a lifestyle that permits better nutrition, better living standards, literacy, and all the rest of it.
And I guess, on the one hand, those who really want to claim that they would like to stay with their ancient or their old culture and civilization and old standards of living and old standards of illness and illiteracy, et cetera, that's their choice. But that's not what most of the people in the world are choosing, and in that sense, what worries me mostly is that there are people who say they are anti-poverty, et cetera, who also say they're anti-globalization. And I do not understand that because it seems to me that much as, of course, there are costs and, of course, we can do better and, of course, we can address them, that the basic thrust has made the world a lot better place on balance than it would otherwise have been.
QUESTION: The Mexican News Agency, Notimex. You mentioned there were uncertainties, and, you know, in light of that gloomy prospect, I wonder if the IMF in some way thinks that maybe this is the best time to push again to sell the idea that for some countries the contingency emergency line will be, you know, maybe a resourceful(?) tool in light, you know, those uncertainties(?). So I wonder what the IMF is going to do, particularly in the case of countries like Mexico, which I understand has expressed some interest in this line.
MS. KRUEGER: Right. Well, as you know, the Contingency Credit Lines are one that's intended for countries where it is deemed that policies are in good shape, and so basically this is, if you like, an insurance policy against adverse circumstances. And as I mentioned earlier, we are, of course, looking at, you know, what happens if the uncertainties and the downside are what carry the day, what are the options there, and one of those is looking at the CCL. At this time, as we speak, that is being looked at, and I can't give you an answer because we haven't gotten to the answer yet. But certainly we're looking at it.
QUESTION: Nick Stern, the World Bank Chief Economist, was quoted today saying that increasing public spending would be a good idea for Europe in the face of the downturn (inaudible). Would you support that point of view?
MS. KRUEGER: I think that there is--certainly I think the Fund has had the view for some time that structural reforms are needed in Europe and that those are appropriate, and certainly we were pleased to see the reduction in interest rates last week.
I think that basically while we think the Europeans should do more in terms of pressing on with reforms in order to achieve more rapid growth, we would not be that happy to endorse specific measures such as an expenditure increase. I think that would be an internal European concern.
Automatic stabilizers, of course, those are working, anyway. But that's a different issue. In terms of, you know, discretionary new spending, I think that would be much more a European decision.
QUESTION: After the stock prices dropped farther in Japan and this has been reducing Japanese banks' financial strength, are you concerned about soundness of Japanese banking system?
MS. KRUEGER: Well, as you know, right along the Fund has been urging the Japanese authorities to move further in terms of getting the banks on a sounder footing, and, in fact, participating in the financial assessment program and all of that. So, yes, it has been a concern right along with regard to Japanese banking.
I don't--if anybody in the Fund has had a chance in this past hectic week to look specifically at that issue, I haven't been told. But that may be because I was too busy. But certainly, as a basic issue, right along I think that's been a concern of the Fund with regard to Japan.
QUESTION: When you released the statement, the IMF and the World Bank joint statement, canceling the meetings, the Annual Meetings, you talked about the fact that the meetings would be on the regular schedule for next year. Is there any thought of reviewing that given this increased concern about terrorism, that such high-profile meetings such as an Annual Meeting of the IMF and the World Bank, or even a Spring Meeting, which has a lot of countries coming here, it's just too risky to hold those meetings at this time?
MS. KRUEGER: I think right now is--I think my judgment and that of most people here would be that it's too early to make a definitive assessment. But certainly as of right now, we are planning on spring interim--IMFC and Development Committee meetings. We're planning on Annual Meetings next year. And, in addition, we are still hoping that a way can be found to have the IMFC and Development Committee meet sometime later this fall in order to at least have our members be able to get together once, if it's some kind of shortened and not quite so satisfactory format.
There is a tremendous value, especially for the smaller countries that are members of the IMF and the World Bank, to having one chance a year when they can meet face to face. And I think that there's certainly a commitment to trying to carry that on if we possibly can.
QUESTION: [inaudible] time and place been set for [inaudible]?
MS. KRUEGER: No. That's still subject to discussion, and it's probably too soon to say. Again, we're dealing with tremendous uncertainty, and there's a certain amount of value just to waiting until things settle down a bit more. But we're hoping that we could come to some kind of decision on that in the not-too-distant future.
QUESTION: Do you think that in this contingency a G-7 meeting could be useful? And the second question, focusing on Central Asia, is it true that IMF closed some offices in Central Asia and blocked all the missions in this region?
MS. KRUEGER: To your first question on the G-7, it's my understanding that they are considering having a meeting. Obviously, the G-7 has its own set of issues which they might well want to consider, but I don't think I'm in a position to judge whether or how useful it would be relative to other use of Ministers' time. I think that they've all got a lot on their plate right now, but I do believe that there is a reasonably strong possibility that that will happen in the reasonably near future.
As to Central Asia, it is certainly not true that we closed all offices or anything like that. We have, as I think everybody else did, sort of urged our staff not to travel unless it's urgent, and that in that sense I think--what's the wording? "Necessary"?
MR. DAWSON: Non-essential.
MS. KRUEGER: Non-essential travel is, for the time being, discouraged. But that to me makes evident sense, and it certainly isn't closing offices and it certainly isn't canceling all missions. We have missions in the field all the time. But when Fund staff can postpone something or has been able to postpone something, they've been urged to do so.
QUESTION: In terms of the actual reform of the IMF itself, how do you--how do you view the progress that's been made since Horst Köhler took over? And what sort of direction do you favor? I mean, obviously, you're not going to say, well, I disagree with the broad direction. But what do you see as being the most important elements of IMF reform? You've been looking at this institution for a long time.
MS. KRUEGER: Right.
QUESTION: So, from your perspective, what's good.
MS. KRUEGER: Well, fortunately, I am mostly in agreement with him, anyway, as you can prove by looking at some of the things I wrote before I came to the Fund in checking that out. So that's not--that's an easy part of it. And I think I certainly agree with the streamlining of conditionality, which certainly is something that needs to be done. Certainly focusing, if you like, on our core competence, which is, of course, in the macro stability area, and getting to that essential focus as much as possible, I'm certainly fully in agreement with. And those I think are the two most important things.
There has also, of course, been some degree of emphasis on poverty and all that. I think that's a little bit more--how one within the Fund context addresses that is an interesting question. In my own view, obviously, if you attain macroeconomic stability and if you cut inflation rates, you're already doing a great deal for the poor. There's every--every piece of empirical evidence I've ever seen from microeconomic data says that when there's a higher rate of inflation, it's the poor who take it in the neck. Middle-income, upper-income people have all kinds of ways of protecting themselves and use it, and the poor do not. So whether--it seems to me our message should be that if macroeconomic stability obviously enhances growth prospects, growth, when appropriately undertaken, which does mean, of course, attention to education and other issues, in turn is the best remedy for poverty. But how that works and exactly is still subject to being worked out.
QUESTION: Many folks on Wall Street who would define a global recession as 2.5 percent global growth or less are saying that even before the September 11 events, the world was in a global recession. And now they're saying that the situation is worse and we're going to head into a deeper global recession. And they look at the sort of 2.7 percent forecast, 2.6, whatever it is, in the WEO, and say that, you know, the IMF is just being a cheerleader and that the forecasts that you make are overly optimistic. So I wonder if you could address those criticisms.
Then a second question on affected countries by the strike, Pakistan and others. There's been some talk that you guys might be setting up some sort of availability for those countries that are most affected, and can you let us know what sort of progress you may have made on that issue?
MS. KRUEGER: Okay. Recession, 2.5 percent worldwide growth, is that overly optimistic? I don't think so. If you think about 2001 as a year, certainly China is going to come out high; certainly India is going to come out somewhere in the 4.5 to 5 percent, or thereabouts, range. Russia's doing well. I mean, you can name a number of countries that are doing much better than that.
And then you look at Europe for the year and the whole, it's not that much below, and U.S., too, so that for the year as a whole, I don't think we're going to show that and I don't think we're being overly optimistic. And I think the same is true for next year.
But you will see the details in Wednesday's press conference on that, and you can judge for yourself at that time.
I should say that I think the great amount of uncertainty in terms of what the impact of all this is, first off, just in the very, very short run, and as we learn more about how things are going to unfold, I think then we'll be able to do better, if you like, forecasting for 2002. But based on now, which is to say, no more negative surprises and so on, it's very hard to see very much medium-term macroeconomic impact after the initial bout of whatever has happened as a result of September 11th happens.
Now, obviously, the one can feed into the other, but I don't see as of now why prospects--it could be that we have a little bit more downturn now or maybe a little bit delayed, but that may also mean a sharper upturn later on.
As it happens, Pakistan, I think for the first time ever, completed its program with the Fund on time and meeting all conditions. And, actually, that paper came across my desk before September 11th. So Pakistan was already in shape because they'd been performing well to consider entry into a Poverty Reduction and Growth Facility program, which, as you know, supports the longer-term issues, policy reforms that will be conducive to a higher growth rate in the longer run.
So we were already on track to look favorably upon a proposal for such a program for Pakistan. That is still forth--that is still an ongoing process, and so far, as I said, because it so happens that they were already fortuitously there or fortuitously at least from this viewpoint of timing, basically we are on track to go ahead with that.
QUESTION: The number of 2.5 billion for some reason has popped up in an awful lot of stories about this PRGF for Pakistan.
MS. KRUEGER: No. That's way off.
QUESTION: That's way off?
MS. KRUEGER: That has to be way off. That's just the wrong ballpark.
QUESTION: [inaudible] a lot of stories, and--
MS. KRUEGER: I don't think there is that much--you know numbers, but I don't think there's that much in the whole PRGF facility at the moment.
MR. DAWSON: Uncommitted. That's right.
MS. KRUEGER: Uncommitted.
QUESTION: [inaudible] better ballpark if we could correct those figures.
MS. KRUEGER: I can't give you--I mean, any number I give you is so likely to be, again, out of the ballpark, it's probably more risky to give it than not. You can check with Tom [Dawson] later. He can see if there is a number that would be reasonable there. I know the number I've got in my head, and I'll see how far I'm off again later.
MR. DAWSON: You can do your own interpolations by looking at other programs, but if you calculate its program, give me a call.
QUESTION: A couple other follow-up questions on specific countries. Brazil right now has the worst-performing currency this month. The real is down about a third this year, and there's an emergency meeting later today in the government to discuss what to do. Is there anything the IMF would counsel or anything the IMF can do beyond the program it's already entered in with Brazil?
And then also Turkey, it's a little unclear. The Turkish Government has basically it may need more help, and there were some comments along those lines from Mr. Köhler last week, but can you be a little more specific about what are the options for Turkey? What is the IMF--what else can the IMF do for Turkey?
MS. KRUEGER: Well, in the case of Brazil, I guess as you know, we just passed the new package or the last part of the new package just the week before last. And they have had the fairly rapid depreciation of the real, but basically our urging is basically to hold onto--keep on course with regard to their policy reforms. They have already tightened liquidity somewhat. They may want to do a bit more on that score and basically look to policies to make sure they can shore them up. We are, of course, monitoring the situation, so that's the Brazilian situation as of now.
As to Turkey, we think that we have done all we--just virtually all we can at the present time. The Turkish program gives cause for concern but, on the other hand, it is still proceeding. Obviously they got to some extent hit last week in terms of interest rates and things like that. But, again, how short--how--if that's short term, it's not a cause for concern. If it's longer term, it is. So that, once again, we face this bigger uncertainty, which is just true over and over again, and that's certainly the case for Turkey.
QUESTION: I just wanted to clarify your answer to Mark's question about global recession. So you're saying that you do not see a global recession resulting from the impact of the September 11th attacks right now? And, second, I just wanted to follow up on your answer to my question about U.S. policy measures. You mentioned that a lot of monetary stimulus is being put in place already in addition to the spending packages. When you're saying that going further at this point would not be appropriate, are you also--are you also referring to monetary policy?
MS. KRUEGER: First off, two points, (tape inaudible) global. As I said, I think that there is increased likelihood of uncertainty, particularly on the downside and particularly for the short run, and that in that sense we may see less good performance than we expected in the third and fourth quarters of this year, and possibly even spilling over to the early part of next year.
But even if that happens, remember, that gives you a lower base for next year, and, secondly, we're more likely to get the V-shaped upturn, in which case then, once again, you're back on track before the end of 2002. So my answer held with regard to that. Does that answer that question or have I still--I don't meant to, but I may not be--
QUESTION: [inaudible] recession.
MS. KRUEGER: Well, the recession, as was defined--the IMF has apparently--I'm learning these things as I go--defined global recession as being less than 2.5 percent growth of world GDP. I guess on the theory that there are a lot of new people and so on, so it's a per capita income definition. On that basis, we are saying that we do not believe there will have been recession in 2001 because we believe the growth rate will be above that, and we're calling for a growth rate above that in 2002. So we are not calling for that.
As to U.S. policy, I think what I said was--and I think I'm willing to say it again--that as of now I would not regard further measures as being called for. Now, this does not mean that as of tomorrow things might not have changed. That's what greater uncertainty is defined as. But it seems to me that right now both monetary and other policies have been adapted to what I would judge to be an appropriate degree, in light of uncertainties and in light of the fact that one can always move further if one needs to at a later date.
QUESTION: Just to clarify, you're talking about both fiscal and monetary policy.
MS. KRUEGER: Yes, I certainly am.
QUESTION: May I ask you about your travel plans, please? What are your priorities in that regard, and do you have any travel plans before the end of this year?
MS. KRUEGER: When I came to the Fund, I knew I'd have my work cut out for me getting up to speed. What's happened in the world since I got here in early August has not made that any easier.
At the moment, I have no--virtually no hard travel plans over the next two months, let me put it that way, and even anything in December is fairly soft at the moment. So I don't have strong plans.