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Transcript of a Press Briefing by Thomas Dawson|
External Relations Department
International Monetary Fund
Thursday, November 1, 2001
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MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings. The briefing is embargoed until 15 minutes after its conclusion, and we'll set a precise time when I wrap up.
I would say pardon our surroundings. I clearly don't have enough clout to get a bigger room, but we will work on that in the future. But this does offer a bit of nostalgia since one or two of you may remember this is actually the room where the first of our regular press briefings took place, almost exactly two years ago.
QUESTION: Do we have a cake?
MR. DAWSON: No, we don't have a cake. It's just Fund austerity at work. Before I begin, I hope everyone did have a happy Halloween. At the Fund, Halloween was observed with the IMF Day Care center visiting the 12th floor, including a visit with the Managing Director. It was actually quite a lot of fun. Next year perhaps they will visit the Board as well, but they were scared away from that yesterday.
MR. DAWSON: Now, before we get to questions, I suspect a number of you may be interested in the preparations and arrangements for the IMFC meetings in Ottawa in a couple of weeks. We expect the Canadian authorities to post on the G-20 website the press accreditation material for the meetings on Monday, November 5th, and the Fund and the Bank will jointly post a press advisory alongside them. If you have any questions, I would ask that you follow up with Media Relations Division later on.
And, finally, I do expect that the Managing Director will have a press conference here in Washington ahead of the IMFC meeting. The IMFC meeting is November 17th. We don't have a precise day for the Managing Director's press conference. It will be -- I would suspect -- the Wednesday or the Thursday before the IMFC. We'll let you know when details are finalized.
And that's all I have to say at this point. I would ask you to please use your mikes and identify yourselves.
QUESTION: In relation to Mr. Köhler's statements three days ago, do you have the date of the IMF mission visit to Turkey? And still the Turkish Government has not announced measures to cut spending for next year. Will we be discussing this thing during the visit, or would you be expecting a public statement beforehand?
MR. DAWSON: On the last one, I don't expect a public statement beforehand, but let me just go through my points.
The negotiating mission headed by Juha Kahkonen will travel to Ankara later this week. And since today is Thursday, I suspect that means he's about to go. The mission hopes to complete its work by mid November. As the MD said in his press statement on Monday, the mission will discuss the program, the economic program overall, and the tenth review in particular. They'll work with the authorities on strengthening economic policy and on this basis recommend how Turkey can continue to be supported.
As part of the tenth review -- and that I think gets to your question -- the authorities are expected to specify the measures to achieve their public sector surplus target of 6½ percent of GDP. As always during the program reviews, the mission will discuss with the authorities an updated letter of intent. A Board date would be set only after the mission is concluded, and we're hopeful that the Board would be able to meet on Turkey in late November.
QUESTION: I'd like to know whether you consider the problem with Argentina to be on track, seeing that the fiscal targets are seemingly not going to be met, and where do the negotiations regarding the debt restructuring and the $3 billion stand at this point?
MR. DAWSON: As far as the program goes, the authorities are, of course, continuing to work on the fiscal situation including how to implement the agreed program. We would expect a Fund mission would go down once the authorities have concluded their considerations, and that could be in the near future and would be expected to happen once sufficient progress has been made on the fiscal side. We have, of course, had a couple of missions that have gone down there for brief visits, including one over the weekend and we remain in close contact with the authorities on their program.
With regard to the latter part of your question, I think I'll start by interpreting the question rather narrowly, which was what is the status of the potential acceleration of the $3 billion in the program that was approved a couple of months ago. I don't have any news in that regard. That is, as we've indicated from the beginning, a matter of discussion between the Argentine authorities and their creditors. It is, of course, something the Fund and the other multilateral institutions as well as bilateral individual governments are interested in, but I don't have any new information in terms of that, but it does remain as potentially part of our program.
QUESTION: There's also been speculation this week that one of the things that the Fund might be able to do for Argentina, would be to speed up disbursement for next year. Is that being considered? I mean is that possible?
MR. DAWSON: That is not being considered and is not in the cards at this point. I think the clear guidance is it is not something being considered.
QUESTION: Is there any interest in the IMF in seeing additional support if it's requested or needed by Turkey and/or Argentina coming from the larger G-7 countries themselves?
MR. DAWSON: I have noted speculation in the press in that regard, and I've also noted that Minister Dervis has indicated the need to fill the financing gap that he specified. I think a major, a purpose of the mission, a clear purpose of the mission that will be going out there is to get better ideas of what that residual financing gap would be after the strengthening of policies and how it could be filled. Certainly there are any number of mixtures of financing, bilateral or multilateral, that can be imagined, and that is I think still an open question and one that I'm sure the Minister will be pursuing vigorously.
QUESTION: Is the $3 billion that are supposedly going to reinforce the program of restructuring of the debt contingent to Argentina meeting the goals? I mean meeting the program agreement?
MR. DAWSON: The $3 billion is indeed part of the program. It was contained in the augmentation of the program. It is funding that is, in the first instance, slated to be disbursed over the next 18 months or so. It is available to be accelerated if there is indeed a voluntary market-oriented debt operation of which the Fund contribution would be a component, so presumably it would include other multilateral potentially bilateral funding. But, yes it would require a program being on track because it has to be disbursed as part of the program, because it is in fact part of the program.
QUESTION: What about to speed up of the next disbursement (to Argentina) for 1.3 billion from December?
MR. DAWSON: I do not see that this in the cards. We are trying to complete the current review.
QUESTION: And when do you think that this completed...
MR. DAWSON: That depends. That, as on a number of other matters, depends on what is going on in Buenos Aires at this point.
QUESTION: I'd like to know what the status is of Pakistan and the IMF? Is there a Board date for anything there? Is there any interest that the IMF has in taking a new look at Pakistan's debt on either the HIPC or a different type of program?
And then on Argentina, just to follow up, you suggested...the $3 billion, is it possible that there is never a market transaction, the IMF uses that money for, provides that money for, or would that money be available as part of the regular loan program?
MR. DAWSON: Yes. To take the second part of the question first, that's precisely how it is structured. If there were not a debt deal and if the program remained on track, it would be disbursed over time, over the next couple, 18 months to 2 years.
On the former, on the question on Pakistan, a Fund team met in Paris last week with Finance Minister Aziz, and made good progress toward completing the negotiations on a PGRF-supported medium term program. The team, the Fund team also met with members, representatives of the Paris Club Secretariat to discuss the financing and debt situations. Clearly, I mean, outstanding issue is the financing of the residual balance of payments gap, and it's hoped that a financing package supporting the authorities' program is agreed soon and that the PRGF discussions can be wrapped up in the near future. We do not have a Board date, but I would not want you to draw the conclusion from this that things are going more slowly than otherwise. In fact, good progress is being made on the program.
QUESTION: The State Department's Mr. Boucher said earlier this week in one of his briefings, that that IMF package would amount to $2 billion. That number's previously been questioned by Anne Krueger and other people here, and I was wondering if you could shed any light on what he might have been thinking of and what size...
MR. DAWSON: We have not come to a conclusion on the access under a PRGF program, but I think it is fair to note that the resources under PRGF are limited. I would direct you to the Managing Director's buff of October 5th on the world economic situation, where he noted the need to augment resources of the PRGF, and we are indeed in discussions on that issue. But if what the reference was to was to a PRGF program of that size, that is not -- that does not look like that is there, and my own experience is quite often when people make references to the Fund supporting a particular country, oftentimes there's a mixing and matching of numbers that may not actually be the Fund's. So I think it's premature for us to be speculating on what our own contribution would be, and I'm not quite certain where that number came from.
The reason I note this sort of occasional mixing and matching, is I noted in a prominent Wall Street publication yesterday a reference to a $40 billion loan by the IMF to Argentina last year. I've checked our records and I couldn't quite find that one.
QUESTION: I wanted to know if you are studying to give a new aid to Brazil.
MR. DAWSON: I would direct you to, I believe, Minister Malan quoted this morning, as indicating there are not any discussions for additional financing for Brazil, and that's my understanding as well. We are, of course, in regular contact with the Brazilian authorities, and there is an Article IV Consultation and Review Mission currently in the field that is making good progress, and should be finishing up this week. And we would also note that the primary fiscal target for the end of September was exceeded by a wide margin.
QUESTION: I wanted to know if you have, the IMF has an assessment of the US economy, and if you can tell us a little bit about the impact of the situation here from Mexico, and if there is anything like any package or financial support being planned or discussed here for Mexico?
MR. DAWSON: On the latter part of your question, we are of course in regular and close contact with the Mexican authorities, and the only sort of element of support that has been under consideration is the possibility of a contingent credit line facility. That remains an item of discussion among the authorities.
In terms of our global, our world economic outlook and impact on Mexico in particular, we are of course, as indicated again in the Managing Director's statement from October 5th, in process of reviewing our assessments, both globally as well as regionally. Obviously, the U.S. economy and Mexican economy are important elements of that. We have a WEO, World Economic Outlook review process that will lead to a new WEO later this year in December. However, I think it is fair to note, fair to expect, that with regard to the IMFC meeting coming up on November 17th, you can expect that the Fund will have at least some more specific views in terms of our assessment of the global economic situation that would be ready for presentation to the IMFC at that point. And I think you can expect that we will be making it available in a fashion to you as well.
I would not want to hold out that it would be something addressed at the Managing Director's press conference. I'm sure you'll be asking about it then in any event.
QUESTION: Since I don't want to misinterpret you, you seem to imply that the Argentina program is not on track, and that there is some measures, fiscal measures that need to be taken so to meet the target. There is a very complicated political situation in Argentina, as you probably know, so I would like to see whether you could elaborate a little bit on that, and also tell us what was the (most recent)mission all about? Because Francisco was telling us it was a preparatory mission, which I've never heard of before, so if you could tell us why they went down there, especially accompanied with someone from Capital Markets.
MR. DAWSON: In terms of the present status of the program, we are awaiting the review mission. It is the review mission that determines the status of the program. Clearly, we recognize the difficult political situation down there and the difficult discussions between the central government and the provinces in particular, and resolution of that is naturally a requirement for going ahead with the program. So I think that it's pretty clear what the state of that is. It is difficult to indicate quite when it will be resolved, and that's why I indicated in a sense that the action at this point is in Buenos Aires as opposed to here.
In terms of the mission, I would just note this is actually the second brief mission that has happened in the last several weeks, that went down when the authorities thought it would be useful to have discussions with the Fund. John Thornton, the mission leader, who will be mission leader for the review mission as well, is the mission leader, and so it's natural that he went down. And there actually were I think three other staff members including one from Capital Markets. And clearly one of the issues that has been increasingly discussed down there is the debt situation, so it's not surprising that someone from that department went down to participate in the discussions. But it went down as a short meeting, a fact-finding meeting, as well as a meeting that was requested by the authorities. They found their facts and they came back.
QUESTION: I'm sorry. Did you say when that mission was going to go?
MR. DAWSON: We don't know yet. And I can assure you, we will let you know if you don't find out first.
QUESTION: Thomas Reichmann then is not going to lead...
MR. DAWSON: I can't tell you whether Reichmann will be going, but Thornton is the mission leader.
QUESTION: He's the mission leader?
MR. DAWSON: Right, yes.
QUESTION: You said that the discussions over the restructurings are becoming increasingly a part of the discussions?
MR. DAWSON: No. I said it became increasingly public, that that's the issue of why -- I mean it is increasingly part of the public debate. The debate going on there is not simply a zero deficit debate. It's a debate on the debt situation.
QUESTION: What role is the IMF playing in the behind-the-scenes debate about...
MR. DAWSON: We provide information and advice, but the discussion and the relationship on the debt is a matter of discussion between the authorities and their creditors. We obviously have an interest and a need to be aware of what is going on, but we are not a party to the negotiations.
QUESTION: Are you supporting the Argentinean effort to get more aid with World Bank and the IDB to restructure debt?
MR. DAWSON: That is not what our role is. I mean clearly the $3 billion potential acceleration in the existing program is something that we envisaged would involve other institutions including the two that you mentioned. So in that sense of the word we are in contact with them, but we are not acting on the behalf of the Argentine authorities in that regard. Again, back to my other, my earlier sort of theme, the action in that sense of the word is with the authorities. We are not a party to that, but we are part of a web of relationships.
QUESTION: Two quick follow ups. Who is the lead negotiator now for Argentina, Reichmann or Thornton?
MR. DAWSON: Well, I mean, at this point the mission leader is Thornton, but Reichmann is senior in the department. This is not at all unusual. John Thornton, in the structure of the Fund, is the mission leader, but Thomas is the more senior person, more oriented toward Argentina than other more senior people.
QUESTION: And then in terms of the WEO, you mentioned just now December. Is that early, mid, late December?
MR. DAWSON: Mid.
QUESTION: Do you have a goal right now?
MR. DAWSON: Mid, mid. I don't want to commit the publications -- perhaps it's mid -- before Christmas.
QUESTION: And this will be numbers and text? It won't be just a bunch of numbers that will...
MR. DAWSON: We have in the past done interim WEOs, and it would be along that line, yeah.
QUESTION: I understand that Argentina have a problem with the fiscal target from the IMF?
MR. DAWSON: They have a zero deficit program that is an essential part of their program, and that is what they are attempting to meet, yes.
QUESTION: Will the IMF give a waiver?
MR. DAWSON: The fiscal deficit law, as I understand it, is an Argentine law, and so it's a matter of the Argentines meeting their own domestic requirements, and then that's what the status is. And I should also note we are talking about not just about this year. The review mission also looks at the year 2002. So we should make that clear as well.
QUESTION: To what extent does the IMF see a potential credit shock? If there were a credit shock from Argentina, what risk is there for contagion at this point? What's the overall assessment of if Argentina goes badly, the risk of contagion to other emerging markets in the current...
MR. DAWSON: Obviously, the markets would make and make that judgment on a regular basis. And it is I don't think appropriate to speculate on an "if" situation. However, I think you could simply take a look at, for example, as an indicator of indications of contagion, you could just take a look at any number of investment banks. The Fund itself publishes lists of how the spreads are operating. And if you go through that list, unlike, for example, in '94 and '95, or in '97, '98, you will see that spreads, say during the course of the year 2001, have actually not moved in a fashion that indicates contagion.
Citing a few examples, several of the East Asian countries' spreads are either lower than or at the levels they were at the beginning of the year. The Russian spreads have shrunk substantially. The Mexican spread is, I think, only up to something like 14 basis points during the course of the year. So I think the market in that sense of the word is showing quite an ability to discriminate, and so I think that the ideas of contagion in a sense that we have known it in past crises just simply does not seem to be in the cards, but ultimately that's a judgment the markets make.
I think one last question. Is there someone who hasn't asked one?
QUESTION: The markets have not been terribly happy about what they've been hearing about the debt swap, as it's been sort of leaked out. The idea of reducing the interest rate sharply and whatnot, they're considering it a default. What kind of swap would meet the IMF criteria as a voluntary market based?
MR. DAWSON: Well, I think certainly it has for a long time been our view that if a country has a debt situation, the better solutions are in fact the voluntary market-based solution. So I've answered your question by quoting part of your question. I think that's the best that I can do.
QUESTION: It is what they're talking about.
MR. DAWSON: A number of items, a number of proposals are being talked about, and I think sitting here 4,000 miles north of Buenos Aires, it's a little difficult for me to comment on what's going on there. Again, I think that's an issue that, those sorts of questions are better directed down in Buenos Aires where there is no shortage of news coming.
Thank you. Thank you very much. I think we can lift the embargo at 10:15, and I do not expect that we will have an additional briefing prior to the Managing Director's press conference.