Islamic Republic of Afghanistan and the IMF
Argentina and the IMF
Arab Republic of Egypt and the IMF
Turkey and the IMF
Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet
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Transcript of a Press Briefing
by Thomas Dawson|
External Relations Department
International Monetary Fund
Thursday, January 31, 2002
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MR. DAWSON: Good morning. I am Tom Dawson, Director of External Relations at the IMF, and welcome for another one of our regular press briefings.
I just have a couple of items before I take your questions.
We have posted the latest public engagement schedule on the external website, but just to recap the Managing Director's schedule, which seems to be followed avidly particularly by some wires, he will be in New York on Friday and a portion of Saturday to attend the World Economic Forum, but we do not expect him to have a press briefing while in New York.
I can also confirm, since we have had some inquiries, that the Managing Director, as is customary, will attend the G-7 Finance Ministers and Central Bank Governors' Meeting in Ottawa at the end of next week.
I guess that is it. I guess I should perhaps also note that questions about Mr. Fischer henceforth should be directed to Citicorp; Mr. Fischer has departed the premises yesterday morning. So I am no longer responsible for Mr. Fischer, but we will miss him, of course.
QUESTION: What is happening about Turkey? There was a Board meeting tentatively scheduled for Monday. Does it remain in place?
And secondly, the Economy Minister, Mr. Dervis, is in town; I think he is trying to meet with IMF officials. What is the situation about Turkey?
MR. DAWSON: The Executive Board is in fact still scheduled for February 4, and if that were to change, we would let you know, but it is our expectation still that it will be February 4. And yes, I do understand that Mr. Dervis is in town on his way, I believe, to the World Economic Forum in New York. I don't know about his meetings outside the Fund but he met with Ms. Krueger yesterday.
QUESTION: There was some speculation that the comments that Mr. Dervis has been making in recent days might compromise the independence of the central bank there. I was wondering if you could comment on that; and also if you could give us an update on how Mr. Loser and Mr. Reichman are getting on in Buenos Aires, and if you can shed any light on the situation with Argentina.
MR. DAWSON: I'm glad you asked the second part of the question, because I have nothing to respond to on the first part of the question. I had not noticed those comments. I'll take a look and see whether I have something for you.
With regard to Argentina, there has been actually substantial media coverage of the visit, the team led by Claudio Loser, including Thomas Reichman and John Thornton. The discussions are going well. These were reported on, I think, in a number of publications this morning, but particularly our favorite Argentina publications, discussions to work with the authorities on seeing what assistance we can provide them in putting together a comprehensive and sustainable program. The discussions are going well.
We expect Mr. Loser to be back in the office tomorrow morning, coming back, in other words, tonight, and all indications are that the talks have been going quite well as we would have hoped. And Claudio is quoted in one of the papers this morning as indicating that the purpose of this sort of trip, which is not a negotiating mission, is to set the ground for what, once the authorities have prepared and presented their program, could lead to a negotiating mission.
So we are on that sort of path that we had hoped to be, and things seem to be going well.
QUESTION: As you know, the Government has expressed the intention to go toward a floating exchange rate as soon as possible, but apparently, this cannot be done if they don't have a signal from the IMF. Do you think they will get that signal? They are very afraid of doing it without any kind of support, because, of course, they are afraid that if they go directly to a floating exchange rate, everybody is going to run and buy dollars, and then it will be—
MR. DAWSON: Well, certainly, we and the authorities share the objective of the unification of the exchange rate, and all indications are that the authorities have it as a goal, with the unification, the adoption of a floating rate system.
One of the lessons that the Fund has learned over the years is the importance of proper sequencing and preparation for reforms of this sort, and there have been a number of estimates given by the authorities as to how long it would take for this approach to be implemented, most of them in the several months range. We are looking with them at the nature of their program and then, after that, we will be talking with them about how we could possibly support it financially.
So I think it is being approached on the part of the authorities and certainly with our support in a sequenced fashion, so I don't think anyone is looking for rash actions.
While certainly it is true that the Fund has a strong preference for unified exchange rates, we understand that these need to be carefully prepared and sequenced. So it is too early to say what that timing is. It is certainly premature to talk about the nature of Fund financial support, but that is obviously the track on which we are operating that may wind up in terms of financial support.
I have noticed in this morning's press some commentary about possible sizes of packages; that is still premature. I'll leave it at that.
QUESTION: Would you say that Argentina is on its way to a sustainable and credible economic program? Do they have your support until now?
MR. DAWSON: We are working with them to develop precisely that, and all indications are from the team that that is their goal. And from what we see, that is the direction in which they are working. We are giving them advice as we normally do, but they are going in that direction. This is not like on your computer screen, when you see how long it takes to download the program, but clearly, that is the direction in which it is going, and I think the discussions have been quite productive.
But as I say, we are not in the program negotiating stage; we are in the position of helping them develop their, as we say, comprehensive and sustainable strategy, and things are working well in that direction.
QUESTION: Tom, going back to Ann Krueger's speech on debt a couple of months ago, what is the status of IMF discussions on that? And you mentioned Mr. Köhler is going up to the G-7 meeting in Ottawa; will he be reporting on discussions that the IMF has had on this? Where is the state of play on her ideas?
MR. DAWSON: I am not aware that that either the Managing Director's particular events has a particular focus on SDRM.
With regard to the first part of your question, I think you will note by perusing our website that there has been some further development of some of the ideas. Ms. Krueger was most recently in Australia, where she gave further development of those views.
There is an active dialogue developing among the governmental, nongovernmental., and business sides. I think, from an internal Fund point of view, that the next step will be some form of discussion in the Fund Board, which will take place, I believe, in February—I don't have the precise date.
So I think that in that sense of the word, it is moving forward. If you check the Op-Ed pages and letters to the editor, you will see an exchange of views on the subject, including some responses from the Fund to some of the criticisms.
So it is proceeding, and Ms. Krueger has been doing some discussions with both public and private sector individuals, as have Fund staff. So it is proceeding. We are not at the position where we have a formal proposal. We do certainly have an idea. There is certainly the belief of Ms. Krueger and the Managing Director, and I think the Fund staff, that there is, as is sometimes described, something of a hole or a gap in the system of workouts, and this is an idea that is being developed, and what the timing will be, I can't quite say, but I think the next formal discussion, and actually, in a sense, the first formal discussion, by the Fund Board will probably be at some point in February.
QUESTION: When did Dr. Krueger's proposal become SDRM? All of a sudden, that seemed to pop up this week. Does that show that this has moved farther along than I realized?
MR. DAWSON: No, no. It is basically that I like to say things, and people like to have a handle on which to handle things.
Perhaps I should say "sdrm" in small caps as opposed to big caps. It is not a proposal, so that is a wrong conclusion to draw.
QUESTION: A question about the pre-conditions that Turkey should have met before the Board meeting. One was banking law, which was vetoed by the President, but Parliament once again passed it, so there is no problem about that, I believe.
But there should have been a couple of government decrees, according to Dervis, who said this a few weeks ago. There is one on transparency, another on improving the climate for investment. I think those decrees have not yet appeared yet. Are these similar pre-conditions, or are you working on that? Do you think the Turkish Government has met the pre-conditions, or should there be some more?
MR. DAWSON: I think in broad terms you are correct that there were a number of items that the government had indicated it would do first. Those are still the items that need to be done.
I am not quite sure that what you describe is exactly correct. My understanding is that besides the vetoed banking law that is being repassed and then automatically becomes law, it was my understanding there was one other measure that hasn't been completed; but certainly, that is the understanding, but it is our expectation that this can be done by February the 4th, when the Board meeting is scheduled. As I indicated earlier, should that change, we will let you know.
QUESTION: Can we check back with you?
MR. DAWSON: I'm not sure whether you need to check it with us. I think this is more a matter of Turkish internal procedures, so I think you might want to call home.
QUESTION: On Argentina again, you said it was not a formal negotiation on the program under way as yet.
MR. DAWSON: Right.
QUESTION: The Economy Minister is due to travel to the U.S. this weekend. Is that going to be the start of the formal negotiation? When are the meetings scheduled, and what are the plans for the mission that is there now—the various missions.
MR. DAWSON: Claudio Loser will be returning overnight tonight. The visit of the Minister is not in any legal sense or otherwise a start of negotiations. I mean, the expectation would be that at some point, there would be a negotiating mission to go down there. Obviously—as well reported in the Argentine press, including the menu—Claudio did have lunch with the Minister yesterday, and it is useful to have meetings with the Minister. But as for the stage of actual negotiating mission, that is not what is happening now, that is not what will be happening over the weekend or shortly thereafter. When that stage, as we hope, is reached, we'll let you know.
QUESTION: I'm sorry—the other missions that are down there—
MR. DAWSON: There are a variety. You might want to try to follow up. I frankly have a hard time at times keeping track of the various missions—fiscal, monetary affairs, dealing with debt issues and so on—that are down there, but there is a very close dialogue and contact with the authorities, and if you have interest in sort of a sense of it, we can provide a little more information. I just don't track each individual going down. But at the moment, these are obviously quite serious discussions with the authorities. But when you have a situation where you have Claudio Loser, Thomas Reichman, and John Thornton down there, my suggestion, I guess, would be that that is the mission to be focusing on.
QUESTION: On Turkey, in order to understand you as clearly as I can, you said that there is still one measure that has not been completed yet, but you also stated that the Board is going to meet on the 4th, and there is no change on the date.
So without this measure that has not yet been completed, should we also expect the Board to approve the new standby agreement?
MR. DAWSON: No. In the event that prior actions that have been agreed to are not approved by the time of the Board meeting, the Board meeting would be delayed by a few days.
I think that technically, there are still the two measures. I don't believe the President has put his signature on the bill, which is I think more or less automatic, given my expertise in Turkish constitutional law, but certainly the prior actions agreed to are still the prior actions that are required for the Board meeting.
QUESTION: I have two questions on two different subjects. The first one is Egypt. I just wanted to know if the IMF was getting ready to provide some help to Egypt because of the fall in the Egyptian pound.
And the other question regards the debt proposal. When the Argentine Finance Minister was in town last week, or a few days ago, he said that the proposals could be very well tested on the Argentine case, but when Ms. Krueger presented them two months ago, she said that they were two or three years down the road.
So where are we standing with regard to that debate?
MR. DAWSON: Let me take the second question first. I am not quite clear about what—I am familiar with the Minister's quote. Certainly the idea of a sovereign debt restructuring mechanism as it is being fleshed out now is not something that is going to have the effect/ applicability for current problems.
Certainly the Argentine experience, in our view and the view of many observers, shows the need to have a mechanism such as this as part of the tool kit for dealing with sovereign debt crises.
So I think I would leave it at that. We do not see in fact that this mechanism would be effective in time to deal with the present situation in Argentina.
With regard—the question was Egypt, right?
MR. DAWSON: Okay. With regard to Egypt, Egypt was indeed particularly affected by the events of September 11th, with a sharp decline in tourism and less favorable outlook for exports. We have been in close contact with the authorities, and they have indicated their intention to request a loan under the CFF, Compensatory Financing Facility, and that is the issue that is coming up.
We are looking at this. We are engaged in discussions with the Egyptian authorities, and we will see whether we can proceed along those lines.
QUESTION: Could I have a follow-up on that? Is there any road map? I mean—
MR. DAWSON: No. This is something that has come up—the Egyptian economy has been having difficulty, and the events of September aggravated it, and we are looking at the nature in which we can support them and how such support could be provided.
I know that a mission has been expected in Cairo. I have to say quite frankly that I'm not certainly whether it is there at the moment, and we will have to get back to you on that.
QUESTION: I have two questions on the G-7 in Ottawa.
Will Mr. Köhler bring any particular message to the Ministers there, and will the IMF review its economic outlook for the Ministers?
MR. DAWSON: The Managing Director does, traditionally and typically, present views of the status of the World Economic Outlook. It has not been the occasion for a formal update of the World Economic Outlook, but he does indeed make a presentation on his views and the updated view of the staff but not in a formally updated fashion. And typically, then, the 7 will make some form of statement thereafter.
But yes, that is obviously the purpose of his attendance, not only the World Economic Outlook interested in a number of key country cases.
QUESTION: Following up on the World Economic Outlook, given that there are signs that the United States' economy is recovery faster than expected, could there be a suggestion that the WEO target could actually be exceeded?
MR. DAWSON: We certainly hope that the World Economic Outlook forecast would be exceeded—this is certainly something to be aspired to—but we are not in the process of doing any reassessment at this point in time, unlike, for example, in the fall, when I think there was a need, and we did indeed put out an interim WEO.
We will be updating—or, having a new World Economic Outlook in a legal sense, for the Spring Meetings in the middle to the end of April, so there will be an update at that point, but I don't think anyone at the Fund will be unhappy if our forecast proved to have been a bit on the low side.
One last question.
QUESTION: Can you tell us something about the Fund's role in Afghanistan? There was a report in today's Times, I think, that the Fund is proposing the dollarization or adopting dollars as the currency.
MR. DAWSON: There has been a mission in Kabul led by Paul Chabrier, the Director of the Middle Eastern Department. I think it was there in association with a Bank mission as well, and we have been talking with the authorities on the very substantial task that they have ahead of themselves in formulating a budget, developing monetary policy and so on, and we expect to be in continuing close contact with them.
There was over the last 36 or 48 hours some focus on the exchange rate regime that the Afghanis might ultimately pick. We are certainly in discussions with them on how to handle both the short- and longer-term problem of the issue of an exchange rate regime. The nature of the regime, whether it has a link to a particular currency, whether it is dollarization, euroization, or whatever, are all issues that are perfectly fair to be considering at this point, but no decisions have been made by the Afghan authorities in that regard. We are in contact with them. And the reference in the press to the IMF having a formal position is not correct. In fact, as I believe it was The Washington Post this morning noted, the particular IMF staff member quoted that idea as being his personal view.
I think that is it.
QUESTION: One more. Could you just clarify that, because it was my understanding that it was an IMF official there who had a press briefing and said at a press briefing similar to this one that dollarization would indeed be the best method over the next 18 months.
MR. DAWSON: I believe he said it was his personal view.
QUESTION: So you're saying it's not the IMF's view.
MR. DAWSON: No. We do not have a view in that regard. That certainly is one of the approaches being considered, but that was his personal view. It may indeed wind up being that approach, but this is an issue ultimately for the Afghan authorities to pick for themselves, and we aren't dictating any choice.
Thank you very much.
IMF EXTERNAL RELATIONS DEPARTMENT