Argentina and the IMF
Brazil and the IMF
Indonesia and the IMF
Pakistan and the IMF
Paraguay and the IMF
Russian Federation and the IMF
Uruguay and the IMF
Republic of Uzbekistan and the IMF
Free Email Notification
Transcript of a Press Briefing|
By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Tuesday, July 2, 2002
View this press conference using Media Player
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. We have our normal ground rules. The briefing is embargoed until about 15 minutes after conclusion, and we'll set the precise time at that point. And in observing good decorum, would you please identify yourselves and your affiliation when you ask questions?
When we last met on June 19th the Fund's Executive Board had just completed the latest review of Brazil's performance under its standby arrangement. Since then interest in the Fund has continued to center on our relations with a number of emerging market member countries. You will have seen in recent days Fund Board approval of lending to Indonesia, Turkey and Uruguay to support those countries' economic programs. As the Managing Director, Mr. Köhler, announced last Friday, we are in an act of negotiating a situation, relationship with another member country, Argentina. Let me just briefly explain what this means.
Following the progress in our discussions last week with Minister Lavagna and his team, we expected over the coming days and weeks a number of Fund staff missions, rather than a single grand negotiating mission, will travel to Buenos Aires. They will focus on finalizing the fiscal framework, addressing critical problems with the banking sector, developing an effective monetary anchor for the Authority's economic program, and reinforcing central bank independence.
The Managing Director is a making a number of public appearances this week. Yesterday he addressed the high level meeting of the UN Economic and Social Council, ECOSOC, on the role of the Fund in the IMF and the Global Economy, and a copy of his remarks is available on our website. On July 3rd, tomorrow, he will speak at a press conference at the Bundesbank at the invitation of Bundesbank President, Mr. Ernst Welteke and the International Club of Frankfurt Economic Correspondents. That is—I will be there—an on-the-record but embargoed press conference, but I'm sure your affiliates in Frankfurt are aware of that already. On July 4th he will speak on the IMF in the Process of Change before the U.K. Treasury Select Committee in the House of Commons in London. And on July 5th he will speak on Reform of the International Financial Architecture at the Central Bank Governors' Symposium at the Bank of England Conference Center. The July 4th and 5th remarks will also be posted on the Web.
Finally, you have seen a story in today's "Washington Post" about a discussion that took place at the World Bank last Friday between the IMF's Economic Counselor, Ken Rogoff and Joe Stiglitz, the Bank's former Chief Economist and now of Columbia University. I do not have any comments on the discussion which was on Mr. Stiglitz's new book, Globalization and its Discontents, partly because it was off the record and partly because I wasn't there. We are, however, posting a statement by Mr. Rogoff, on the book Globalization and its Discontents later this morning, and we will also be posting later this morning a speech that I gave on June the 13th to the MIT Washington Alumni Chapter, who had asked that the Fund respond to comments that Professor Stiglitz had made about the Fund at a previous meeting of the MIT Washington Alumni Chapter. So those comments will also be posted on the Web, I think around 10:30.
And with that, I am happy to take any questions that anyone may have.
QUESTION: Heather Scott of Market News. Can I ask the obvious question? Is the mission going to Argentina this week and what type of mission? What kind of discussions are they going to be having? Have they made progress towards starting formal negotiations?
MR. DAWSON: Well, this is a negotiating process. We expect a number of staff missions to go, so I don't think one should be focusing on the arrival of a particular mission. There is a great deal of work to be done. It's going to be done intensively, and I think the missions will be there on a more or less continuous basis for the coming weeks. So as specific missions go, I suspect either on the Buenos Aires end or on the end up here, there will be comments about whether it's an MAE mission or a fiscal mission or Western Hem mission, but we will, as usual, confirm those developments. But again, I do not focus on a particular mission. I think the fact is that the activity and the relationship is going to be going on at quite an intense level across the board.
QUESTION: Mark Egan with Reuters. You guys are certainly couching developments with Argentina as positive. And yet those of us who follow the situation, you know, looked at that statement. We saw the two legal issues that were resolved, but they had largely been resolved before. We saw—we had heard management say that they were pretty happy with them. They needed to look at the fine print, so they had assumed that those issues were going to be fine. You also said that the Minister, who was offering further progress on fiscal issues, he's been doing that for quite some time.
MR. DAWSON: I disagree with every one of your premises in that regard. We had in fact questions regarding both the issues in the legal area as to whether there were movements to repeal or otherwise nullify the changes in the laws. It is only recently that we were assured that those efforts were not proceeding and had a strong commitment from the government that they would be opposing them. Secondly, on the fiscal side, there were letters of intent, to use a paraphrase, that existed before. The indications from the Minister were on implementation agreements which are the details. So those were steps forward in each of those areas.
QUESTION: And the four areas that were pointed out as the major ones, have been, roughly speaking, of primary concern for quite some time. So we were wondering what substantively and specifically changed.
MR. DAWSON: Again, you're wrong about that. We had indicated those three areas were in fact what were needed to be able to go forward on the negotiating process. Those precise three areas have been satisfied exactly according to the fashion in which we've identified for probably a couple months now, at least 5 to 6 weeks.
QUESTION: The Minister also said on Saturday in a radio interview with Argentina that he was not interested in changing monetary products or foreign exchange products. And then the President on Sunday said that U.S. ignorance and a preference to giving money to the Middle East was his biggest hurdle. I wonder if you can respond to that?
MR. DAWSON: I have absolutely no response on that latter issue since it's not directed toward the Fund. The authorities understand fully that we have concerns on the monetary program, the need for it to develop an anchor, and we are pursuing that along with a number of other related issues, the banking sector and so on, that are going forward. That is the reason that—that's going to be the subject matter of the missions that go down, and I would also note what was noted in the statement, the Managing Director's statement on Friday as well, that we and the authorities are looking at a possible selection of an expert, group of experts, to advise on the monetary policy issues.
In that regard, to perhaps preempt a question that may be coming forward, yesterday I read that this idea was unprecedented and the initiative of the Argentines, and this morning—I read this in Argentine Press—that this idea was an idea of the Fund management opposed by the Fund staff. Now, it's hard to have both stories be true. Let me tell you the truth is indeed that it was a recommendation idea from the Fund management, and it is also not unprecedented. I would cite Indonesia in 2001 when there was an outside group of experts to handle much the same issue, headed by Don Brash I think the Governor of the Reserve Bank of New Zealand, along with Mr. Zahler, Governor of the Central Bank of Chile. So it is not an unusual or unprecedented step to go forward in this regard.
QUESTION: Do you know who's going to integrate this commission of experts?
MR. DAWSON: No, we do not have information as to who it would be. There's been quite a bit of speculation in the press, and in looking at least at those names, I'm reasonably certain that each of them is somebody that somebody has thought of, but to my knowledge—and I've asked quite recently—no decisions have been made.
QUESTION: Can I follow up? Who's going to choose them?
MR. DAWSON: I think it will be something that the authorities and we would work up mutually.
QUESTION: And a final one. What's going to happen with the payments that Argentina has to make to the Fund next month?
MR. DAWSON: The authorities indicated that they expect to exercise provisions under the Supplemental Reserve Facility which allow a postponement of one year on the original payments coming due, and I think we will deal with that issue when it comes forward. The SRF facility is designed precisely with that option in mind. And as I'm sure you're aware, we've already done that with regard to some payments.
QUESTION: Los Angeles Times. Can you say anything about the context of the discussion last Friday, who arranged the debate and who was invited and what the purposes was?
MR. DAWSON: It was an initiative that came in the most immediate sense from the Bank, in other words, that they were planning an event with Stiglitz, but they—but from the outset, at least as far as I can tell, they asked us to participate, and we agreed with that.
QUESTION: So it was a World Bank event?
MR. DAWSON: Yes. I mean it was open to all World Bank staff and Fund staff, as a matter of fact, and it's my understanding that it was video-streamed to the Bank staff on a live basis. We did not have that technical capability here but I the Fund staff have been able to look at it.
QUESTION: Were there any outsiders invited?
MR. DAWSON: I honestly do not know. I am aware that some press attended on an off-the-record basis. I don't know whether you consider yourselves outsiders or not.
QUESTION: Apparently from the description in the newspaper today, the discussion got rather heated, and there was a comment from a World Bank economist criticizing Rogoff for personal attacks. Has Mr. Rogoff had any comments with Mr. Stiglitz since then? Have there been any apologies or will there be any apologies?
MR. DAWSON: I can't imagine why there would be an apology. I would just suggest that you read the book, and if you want to know what personal attacks are, you will find a lot of them in the book, and I think the Fund has been remarkably restrained, as the Post article sort of gave us credit for this morning, in not responding previously. But a number of the comments in the book I think are absolutely outrageous, and some of Mr. Stiglitz's personal comments that he has made in promoting his book, I think are similarly outrageous.
I will just cite one from last week on WAMU on June 26th, the Diane Rehm Show, with Susan Page hosting it, in which Mr. Stiglitz essentially says that the Fund has promoted terrorism in Pakistan by cutting educational spending there. It's an absolute lie. He knows it, and I would expect he would apologize. We can make the transcript available. But those sorts of comments, I think it's not surprising that they get a response. Let me read his actual answer. The question was—the phone-in question had to do with, wouldn't it be a good idea to promote, quote, "American style schools in Pakistan?" And his answer was, "Thank you. I think there are two interesting points I want to raise. First, you are right that there are strong austerity programs that are often imposed by the Fund that have consequences that go beyond macroeconomics. In the case of Pakistan there were strong austerity. It means that they couldn't spend as much money on education, and that led to the fact that the public schools weren't there, and the children were sent to these Madrasa schools with obviously some severe consequences. That kind of severe austerity that the IMF pushed, I document interested context of the book."
First of all, there is no reference whatsoever to this issue in Pakistan in his book. Secondly, there is absolutely no evidence that we did in fact counsel cuts in social spending in Pakistan. In fact, I think our record is quite clear. In fact, I remember a Reuters story I think earlier this year that the headline was "IMF Pushes for Increased Social Spending in Pakistan." And then finally, at least I was told, according to World Bank statistics, these Madras schools account for seven-tenths of one percent of school enrollment.
QUESTION: Going back to this group of experts, I would like to know how do they work. What would be the outcome of their participation? MR. DAWSON: It's clearly advice for both the authorities as well as the Fund. This is part of our learning process and our openness to ideas. I note in the context of Argentina several months ago, we had a seminar of leading economists from around the world on advice on Argentina that came in and met with senior Fund staff. So this is part of a learning, getting advice. We don't think we have a monopoly on ideas, and it's to advise both parties.
I'll try to get you some information on the experience under Indonesia. That was simply an example. There have been other cases, sometimes more publicized, sometimes less publicized, of outside advisers assisting countries and the Fund, in the context particularly on monetary issues.
QUESTION: Did they advise to Mr. Singh?
MR. DAWSON: I believe Mr. Singh probably was involved at that point on the mission. He certainly was in the Asia Pacific Department at the time, yes. I mean there's a little confusion as to when the advice was. I recall some advisers as early as 2001. I think there were a number of times in the context of Indonesia in particular, where advisers came in. We will get you some more information on that. But as I say, it's not unusual for us to do that. In its own way it is a natural extension of technical assistance that we provide to countries, and quite often, technical assistance in the monetary area consists of former Central Bank Governors and senior staff going in and advising the authorities, and for that matter, advising the Fund.
QUESTION: Can we have a comment about the reaction from the staff?
MR. DAWSON: I checked that this morning. It is complete astonishment about that, because this is something that is accepted. The Fund staff actually look forward to getting the advice of these people. I mean we have regular training programs, seminars, outside experts coming in to talk on a wide range of subjects. So I think, frankly, that story, as far as I can tell, and I've talked to people involved, has absolutely no foundation.
QUESTION: Just to clarify, when is the next mission going to Buenos Aires and what specifically will it be dealing with? Could you set the date please?
MR. DAWSON: We have at least four subjects for missions plural, so I can't give you a particular date when they're going, but it is quite shortly, but there will be likely multiple missions there at a given point in time.
QUESTION: So this week then?
MR. DAWSON: I'm not sure how the holiday affects that, but certainly by next week. There might even be some mission people there now. I have no heard of anyone going over the weekend though.
QUESTION: How many people do you expect to be on this committee?
MR. DAWSON: On the advisers?
MR. DAWSON: I don't know. I honestly don't know. I mean, you know, one or more is all I can answer.
QUESTION: And if I can just follow up. Some people have cast this as a sign that there is a deadlock between the IMF and Argentina on the issues of which this committee will be discussing. How do you respond?
MR. DAWSON: Well, I'm not sure I would describe it as a deadlock. We have been very open about the idea that there are differences of views about how the monetary anchor can contribute to the stabilization and growth of the economy, and how the banking system can be made to be more functional. So I mean I'm not sure I would call that an impasse or a standoff, but there certainly are different views, and we and the authorities have been very open in discussing that.
QUESTION: I was interested in the point of the independence and the central bank, why this has become a so much important issue? Why did Köhler link it to the trust on the government, the importance that the central bank being independent. You could develop a little bit more that point.
QUESTION: I think our views on central bank independence are well known and they come up in a number of country contexts, so it is not a specific Argentine point in that regard, in that we do find central bank independence quite usually contributes to a sounder monetary policy, greater competence in economic policy generally, and while I'm sure the econometric studies are under way, I think our view is also it's likely to lead to better results, better performance results. So it's in that context that we mention that, but it is I think a general view of the Fund for which we are well known and for which occasionally we even have some critic saying that we put too much emphasis on that, but I don't think that's our view.
QUESTION: I have a follow up. You know there has been a discussion in Argentina about the immunity that the Central Bank President or Chairman and Directors have to have. Is this linked to that discussion also?
MR. DAWSON: I mean our views on central bank independence are far wider than just that particular issue. I am certainly aware of that issue. I suspect it fits under it, but that is—I don't think that recent issue over immunities would have led us to have this view on central bank independence. We have that with regard—as a view more generally. It's come up, for example, recently, in the context of countries such as Poland and Israel. I mean it is not a—it's an issue and a position which the Fund has well-established views.
I think the immunity fits under the panoply of the issue, but it is an issue that we feel strongly about, and so the issue of immunity or not immunity—is not what led us to take our position on central bank independence.
QUESTION: You mentioned last time that there's about a billion dollars left in the current program. What's the time length for consideration for the next disbursement?
And separately, is it fair to say that any expansion, augmentation or introduction of a new program for Brazil would have to await the formation of a new government at this point?
MR. DAWSON: I mean that's a hypothetical question.
Well, let me get on the first part of the question. That is the amount left, as I recall. The agreement expires toward the end of this calendar year, I think in October, unless I'm mistaken. And that is the timeframe over which the remaining money would be available. As we have indicated, the Brazilians' performance under the program has been very strong, very resolute, bold, and I think we have continued to have a high degree of confidence in the authorities' ability to manage their situation, and I don't have a sense of your hypothetical question becoming less than hypothetical.
QUESTION: Associated Press. And I have a question on Ecuador. The new Finance Minister visited the IMF last week. Do you have any update on the Ecuador situation?
MR. DAWSON: Sure. The new Minister, Minister Arosemana did in fact visit the Fund. He indicated that his main priorities were to take the necessary measures to bring the fiscal position back to a sustainable path, and to work towards reaching agreement with the Fund on a program that could be supported by us as well as providing for a smooth transition to the government that will emerge after the coming elections, which I think are in October. The authorities are now working to prepare the necessary measures so that a Fund mission could travel to Quito and we would let you know when we do have a date in that regard.
QUESTION: Mark Egan with Reuters. There was a little run on the banks in Paraguay on Friday. I wonder do you have any comment on the situation there or how concerned the IMF is?
MR. DAWSON: I mean I certainly know that we have been following developments in Paraguay quite closely. They obviously are affected by their large neighbor to the South, South and West I guess also. But I don't have any more details on Paraguay, and I think we could provide some guidance for you later on.
QUESTION: Another question on Argentina. The negotiations have been fairly tense, and the situation there is pretty tense. The press there has at various times labeled different people as the villain, including Mr. Singh and Ms. Krueger. This weekend the villain du jour was the Managing Director with members such as Ms. Krueger and Mr. Singh being interceding on Argentina's behalf as well as Paul O'Neill and even Alan Greenspan, according to the one report. Can you give us a feel for how the negotiations went? Was there this tension? Did these people intervene on behalf of Argentina with the Managing Director to sort of soften his stance?
MR. DAWSON: I was on the fringes of these meetings, and I saw the Minister a couple of times, and I sensed no tension. In fact I sensed progress, and I sensed quite a sense that the visit had been quite successful, and indeed the fact that the Minister extended his stay and they were able to work out a plan of action, I think was quite positive, and as I say, they stayed over and wound up having lunch on Friday, and agreeing on this course of action. So I don't think that's an accurate characterization, although I don't disagree that there does seem to be a villain du jour tendency in a number of these cases, but there's usually only one institutional villain.
That's it? Oh, Mr. Sitov, I'm sorry. I meant to call on you at the beginning.
QUESTION: Sure, the obligatory region of interest. I'm interested in two recent missions, one to Russia and one to Uzbekistan. In terms of Russia, the mission coincided with some spirited debate in Russia about the budget, so I'm interested in the views of the Fund on the new Russian budget, and the financial situation in general.
MR. DAWSON: On Russia, we did in fact have a staff team in Moscow from June 13th to the 25th to discuss the macro performance as well as the draft 2003 budget. The macro developments in 2002 are broadly in line with authorities' targets. Inflation has come down to 16 percent year on year and the authorities targets are 14 percent for the year end, seems attainable. In terms of the budgetary targets, I don't have great detail for you, but the overall expenditure limits seem not to have been increased relative to the overall budget, and revenues are certainly in line with projections I think overall. Prospects remain strong and the goals set forward for 2003, which would be inflation in the range of 10 to 12 percent, growth around 4½ percent, and a budget surplus of slightly less than 1 percent of GDP, all seem attainable. So I think it was considered—performance is considered to be continuing to be quite strong.
QUESTION: To stay with Russia for a moment, were there any signs that the capital is starting to return?
MR. DAWSON: There certainly are signs of the capital flight situation getting general. The question as to when the sign turns positive, negative and how you assess the, given the flows and given the ways the capital flight takes place, it's not like there's an entry item in the balance of payments that says capital flight. It appears in a number of guises. But certainly there are indications that increased confidence—there is increased confidence in the economy and that money is not flowing out in the fashion that it was, and indeed by many measures it is returning.
With regard to Uzbekistan, we have a staff monitored program which is trying to establish something of a track record that would allow a program to go forward in the future. We could give you some more information on that, but that is basically where we are, with a staff monitoring program. The purpose of that is, in cases such as Uzbekistan, to try to establish a track record that might then provide for a program that could include the financial support.
QUESTION: But the program was concluded prior to the mission, right? Did you decide on a new one?
MR. DAWSON: No. We are still assessing, and we will basically have to see if it was fully implemented basically.
QUESTION: So the assessment is not yet over?
MR. DAWSON: Correct.
QUESTION: And I'm sorry, but to stay with Russia for just a little bit more, I have had two people, one from the World Bank, one from the Russian Government, tell me in recent weeks that they see the signs of—encouraging signs of capital returning. I'm sure the Fund's people looked into that.
MR. DAWSON: I think we don't disagree with that. I mean clearly capital flight is an important indicator of confidence in an economy, success of reform programs. And it is quite clear that the net capital outflows have been reduced. The question was sort of—I think your question was more has it been reversed, and I don't think that we quite have that evidence, but clearly it is far lower than it was previously, and this is a very positive sign. That's not optimistic enough for you?
QUESTION: No, it's not a matter of optimism. What I am trying to see is if there is a pattern here that the Fund normally has for such situations. For instance, the Bank person was saying that you need to have your own money come back before you can expect any major international investment happening.
MR. DAWSON: That's true.
QUESTION: But that seems to be a little different.
MR. DAWSON: No. That's absolutely right. I think it is entirely consistent with what I said. It is the indication of people's confidence is when domestic money comes back.
QUESTION: Right. And the situation that we see now, does that bear out this general scenario or is it different from this general scenario?
MR. DAWSON: I think it bears out the general scenario. I'm not sure what the distinction is. We agree. We agree completely.
Two last questions, back here and then here.
QUESTION: I believe it was about a month ago that Mr. Köhler suggested that a loan agreement for Argentina could be reached by the end of July. I would assume with all of these multiple missions, that timetable has slipped?
MR. DAWSON: We are working as urgently and quickly as possible. We have not set a deadline. He was in fact responding to a question, is it possible that it be reached by the end of July, and almost anything is possible, and certainly at that point it was possible. But the progress has not clearly been as rapid as we had expected and hoped for, but I think we now have some new momentum with the authorities, and we are going forward in that. But I am not going to be predicting a particular date for you at this point, but we are entering into a period of every activity and we're hopeful that it will be done as quickly as possible, and we are—there is no shortage of resources being devoted to this.
QUESTION: Some experts are speaking about the danger of a financial crisis in Latin America. Do you still think there is no contagion at all, on Uruguay, maybe Paraguay?
MR. DAWSON: The markets are nervous. There is no doubt about it. But the contagion is word that is viewed, for example, in the context of 1998 and what happened globally between regions, for example. We don't see any indication of that at this point. Markets are certainly nervous. Uruguay is perhaps the most obvious example, Paraguay as well. There is no doubt that at times markets have sympathy spill overs from country to country and indeed from region to region, but we do not see this as a contagion in the sense of which that phrase has been used in recent history. And we think that markets do in fact differentiate quite strongly among countries, and the fundamental judgments that markets are making about countries, and if we deal with the Latin American region, I made this point the last time, and I will repeat it, is markets fundamentally are judging the prospects and the performance and the policies interested individual countries. And I think the markets' judgments of what goes on in Brazil are fundamentally based on Brazilian policy and performance. Similarly, Mexico, Chile, the others.
In the case of Uruguay, which you cited in your question, clearly is an example where there is an element of contagion. There is no doubt about that, but I think the word "contagion" has a meaning from the sort of 1998 time period, and we do not see that at this point.
Thank you very much. We will lift the embargo at 20 minutes after 10:00.
[Whereupon, the press briefing was concluded.]
IMF EXTERNAL RELATIONS DEPARTMENT