Thomas C. Dawson
Thomas C. Dawson

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Argentina and the IMF

Brazil and the IMF

Iraq and the IMF

Turkey and the IMF

What does it mean?
Arrears

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Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations, International Monetary Fund
Wednesday, September 10, 2003
Washington, D.C.

View this press briefing using Media Player.

MR. DAWSON: Good morning, everyone. I am Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings.

Before I take questions, I have a number of points I would like to make. First of all, I would like to update you on the upcoming press events. As I indicated, formally, at 11:30 this morning, we will release the annual report. Tomorrow morning, at 8 a.m., there will be a WEO press conference call with Mr. Rogoff on the analytical chapters of the World Economic Outlook. That is Chapters 2 and 3, and that will be an embargoed briefing, with the embargo lifting at 2 p.m. tomorrow afternoon.

I will note that next Tuesday, September 16th, at 6 p.m.—these are Washington times--the WEO Chapter 1 will be available on a password-protected Fund website, embargoed until September 18th at 10 a.m. Dubai time; Wednesday, the 17th, at 9 o'clock in Dubai, the opening of the Annual Meetings press room; and on Thursday, the 18th, 10 a.m. Dubai time, we will have the WEO press conference, and at that point, the embargo on Chapter 1 will be lifted. And at 3 o'clock that same day, Thursday, the 18th, we will have an Arabic language WEO briefing as well.

A couple of other points I would like to make. I am sad to report that Shige Sugisaki has decided to retire from the Fund effective in early 2004. We have a press Release (see Press Release No. 03/153) that we made available to you in that regard. Mr. Sugisaki joined the IMF in August 1994 as an Advisor to the Managing Director, and has been Deputy Managing Director and has chosen to retire and return to Japan for personal reasons.

We are very sad to see Shige leave. He has been a stalwart in the institution, not only with his responsibilities on country issues, but also having had responsibility for personnel and administrative matters in the institution, and we will all miss him very, very much. And as I indicated, we do have a release with comments both from Shige and from the Managing Director, which are available to you.

I suspect that people are interested in the status of negotiations with Argentina, so I thought perhaps I might quickly give a summary of where we are.

The Fund staff mission in Buenos Aires is continuing negotiations with the Argentine authorities. When we have further to announce on the outcome or status of these discussions, we will let you know, as I think we have established a track record on. And I can confirm, if you wish to ask, that Argentina did not make the payment yesterday that was due to the Fund.

Now, I will be happy to take your questions.

QUESTIONER: The United States is finalizing its long plan for Turkey. How would the American assistance affect Turkey's economy? Is the IMF in coordination with the U.S. Treasury on this matter? And do you have comments on the latest developments about the Turkish economy?

MR. DAWSON: To take your last question first. The program remains on track. The next review mission is likely to take place toward the end of this month or the beginning of October.

As far as the developments, in terms of the U.S. assistance for Turkey, as I have indicated, in response to previous questions, we certainly have always been aware of this assistance and factored into the program that is developed, but I think I would leave it at that. And questions about the bilateral program, of course, are best directed toward the U.S. Treasury.

A follow-up? Sure.

QUESTIONER: Yesterday, the Bush administration yesterday informed Congress that they are ready to go ahead with the $8.5 billion. And the letter sent to Congress by the State Department says that they are doing this to support the Turkish economic program. So there is a link between IMF, of course.

So can you give us the sense of—

MR. DAWSON: I have indicated from the beginning the there is, indeed, a link, yes. We are certainly aware of the bilateral assistance, and it has been a factor as the program has been designed, and the strong implementation of the program has been welcome. And I would leave it at that.

QUESTIONER: On Argentina, the Argentineans have stated that they are very close to an agreement with the IMF. Can you say what the status is at the moment.

MR. DAWSON: Negotiations are continuing. I am not certain whether there are meetings going on at this precise moment, but I know that discussions continued late into the day yesterday. And I spoke with Anoop Singh, who is up here, in contact with the mission this morning, and discussions are, in fact, continuing. And as soon as we have an announcement or a statement from this end, you will hear it.

I suspect, you know, it is more likely you may hear something from the Argentine end first, and you will call us for confirmation. And if we can make any comments on it, on the state, at that point, we will. As I say, they are in active discussions, and it would not surprise me if we have something to say today.

QUESTIONER: I was just wondering because the Argentineans seem to be kind of playing down the importance of the fact that they missed yesterday's deadline, and I was wondering how the IMF takes it.

MR. DAWSON: Well, certainly not making a payment deadline is regrettable, and countries are encouraged, certainly, and expected to be current on payments, but we have understood the difficult situation and difficult negotiations going on, and we are hoping that those can be resolved promptly.

But I think the important thing is to get this resolved, if we possibly can, collaboratively with the authorities, and that is the basis on which the mission is working.

QUESTIONER: [Off microphone.] —on the debt payment or—

MR. DAWSON: A further announcement of the state of play, I cannot, I do not know what the announcement will be on. I am just saying that, since, there are active discussions going on, it is perfectly reasonable to expect that we may have something to say.

QUESTIONER: Can you say if there's been any progress on overcoming the differences on the three remaining issues that both the IMF and Argentineans mentioned?

MR. DAWSON: I do not wish to go into details on a negotiation that is ongoing. And, indeed, I would not, I just want to make it clear, I do not necessarily accept a premise that there is any particular number of unresolved issues.

QUESTIONER: [Off microphone.] [Inaudible.]

MR. DAWSON: Not yet. waiting to trap me.

[Laughter.]

QUESTIONER: I was wondering, this nonpayment, and if it just extends itself into time, what would the IMF have to do to compensate? Would it have to raise its interest rates? Would it have to go back to the countries to ask for more money? I am asking this because from last year's annual report numbers, this current nonpayment seems to at least equal the total amount due to the IMF by the seven previous countries that were in arrears. So it seems to be a big payment. What would be the impact?

MR. DAWSON: Well, I think, first of all, there is a hypothetical element to your question because we certainly hope that this would be resolved promptly. I would note that there is an established procedure in the case of countries that do fall into arrears with the Fund, and I would direct you to Financial Organization and Operations of the IMF, Pamphlet Series No. 45, Sixth Edition, on Pages 162, 163, Box 5.2—measures for the deterrence of overdue financial obligations to the Fund, IMF, time tables of procedures.

And then with regard to the issue of the financial impact, we also have information publicly available on what that status would be. But as I indicated, we are hopeful that this would be resolved quite soon.

QUESTIONER: Is the IMF waiting for the U.N. resolution before giving aid to Iraq?

MR. DAWSON: We are involved in working with dealing with the problems facing Iraq, in particular, I think the task or the event that we are working toward, most importantly, is the Donors' Conference that will be taking place next month. And as I have indicated in response to previous questions, our work on Iraq, at this point, is not constrained by any of the issues, such as a U.N. resolution, and we are able to go forward in that fashion with the sort of work that we are doing.

I should also note that all of our staff members, who were injured in the blast, have returned to Washington, and we are grateful for that.

QUESTIONER: Tom, according to that list of procedures, which you have referred me in the last week, you would send Argentina a cable at that stage, but obviously an e-mail or some kind of notice saying that they are in arrears. It would also start the process of I think probably yesterday would have cut off any kind of financing or any further funding or resources of IMF resources to Argentina. Does that apply to Argentina now or have those been waived until an agreement is reached?

MR. DAWSON: No, the procedures outlined under Box 5.2 do apply.

QUESTIONER: So you definitely did send them a notice.

MR. DAWSON: I mean, we have been in contact with them.

QUESTIONER: You have officially notified them?

MR. DAWSON: I note that the "immediately" section also notes about contacts through the Office of the Executive Director, and I, personally, am aware of that, but we certainly have been in touch with the authorities. I think actually my understanding is that the time of the notification sent is actually the opening of business the next day. In other words, I believe it would have been 9 a.m. this morning.

QUESTIONER: As I understand it, you notify them, but it takes a month before you take this to the Executive Board. So, essentially, they are not in a default for a month; is that correct?

MR. DAWSON: No. I would refer you, once again, to Box 5.2, which specifies—

QUESTIONER: Well, Tom, I know you do not want to say the words in your mouth—

MR. DAWSON: No, but trying to use—

QUESTIONER: —but we do not have—

MR. DAWSON: Yeah, you are trying to put words—

QUESTIONER: Why don't you tell us what it means.

MR. DAWSON: It goes on for almost a page-and-a-half, but there are notifications that are made and determinations that are made and determinations that are made in the established time periods, and I do not wish to use words that are not contained in the decision and the procedures.

QUESTIONER: And so is my reading of it correct, that it will be a month before the Executive Board gets this issue?

MR. DAWSON: In the sense of the procedures to be followed under Box 5.2 and the arrears policy, that is correct. On the other hand, I can assure you the Executive Board will be discussing this issue before then.

QUESTIONER: Why?

MR. DAWSON: Because it is an important issue and an important issue in terms of the status of discussions with the authorities on the program itself, but there are, we have discussions on the policy issues with the country, as well as on the arrears issue. And while there are requirements and procedures on the determinations under arrears, this is a situation where the Board is constantly kept briefed on the status of the state of play in the context of Argentina.

I repeat, this Box 5.2 is available on the web and is quite clear in terms of what the steps are. By the way, we certainly would hope we do not get to those next steps. I mean, we are still on day one, and we are hopeful that this will be resolved soon.

QUESTIONER: I read very well all of the instructions, and I know the procedure, but there is a question. Are we in default or not? Officially, is Argentina in default today, yes or no?

MR. DAWSON: They have not made the payment. You have to define the concept of default for me and tell me how you relate it to the articles. Their payment is overdue. That is correct. They did not make the payment. I made that statement at the beginning. We are hopeful, however, as I indicated, that this will be resolved soon.

QUESTIONER: I have two questions. One is on Box 5.2, but the first one is does an—is it fair to say that "default" is a synonym for "overdue payment"?

MR. DAWSON: No. No, it actually is not. There have been many cases where countries have missed payments, for a variety of reasons, and made them up thereafter. And so, no, I do not think it is.

QUESTIONER: At what point does a missed payment turn into a default?

MR. DAWSON: Again, we have our own description and issues of what constitutes overdue arrears, when countries lose certain rights and privileges within the institution, which are elaborated there.

Again, there is an element of finality when you talk about default. It is quite clear we are not in a final situation at this point, and, indeed, we have had a history in this institution of a number of countries that have run into difficulty in terms of repayments, and the vast majority of them have, in fact, come out of that situation—sometimes rather quickly, sometimes after a prolonged period. As I will repeat again, we are hopeful this will be resolved quite soon.

QUESTIONER: How do you determine the element of finality? Is that just when you get to a point of hopelessness?

MR. DAWSON: No, no. There are various stages here, and you can see that Box 5.2 goes on to an up to 24 month period, and even, indeed, that point is a decision of the Board which sometimes has taken even longer. It is case-by-case. We are not a rigid, inflexible institution.

QUESTIONER: And the last is that, in Box 5.2, it says at one month that is when the Managing Director notifies the Executive Board, and I was wondering how you defined one month. Is it 30 days? Is it four weeks from the date? Is it the same date the next month?

MR. DAWSON: I believe it is the same day of the next month.

QUESTIONER: Is the IMF disappointed? I mean, you have been—

MR. DAWSON: Yes, I indicated that, indeed, it is regrettable that the payment was not made, but we are trying to work closely with the authorities to get this issue resolved.

QUESTIONER: I mean, you have been negotiating this for a long time, and you know it must be frustrating for your staff.

[Laughter.]

MR. DAWSON: We have a dedicated staff that are working very hard, and collaboratively, I should add, with the Argentine authorities trying to resolve this promptly.

I think we are running out of questions on this fairly soon.

QUESTIONER: You are saying that the IMF is expecting to reach agreement soon with Argentina.

MR. DAWSON: I said we are hoping to reach agreement soon.

QUESTIONER: Okay. Do you mean it would be before, between or after Dubai, and could it be possible that the Board treat this case in Dubai?

MR. DAWSON: I have already discussed actually that question. We are hopeful it will be done in the very near future. I mean, I indicated we might hopefully have an announcement in the next day or two. So I think as soon as possible. So I do not think before, during or after is really, you know, obviously, we would like to resolve it before, but the negotiators are working intensively.

QUESTIONER: Is it a possibility, technical possibility, that the Board could treat this case in Dubai—

MR. DAWSON: I do not know about treating this case is. We are trying to reach an agreement, in terms of negotiations. That is necessary before we talk about Board meetings, Board meetings in terms of a program or whatever.

In terms of briefing the Board, as I indicated, I expect we will be doing it on a regular basis.

QUESTIONER: You said that, hopefully, we are going to have an announcement in the next day or two. I just wanted to confirm—

MR. DAWSON: No, I have indicated, you know, when we have something, that they are negotiating as we speak. When we have something, you know, we will let you know promptly. My suspicion is you may hear something out of Buenos Aires first just because that is where the negotiations are taking place, and we are hopeful that it can be resolved quickly.

QUESTIONER: A question now regarding who is, can you just, I mean, is this just the mission, Thornton is negotiating directly—

MR. DAWSON: John Dodsworth is actually the head of the mission.

QUESTIONER: Right. I am sorry, Dodsworth. But is Krueger involved, Kohler—

MR. DAWSON: She is in Cancun at the WTO—

QUESTIONER: What kind of—

MR. DAWSON: Management, of course, is following this closely, but the negotiations are taking place in Buenos Aires, headed by John Dodsworth, with John Thornton there as well.

QUESTIONER: Can you tell us, for the IMF, which were the main obstacles?

MR. DAWSON: I have already indicated I cannot. It would be inappropriate for me to discuss negotiations that are going on.

QUESTIONER: First, this is unprecedented that a country, a medium-size economy like Argentina, reached that stage, and obviously it affects the IMF. It has to affect the IMF. And I wanted you to reflect on that fact.

Second, are you in communications on this fact with the IDB and the World Bank? I understand that there is nothing in their laws that prevents them from continuing the disbursement to Argentina, but that the orientation is that they will disburse from now on only in the context of resolution of this issue.

MR. DAWSON: On the first part of your question, as I indicated, we are working hard with the authorities to try to reach an agreement, and we hope that that can be done soon.

On the part, the aspect of your second question that deals with the policies of the other two institutions, those were of course best directed toward them. In terms of whether we have, indeed, whether we have been in contact with those institutions, we are, in fact, in contact with them on a continuing basis.

QUESTIONER: Do you expect Argentina to pay before the announcement of agreement?

MR. DAWSON: I think that is a question to direct toward the authorities. The authorities made a statement. I believe I saw a text of it last night, and it is repeated in the press this morning. And we obviously would welcome payment, but we are also involved in discussing the program and trying to get that resolved.

QUESTIONER: Has there ever been a case where the IMF has extended the payment date to a country which was either at the brink of arriving to an accord or in difficulties as you have described?

MR. DAWSON: I am not aware of that, no.

QUESTIONER: Tom, has the date, you said that the Board could meet sooner than that one-month time line. Is there a date yet?

MR. DAWSON: What I indicated was that the Board is regularly being briefed on the situation in Argentina and that I am sure that the next time it is discussed in the Board the issue of the overdue payments will be discussed. That is slightly distinct from the requirements under Box 5.2.

And then in answer to your question of whether a briefing of the Board, which are typically informal sessions, has been set, the answer is, no.

QUESTIONER: On Box 5.2 again, just something I did not quite understand in the procedures. The very first thing I think it says is that all resources are disbursement of resources is suspended and no requests are made of the Board for new resources.

But then lower down, maybe at the two-month mark, it says another item where resources are suspended or a country is no longer allowed access to resources. I am not sure I understand the difference between the two. Then, there is another section on SDR.

MR. DAWSON: One is that, in terms of things being brought to the Board, it is the first one, the second one is actually a Board determination, and so I guess I would call it a strengthening of the first, but I think it is reasonably clear there.

QUESTIONER: I think the second, the very first thing or the second bullet there says, "Access to resources is suspended." But lower down it says it again, in a very similar format. Are you talking about the same thing or are there other types of resources that they are denied access to?

MR. DAWSON: One has to do with a decision by the Board, and the other one has to do with what may be placed before the Board. So, I mean, one is a decision by management, in a sense, and the other one is a decision by the Board. I mean, one is a strengthening of the other.

But, as I say, we are very hopeful this is not going to be the case.

QUESTIONER: No, but the fact is that you have procedures and a deadline has been breached, and there is—

MR. DAWSON: Well, the first step—

QUESTIONER: —of the deadline.

MR. DAWSON: Right. So that quite a detailed process has been initiated, yes.

QUESTIONER: Yes. And under that process, if I read it well yesterday, it says that first you pay, technically, first you pay, and then we do the rest. Isn't that what—

MR. DAWSON: You mean in terms of a member, yes, that is correct.

QUESTIONER: Yes. First, you pay, and then we talk, technically.

MR. DAWSON: No. No, not talk, no. No, talking can continue at any point. That is absolutely not the case.

QUESTIONER: No, no, no, but—

QUESTIONER: [Off microphone.] [Inaudible.]

MR. DAWSON: The Board cannot approve something.

QUESTIONER: Before a payment.

MR. DAWSON: That is correct.

QUESTIONER: [Off microphone.] [Inaudible.]

MR. DAWSON: Yes, we would be hopeful there would be an agreement, and then—a successful conclusion to the negotiations, and then we go forward.

QUESTIONER: What I mean is does Argentina have to pay before the Managing Director announces publicly that this is going to go to the Board?

MR. DAWSON: No, and it is quite clear it does not. There is no such—I mean, Box 5.2 is very, very clear.

QUESTIONER: [Off microphone.] [Inaudible.]

MR. DAWSON: The approval, right.

I think let us cut off Argentina questions. If you have anything else, because I think I have given the same answer about 12 times so far.

QUESTIONER: [Off microphone.] [Inaudible.]

[Laughter.]

QUESTIONER: It is not Argentina. As far as Iraq is concerned, you said the IMF is focusing on the Donors' Conference in October.

MR. DAWSON: Right. I think there was a prepatory meeting this week as well, as I recall.

QUESTIONER: Right. Can you describe shortly what is the scope of the IMF regarding this subject? Obviously, the U.S. Government says the international institutions should play a very large role. Could you describe it shortly—technical assistance, money, what preconditions?

MR. DAWSON: I do not know of nay preconditions. We certainly are playing the role that was envisaged in our institution's establishment and in other post-conflict situations. And the Donors' Conference is focusing on what the needs of Iraq are in both financial and, to use your phrase, technical assistance terms.

Also, an element of that is an assessment of the debt situation from the previous regime, and those are all the sorts of elements that are we helping contribute to. So it is a part of the process where I think our role is reasonably well established, and as I indicated, there have been some other post-conflict situations in recent years that could be a model of the kind of assistance that we are providing.

QUESTIONER: Model?

MR. DAWSON: I mean, in terms of helping work with both existing and new institutions, whether it is the revenue side, central banking, tax administration, public expenditure management. Those are the sorts of issues that we typically help governments establish governments, but also a newly established government in preparing to establish the essential functions of a government.

QUESTIONER: Tom, has any decision been made on if to deploy more staff into Baghdad after the workers have been brought out?

MR. DAWSON: No, it is my understanding that at this point the work is being done largely from headquarters, although people are, of course, traveling to interested capitals for meetings and so on.

QUESTIONER: I would like to know if the possibility of a new deal with Brazil will be discussed in Dubai.

MR. DAWSON: I mean, I have not seen the schedule of bilateral meetings, but I am sure there will be a meeting with the authorities from Brazil. But I do not have more than that, and I think that is probably best directed toward the authorities.

QUESTIONER: To follow up on that, in the sense that the Annual Report indicates that the agreement with Brazil was the biggest in the history of the IMF, if the IMF is preparing itself for something of this magnitude or even bigger for the next one, if there is a next one?

MR. DAWSON: We have indicated, clearly, that the Brazilian authorities and we are in a close discussion and the issue of what sort of continuing relationship there would be with Brazil afterwards is an issue that we are happy to discuss with the Brazilian authorities, and the Brazilian authorities will indicate to us what their preference are, and we will try to work with them.

As I have indicated before, the program has been quite successfully, strongly implemented, and we look forward to working with the authorities to see that the way in which we can be of most assistance going forward, but that is very much the initiative and the desires. We are listening to what the authorities are interested in.

Thank you very much.




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