Thomas C. Dawson
Thomas C. Dawson


Bolivia and the IMF

Brazil and the IMF

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Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund

Thursday, October 23, 2003
Washington, D.C.

View this press briefing using Media Player.

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

One brief announcement and then a couple of other notes for you. The announcement is that we have just posted on our external website a Guide for Staff Relations with Civil Society Organizations, whose purpose is to provide staff with a framework for good practices in their interaction with civil society, especially at the country operational level. It was drafted with the assistance of Professor Jan Art Scholte of Warwick University in the United Kingdom as well as Fund staff and reflects detailed consultation with civil society representatives.

The guide is not a final document. It is, in fact, a living document, and we expect that it will change over time in light of comments and evolving experience and evolving practice. And we do welcome comments and have established a mailbox for purposes of receiving them electronically.

I would also note that the Managing Director is in Madrid for the Iraq Donors' Conference. He will be addressing the conference tomorrow. I expect to have a statement that he delivers that will be available at that time.

Also, for your guidance, I expect there may be an announcement about the formal Constitution of the Monitoring Board for Iraq, and assuming that happens as we expect, either later today or tomorrow, we will have a joint statement that we will be releasing from here as well.

Now I would like to open the floor to questions.

QUESTION: I was just wondering if you could bring us up-to-date on this issue of how some social investment and infrastructure investment is putting in the fiscal accounting. I understand that there is some kind of a commission that has been looking into this. Have they reached any kind of conclusion? When could a conclusion be reached?

MR. DAWSON: Well, I certainly would not expect that a one-size-fits-all solution will be proposed. Clearly, it is important to support essential infrastructure, social spending, and it is important to have a fiscal framework that allows analysis to take place and trade-offs to take place. That is the context in which the broad question is being looked at.

It is also being dealt with, which is our responsibility not just to theorize but to actually work, is to work on individual country programs. And so I think you can see this being developed both in terms of budget as well as allowance in a kind of contingent fashion for spending as individual programs develop. And I think as you see programs going forward, you will see, as we have said from the beginning, we do make allowance and understanding for the necessary level both of infrastructure and of social spending so that countries can both stabilize and get on to a growth path.

Ultimately, it all has to be dealt with in the fundamental framework of being financeable. When countries run into difficulty it is because they cannot finance, and it is our effort to help make countries get onto a more stable basis so that they can meet the legitimate needs of their people and their societies, both on the social side as well as the infrastructure that is necessary for investment and growth, because it is growth that is going to be the main way of lifting people and countries out of their problems.

QUESTION: On the same issue, are there examples of this that you just mentioned in specific programs where there were allowances made, for instance, for some types of investment that were accounted in a different way because of those concerns that you mentioned? And will the programs in the future in that regard look--make them look different from programs in the past?

MR. DAWSON: Well, I think the way we have traditionally looked at this is that you have a budget, and setting up earmarkings in budget is generally considered a difficult issue in fiscal policy. I think the way to look at it is to look at programs and look at the line items, whether going forward there will be cases where some expenditures are taken to a different point or out point, that is a presentational issue.

Ultimately, we have to look at and countries have to look at and markets look at how the entire package is financed. At times, having a separate earmarking might improve clarity, but it also has to be clear that it is not a substitute--it is not a way of getting around what are effective binding budget constraints. And countries have the ability--and countries establish their own priorities, and the Fund works to support them.

So, again, I would say look in the budgets, see what the spending is, see how it compares to what it might have been otherwise and so on, and that it varies case by case by case, which means country by country by country.

QUESTION: Is that an evolution in the thinking of the IMF? Or has the IMF always been like that? I do not remember hearing this.

MR. DAWSON: Well, I am pretty old, but I cannot tell you that, you know--that, you know, it did or did not appear a certain way. I think certainly the image of the Fund has not always been one of explicitly, as much as it should have in the past, acknowledging needs for certain types of spending. I think certainly in the four and a half years--time flies when you are having fun--that I have been back, this has been consistent that we have been doing that, making it clear. I think we are doing it increasingly. So it is an evolutionary pattern. At some point the evolution may have been so early that as compared to then it would be revolutionary, but at least in my memory, which is still reasonably good, I would call it evolutionary, not revolutionary.

QUESTION: Do you think that the Brazilian position of the FTAA negotiations can harm the new agreement with the IMF? And how do you see the position of the country in the future if it gets out of the FTAA agreement?

MR. DAWSON: I do not think that there is a Fund role on trade issues in this particular context of FTAA, I do not think it is appropriate for me to be making comments. It is not our responsibility.

In terms of what was the tail end of the first part of your question, which is the Fund's negotiations or discussions with the Brazilian authorities on the current program and the way forward, that is, in fact, proceeding. There will be a mission going to Brazil shortly for the fifth review of the program. As I have indicated in previous sessions, the program is performing very well. I think even for the optimists like me, it has exceeded expectations. And I think that augurs well for the future, and the mission, as I say, will be going down shortly. And they will be discussing with the authorities the way forward, and I think--and I have discussed in the past, you know, that basically we look forward to working with the authorities in terms of what kind of relationship they wish to have with the Fund after the conclusion of this agreement at the end of the year. And I believe the Brazilian authorities have put some comments out in that regard. I think Joaquim Levy had some comments out in that regard, and I would direct you toward them.

QUESTION: I have two questions. The first one is on Bolivia and the second on Paraguay.

On Bolivia, some leaders of the opposition movement have put part of the responsibility of the Bolivian--current Bolivian crisis on the IMF conditions for a program. The question is: Are you planning to review the program or are you planning for getting into a new deal with Bolivia with the new government of Bolivia?

And the question on Paraguay is if the IMF is holding current negotiations with the government.

MR. DAWSON: Again, I think I would take the second question first since that will be the shortest answer. We do currently have a mission in Asuncion which is conducting negotiations on a program that could be supported by a stand-by arrangement. The discussions are advancing well, but it is too early to say whether an agreement ad referendum will be reached during this particular mission. And I would expect that the mission would have some sort of a concluding statement when it finishes its work in Asuncion.

With regard to Bolivia, we are all aware of the recent tragic events in El Alto in Bolivia. We reaffirm our commitment to Bolivia in this--first, I would like to note we do look forward to working with the new President, Carlos Mesa, and his cabinet. We are in close contact with the authorities and including through our resident representative in La Paz. We will continue to follow a flexible approach that takes into account the country's social needs and constraints. And there is a framework in place for continuing Fund assistance in the context of the current stand-by.

I repeat, we have followed a flexible approach in supporting Bolivia which recognizes the difficult circumstances. For example, the current stand-by arrangement targets the protection of pro-poor and basic infrastructure spending by a gradual fiscal adjustment while restoring a sustainable fiscal situation. Recall that the budget deficit was at a level that I think raised questions of sustainability, and obviously things have gotten even more difficult.

The program has tried to concentrate on sequenced structural reforms to lay the basis for a more sustained growth and poverty reduction. And there is room certainly for additional initiatives aimed at enhancing growth and generating resources for pro-poor spending. So we think we have been trying to follow that approach. We look forward with the new government to try to continue that approach.

QUESTION: A question on Italy. Is the Article IV for Italy still scheduled for the 7th of November, or does the IMF need additional information because of the changes of the financial law and the pension reform?

MR. DAWSON: We are not quite at a point to give a precise date, but I believe I gave you my best-guess estimate at the last briefing, and that estimate still stands. So that is all I can leave you on that. And I am glad you did not ask me any more questions about Italian pension reform. We received a record number of phone calls from Italy after my last briefing.

QUESTION: What mandate has Horst Kohler gone to Madrid with? And has he gone with a figure or any kind of idea for lending?

MR. DAWSON: The Managing Director certainly has consulted and discussed with the Executive Board the way forward in terms of the Fund assisting Iraq. And he has, I think it is fair to say, the support of the institution, including the Board.

In terms of what he will say, I think I will let him say what he will say, which will be less than 24 hours from now.

QUESTION: But does it include any kind of lending--

MR. DAWSON: Let us just wait. I mean, I do not think it is appropriate for me, it is not career-enhancing either, for me to release his speech early.

QUESTION: Just to follow up on the question of the social and infrastructure investments. How will be displayed the primary surplus targets? And how will it be expressed in the agreements that will--

MR. DAWSON: You will see it in each program. There are sort of two parts to the issue. There is the more conceptual general review, which is what I think the first question was, and there are a number of efforts going on to try to take a look at this issue to see how it should be accounted for and so on. That is one. And that process will be going forward. There have been various conferences and so on, on that subject.

The proof that is in the pudding will be when you see actual agreements and how they go forward and how you see the treatment--and when I say treatment, I include especially the level of this sort of spending.

Again, ultimately, it does not do much--I mean, if you change the definition of the primary surplus or you have primary surplus X, Y category of spending, that does not change the fact that it still has to be financed. It may make sense for some reasons, for a variety of purposes, to have line items that are identified that way. But ultimately the question that still has to be addressed is what is financeable. And that is something that we spent a great deal of time on, on financeability, but as well as what the levels of spending are that are necessary, whether it is in the area of social spending or infrastructure. I mean, spending takes place in a competition for resources. That is a fact of life. Economics is about scarce resources.

QUESTION: Are you planning to put on the web the Board agenda?

MR. DAWSON: Right. Very shortly. We are trying to figure out how to do it. As I indicated, I mean, we already do some of that in terms of the broad policy issues because the work program comes out and gives you a sense of when they are, and we are happy to, on an informal basis, let you know on those sorts of issues. Precisely how we implement the country-oriented discussions, we are still trying to figure out exactly how we do it.

At the moment, for example, we circulate a daily--or the day before, I guess, really, report to the Board as to what is going to be on the next day. I am sure you are interested in that, but you would like to have a little bit perhaps of a longer perspective, and that is what we are trying to figure out just how to--

QUESTION: John Taylor said yesterday that you should have a lending program to Iraq by the end of next year [inaudible].

MR. DAWSON: The Managing Director will be giving his presentation to the Donors' Conference tomorrow, and I think those questions will be answered then.

QUESTION: On Bolivia, first, do you think that the strength that the opposition has gained endangers the program with the IMF?

And on Brazil, another question. Do you envision a precautionary agreement with Brazil?

MR. DAWSON: On the latter, as I think I indicated before and briefly repeated earlier, you know, we are in discussions with the Brazilian authorities. The Brazilian authorities, will present to us their views as to how they wish to go forward, and we will see how we can support them. I think it is premature at this point for me to comment on that, but clearly that is under discussion.

In terms of the difficult situation facing Bolivia, clearly it is difficult. However, I would note, that a constitutional process has gone on, a change of government, a new government, new cabinet that has been constituted. We look forward, as part of a general international effort, to working with the new government.

The difficulties in Bolivia are real. I would note, as perhaps some others have not given proper or appropriate recognition to, that, in fact, progress over the years has been made in Bolivia. And at times, when difficulties like this come up, people think about only the difficulties, as serious as they are.

We are working with the new authorities to see how we can assist them, along with other institutions, in this extremely difficult time.

QUESTION: On Bolivia, do you know when the next review is coming up? And would that review kind of be set back by--

MR. DAWSON: I think the next step would be a Fund mission to Bolivia. I am not in a position to indicate to you when that will be, and we normally do not indicate precise dates of missions. But I think that would be the next step to expect.

QUESTION: Just a simple question on Iraq that gives you a chance to give a career-enhancing answer. Is it so that--


MR. DAWSON: I am at a point in my career that I am not sure enhancing is what I am interested in. It is a graceful exit. But go ahead.

QUESTION: Is it so that after last week's UN decision there are no restrictions for the IMF to operate in Iraq?

MR. DAWSON: As I indicated in my last briefing, it is the Fund's responsibility to determine the point at which we are in a position to deal with a government in the context of having a traditional financing arrangement.

Clearly, the UN resolution expressed a view on the part of the members of the Security Council that progress had been made in that regard. As I have indicated earlier, ultimately that is up to the Fund to make the formal determination, but I would now revert to my career-enhancing answer and suggest that you look forward to the Managing Director's speech tomorrow morning, which will address some of that issue as well.

QUESTION: You said earlier that there might be an announcement on the joint monitoring--

MR. DAWSON: Yes, I think it is IAMB. I could not quite remember the whole acronym, but I believe that is right.

QUESTION: Could you give us a little preview of that and say who the "joint" is? I mean, is it with the World Bank?

MR. DAWSON: I believe IAMB stands for International Advisory Monitoring Board. It includes the World Bank, the UN , the Fund, as well as one of the regional organizations, and this is an issue that is been reported on in the press over the time, and there is and the UN took action to sort of permit it going forward in terms of agreement on the terms and conditions. And there was a story, I think overnight or late last night, on that, and I think you can expect later today a statement by the four-member--constituent members of the board on how we will be going forward.

QUESTION: On Bolivia: Do you have any regrets? Does the IMF kind of want to learn something about what happened there if they had done something differently?

MR. DAWSON: Well, you know, we are a learning institution, as the Managing Director notes. We learn from, every country experience we have. Bolivia has been a country that has enormous difficulties. As I said earlier, progress over the years has been made, but the situation remains very difficult. And I think we look to learn from all of our country cases. This is hopefully the nature of the institution, and I think that learning is something the entire international community as well as member governments need to do as they deal with, particularly in very difficult country cases, these very difficult social and political problems to try to lay the basis for better prospects for the people.

Thank you.


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