Argentina and the IMF
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Transcript of a Press Briefing by Thomas C. Dawson|
Director, External Relations Department
International Monetary Fund
Thursday, July 1, 2004
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MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular briefings.
Before I take questions, I have a few announcements to make. On Monday, July 5th, Fund headquarters will be closed in observance of a U.S. federal holiday. However, if you need to contact us, please call the main Media Relations number for details on the press duty officer.
Also, online press registration for the 2004 Annual Meetings opened last week, and I encourage any journalist planning to attend the meetings to register, particularly if you need visas to enter the United States. Visa information is on our website as well.
You will have just received, on an embargoed basis, the press release regarding the Managing Director's Statement on the Work Program of the Executive Board, and we will post this on the Fund website following this briefing.
As to management travel, as was already announced in Paris a couple of days ago, the Managing Director will meet tomorrow morning with French President Jacques Chirac at the Elysee Palace. And after the meeting, the Managing Director will hold a press conference, at 11 a.m., at the IMF office in Paris. If you need the exact address, contact Media Relations, and you will need, or your colleagues--unless you are planning on taking the flight tonight--your colleagues will need to alert the IMF office in Paris that you are attending or your organization is attending.
Finally, the Managing Director will be traveling to Honduras on July 8th and 9th to meet with President Maduro of Honduras and to participate in the Third IMF Central American Conference of Finance Ministers and Central Bank Governors.
There will be further travel by the Managing Director, both to the region and elsewhere, prior to the Annual Meetings, and we will announce details when they are available.
That's all that I have. I'd be happy to take your questions now.
QUESTIONER: Going straight into Argentina, a couple of things. There are press reports that say that, A) another mission will be needed to go down to Argentina and, B) a separate press report says a third review will not be approved. I was wondering if you could comment on that.
And my third question I guess is, if it's no to all of the above, when would the review go to the Executive Board?
MR. DAWSON: I would direct you to the statement that we issued on June 25th on the departure of the mission from Argentina which indicated the state of play in terms of the measures and the review going on and that the authorities had indicated they were continuing to work on the policies toward ensuring consistency with their program.
The mission did, in fact, as we indicated, return to Washington, discussed its findings with staff and management. We had an informal briefing of the Board, and I do know, and as we said in the statement, that there will be ongoing discussions with the authorities. So, in that context, the discussions of the third review continue.
Now, in terms of mission, et cetera, I think I would couch it a little differently. The dialogue with the authorities-that's what I would call it--will continue, will resume next week, and there are a number of missions of the Argentine authorities to Asia and elsewhere, I believe, so that the Economic Team, as well as the President, have been out of the country.
We have, of course, in Buenos Aires, John Dodsworth as the senior resident representative. He is a very senior Fund staff member, a Deputy Director of the Western Hemisphere Department, in fact. And I think at the first stage, what I would expect is that this dialogue that we referred to will be conducted by John in Buenos Aires.
Whether there will be a "mission" or not at this point, I have nothing for you, but that is not an indication that discussions aren't continuing because, as I say, John Dodsworth is more than the equivalent of a mission leader himself, and there is another resident representative there as well. If and when we get to a point where there is a mission, we, of course, would let you know.
QUESTIONER: There's no [inaudible]?
MR. DAWSON: No, the discussions for the review continue.
QUESTIONER: I'd like to ask you if there is any concern about the rise of inflation in Brazil, especially now that the economy is picking up again.
MR. DAWSON: I certainly noted the announcement by the Central Bank and discussions of the target for this year and for next year. But I would repeat the line that I've indicated before, that we view growth in Brazil as becoming firmly entrenched, with two consecutive quarters of growth around 6 percent, surging export performance, and a very strong current account. And so we think that bodes well for economic activity in the rest of the year. Again, we think that you need to look at the overall picture not just any particular indicator. Clearly, the markets have anticipated well and adjusted well, and the authorities have taken the appropriate action in terms of their debt profile, in terms of preparing for what has now happened in terms of an increase in official U.S. interest rates. The government returned to the capital markets with a US$750-million bond issue. The primary surplus targets were substantially overachieved. So I think that continues to auger well.
So I would not focus on the inflation numbers in particular. That is something that the authorities obviously are looking at, but I think the overall pattern of performance in Brazil continues to be very strong.
QUESTIONER: You say that the discussions are continuing with the authorities, but--
MR. DAWSON: I said they will continue. The authorities aren't there at the moment.
QUESTIONER: Will continue.
MR. DAWSON: They will continue, yes.
QUESTIONER: Which issues are focused on in these discussions?
MR. DAWSON: Again, I would refer you back to the statement from the 25th, where we discussed the structural fiscal reforms, the banking sector measures, the efforts to restructure debt, and policies in the energy sector and utilities. That's the range that's in the Letter of Intent. It's in the statement. It's I think well-established.
QUESTIONER: On Argentina, again, I seem to remember that in one of the documents that was presented at the beginning of the year I think there was a deadline. I mean, there were some dates for these reviews and all of that. I mean, how strict are those deadlines? Is there a deadline for this review?
MR. DAWSON: No. When a program is established, there is a series of reviews determined and a notional set of dates when the review might be expected to take place. They should not be viewed as deadlines. It might be a useful exercise for us to look at the percentage of programs that have delays at one point or another in the program from what was the original deadline. I suspect most programs are largely on track on deadlines, but I would say a very substantial minority are not. And there are many, many reasons. Sometimes it's because discussions can't be concluded. Other times it's other--well, it's usually because discussions can't be completed, but that itself can be for a number of reasons.
So it is not at all unusual. In fact, that took place earlier this year when the discussions which had been expected to be concluded in December wound up going on into January. So it is not at all unusual and, again, I would direct you back to that statement that noted that these were cordial and good talks, but they just haven't been concluded, and so they will continue.
QUESTIONER: Could I change the subject to Iraq?
MR. DAWSON: Sure.
QUESTIONER: Following the World Bank's recognition of Iraq, does the IMF have a--do you intend to recognize Iraq?
MR. DAWSON: We are, indeed, working on that. I would make an initial statement and then give you a little bit more detail.
Clearly, the recent U.N. Security Council resolution paves the way for recognition of the interim government by the international community. As is our practice at the Fund, we are consulting with our membership on this question. What that involves is getting in touch with member governments to ascertain their position on this. I expect this process will be concluded in the very near future. That doesn't mean I expect an announcement today. It's possible it might be tomorrow. It might be a day or two after that.
I would stress, however, that that has absolutely no implications for the pace of our work in Iraq. It is going forward in terms of our contact with the authorities and our working with them, with the expectation that they will, as they indicated in the transition government, that an interest in getting support, both financial and technical, from the Fund, and as we indicated last October at the conference in Madrid, the nature of the support and the dimension of the support that we might be able to provide.
QUESTIONER: Can I come back to you? Do you have a date set yet when you'll meet with members of the Iraqi Government, number one, and, two, a sense when Iraq is going to clear its arrears? And could we characterize this recognition as imminent?
MR. DAWSON: I think "imminent" is a fair characterization.
In terms of, to go steadily backward on your question, on the clearance of arrears, no, I do not. I would note, however--and this is an issue, as I'm sure you know, applies to the World Bank as well. So questions regarding the Bank should be directed toward them, of course--the arrears to the Fund are rather smaller than they are to the Bank. In the context of the Fund, they come from what is called the SDR account. You do not want to have a follow-up question on that. But the clearance process will be relatively smooth, and there are well-established procedures for that.
Now, what was the first part of your question?
QUESTIONER: Yes, a date set to meet with--
MR. DAWSON: Our discussions with the Iraqi authorities are ongoing, and I think you can understand that we do not expect to be providing dates, times, and places for those meetings.
QUESTIONER: I'd like to ask a follow-up on that. Condi Rice, Dr. Rice, recently indicated that they did receive your report on the Iraqi debt and that the report suggests a debt reduction of I think 67 percent to 95 percent, which is a very wide range. I guess my question about that would be have you had any initial feedback from your members about those suggestions, and when do you expect, what is the time frame for further discussion of the issue?
MR. DAWSON: If I'm familiar with the same exchange that you referred to with Dr. Rice, the question talked about 67 to 95 percent. Her answer went in a different direction.
But we provided a debt sustainability analysis, which ran a number of scenarios, at the request of the Paris Club. The scenarios do not presume, imply, or contain any recommendation for a particular level of debt relief for the Fund. That is not our role. It is our role to simply provide the debt sustainability analysis.
The decision in that regard is a matter for Iraq and its creditors. And in that context, much of the focus is of course on the Paris Club, but there are other creditors. There are non-Paris Club creditors as well.
So it is a document that, as I say, provides a wide range. It is not a document that--it implies a wide range--but it is not a document that contains a recommendation.
MR. DAWSON: The document is provided to the Paris Club. It is for the Paris Club to consider. So I think, if you're asking have we been asked to do a new analysis, no. And if we do, I suspect that word would come out. It is in the hands of the Paris Club and the creditors at this point.
QUESTIONER: Do you know when they will discuss it?
MR. DAWSON: No, I do not. The Paris Club meets mostly monthly, though I suspect not in August.
QUESTIONER: And since I have the mike, can I ask a couple of things on Russia?
MR. DAWSON: Surely.
QUESTIONER: One is recently, in recent days there was new interest in the IMF loan of July 1998. There was a major forgery uncovered in Russia about that. Basically, the question is, looking back at that loan now, with the benefit of all of the hindsight you have now, do you see any evidence of wrongdoing on the part of the Russian Government in disposing of that money?
MR. DAWSON: I had a sense when this story came up a few days ago, that I was either watching "Ground Hog Day" or "Fifty-First State."
This is an old story that has been examined exhaustively. You mentioned, and I follow the Russian press as well. Olga is actually there, so she's been passing it on to us, that apparently there was a newly forged document that alleged misuse of funds. We had, 5 years ago--four-and-a-half--almost 5 years ago, a whole series of forged documents at that time purporting to include transfer orders of IMF money to banks that didn't actually exist and so on. So this is a continuing--I mean, it's "Ground Hog Day."
With regard to what happened, if I can give a brief summary, there were allegations that the funding, particularly in July '98, but there were allegations about earlier disbursements as well, was somehow diverted.
In response to these inquiries, there were a number of investigations, including an independent review conducted by PriceWaterhouse of the Fund transfers of money, which traced the money from the Fund accounts at the New York Fed into the government's accounts at the New York Fed, into commercial bank accounts at the New York Fed and how the individual transactions were then disbursed in quantities that were being used to support the ruble at the time in a fixed-exchange rate regime.
The exchange rate regime, as people will recall, was unsustainable, and some people used the shorthand, therefore, that the money was "lost." It certainly was used in a venture to support an exchange rate regime that did not work, but that's indeed IMF money that is to support exchange rate regimes and support reserves.
I like to occasionally comment that if this money was stolen, it's rather curious because somebody is paying it back to us, and we are indeed being paid back I think somewhat faster than expected, and the Russians have indicated an intention to continue paying it back.
So I think this is an old story. It's a sham, but it does give me a sense of dejá vu. I mean, it was just 5 years ago--and none of you have congratulated me--it was just 5 years ago that I started at the Fund. So it seems appropriate that on my anniversary this issue will come back again.
MR. DAWSON: I trust either that it won't come back again in another 5 years or that I won't be here.
QUESTIONER: And one last thing. Congratulations on your 5 years.
MR. DAWSON: Thank you.
QUESTIONER: I'm certainly happy that the Russian transition over the last 5 years has been such that we are now discussing this with a great deal of humor, that we can now look back at that with a great deal of humor.
But, currently, I detect strong notes of caution in the statements the IMF makes to Russia about its current policies. The question I want to ask you about this is, is there any sort of an event or a mark, an economic mark, that we can watch for that would tell us that the Russian are off-course within the next few months?
MR. DAWSON: I don't think I'll fall for that.
I would note, of course, we have the Article IV mission just concluded in Moscow. The concluding statement was published, and so I think you should take a look at that. And I also note, and we are quite delighted that the Russian authorities have decided, for the first time this year, to publish the Article IV report.
So, when the Board discussion takes place in a couple months probably, the discussion, the Article IV will then be published, and I think people can then take a look at the Article IV report and judge, set up whatever benchmarks they wish of their own to look at in terms of the performance.
Clearly, there is a very strong economic performance, but concerns have been raised. The concluding statement identifies some of them, and the Article IV will of course go into it in more detail.
If we're talking anniversaries, I noted this morning when I came in that the former Managing Director, Mr. Horst Köhler, was today sworn in as President of Germany, and of course we extend our congratulations to him for that. But it also made me recall that at his introductory press conference here, I believe in this room, a little more than 4 years ago, the number one controversial question asked of him at that time was, in fact, Russia. And the presumption was that the major agenda item for the Fund going forward at that point was going to be Russia.
So it is interesting how times change, and the context in which the Russian economy is viewed changes substantially. And Russia, in the Fund context, is rapidly on the way to becoming a creditor of the Fund.
QUESTIONER: Tom, could you talk a little bit about what the recognition of Iraq will mean. Does that mean that IMF loans can begin? Can they begin before the debt forgiveness issue is settled?
And, also, could you refresh our memories a little bit about how much the IMF pledged in Madrid. I was thinking US$3 billion.
MR. DAWSON: You need to, with regard to the last question, go back. I don't have the numbers exactly in my mind. That number is kind of a median point. There are some scenarios in which it could be a bit more, some in which it would be a bit less. It is not, however, I would not call it a pledge. There are a couple of different components.
MR. DAWSON: There is emergency post-conflict assistance, which is one component. That is the amount of money that could be available sooner rather than later. And then ultimately the discussions in Madrid talked about the possibility of a follow-on standby program, which is the traditional program.
In terms of the relationship between the Paris Club debt relief and a Fund program, the Paris Club, of course, traditionally requires that there be a Fund program for them to proceed. So there's a little bit of a chicken-and-egg issue there.
We do, of course, in response, to repeat what came up in the previous question, arrears need to be cleared prior to a program.
What does "recognition" entail? What it entails, first of all, is the Iraqi Government assuming the position, the representation of Iraq in the Fund, which has not been exercised for some period of time. It is, of course, a prerequisite for lending, but as I said, it is not, in any sense of the word, an inhibiting point right now because what we are in the stage now of is helping the authorities develop budgets, develop an approach. We're providing technical assistance.
The full expectation is that this leads to financial assistance later on, but we are, in no sense, beyond or delayed from where we expected to be at this point. The work is continuing as has been planned.
QUESTIONER: If I could follow up. In discussing this debt sustainability report that was provided to the Paris Club, you talk about the fact that you provided a range of scenarios. Would it be correct to assume that these scenarios give the Fund's estimate of what the Iraq economy, how it would perform under different levels of debt forgiveness?
MR. DAWSON: There's a range of ranges. You can look at it in terms of different levels of debt relief. You can look at it in terms of different levels of assumptions about economic performance. So it's all of that. And different ranges of oil prices, for example, that affects everything else.
QUESTIONER: Right. And the numbers that have been published, the 67 to 95 percent--
MR. DAWSON: I'm not going to--
QUESTIONER: Would you steer us away from using those numbers?
MR. DAWSON: I would steer you away from thinking that there is a range, per se. I think you'd think of a scenario and a series of scenarios.
QUESTIONER: In the statement last Friday, there was, in the last paragraph, there was a sentence in it that says the discussion continues in key elements. I'd like to know what does it mean and in which way will you continue that discussion with Argentina?
Can we establish now how many waivers Argentina will need to pass distribution?
And, while it has passed one month that Argentina showed its new proposal, and I don't know if it's time that the IMF says any kind of assessment about that new proposal.
It's that if the Managing Director is planning to go to Latin America and Argentina, in particular, in this.
MR. DAWSON: With regard to the statement from last Friday, I mean, take another look at it. I'll read the concluding two sentences.
"The next step is for the mission to return to Washington to discuss findings with staff and management and for the authorities to continue to develop and elaborate policies in key areas of their program. There will be ongoing discussions toward defining policies that will achieve the essential objectives set out by the authorities in their program."
That's one answer.
With regard to the debt offer, no, we will not be making commentary on the debt offer because that is between the authorities and their creditors.
In terms of the next steps, as I indicated earlier, these discussions, in the first instance, will certainly involve John Dodsworth discussing with the authorities in Buenos Aires next week. If and when there's a mission, we will let you know.
Anything else that I haven't answered?
QUESTIONER: And the waivers.
MR. DAWSON: Waivers. There is no purpose in talking about waivers because waivers are only when you've reached a position that you will be presenting something to the Board because that's just the way it is. Waivers are what's left, and we are not at a point of conclusion yet, so there is no ability to identify what's left.
I think we should try to wrap up. We're getting a little repetitive.
QUESTIONER: Just to go back and clarify the question on Iraq. You said that there is a little bit of a chicken-and-egg issue because of the Paris Club--
MR. DAWSON: No, no. There always is. In every single country, there is. As debt relief is contingent on the Fund program, the Fund program is contingent on debt relief. That's true of every country in the world. There is nothing unique about Iraq in that regard.
QUESTIONER: But if the Paris Club needs an IMF program to approve debt relief, the IMF program needs clearance of arrears to an IMF program?
MR. DAWSON: No. Well, arrears is a slightly different subject. The IMF needs to know what the financing gap is for a country, and that is itself dependent on the debt relief. Clearing of arrears, in terms of the Bank and the Fund, is a different issue.
QUESTIONER: So to do like the emergency post-conflict assistance, the US$800 million or so, do you need the clearance of arrears for that?
MR. DAWSON: The clearance of arrears, yes, we do. Yes.
QUESTIONER: Tabre Vazquez, the presidential candidate of Uruguay, will be here in Washington next week. I would like to know if there are any meetings planned with IMF staff or officials.
MR. DAWSON: I have no idea. Francisco can get back to you. Last question.
QUESTIONER: Just quickly on Turkey, when will the Turkish review be discussed by the Board? And is there a sense that Turkey will take another program?
MR. DAWSON: A new program after this one expires? I don't have anything on that.
The mission, just to quickly go over, the mission did finish its review on June 22nd, and our Senior Res Rep in Turkey issued a statement on the agreement ad referendum with the authorities on what's needed to facilitate the Board consideration of the review and the elements of the draft letter.
Assuming that all is implemented as envisaged, which has basically been the case to date with the program, it's expected that the Fund Board will meet to discuss the completion of the eighth review, which is where we are, together with the conclusion of the 2004 Article IV consultations before the August recess. The August recess starts, technically, I think on Monday, August 9th, which means it really starts on Friday, August 6th. So our expectation is that the Board discussion will be before then.
[Whereupon, the press briefing was concluded.]
IMF EXTERNAL RELATIONS DEPARTMENT