Argentina and the IMF
Brazil and the IMF
People's Republic of China and the IMF
Haiti and the IMF
Italy and the IMF
Mexico and the IMF
Ukraine and the IMF
Zimbabwe and the IMF
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Transcript of a Press Briefing by Thomas C. Dawson
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MR. DAWSON: Good morning, ladies and gentlemen. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular briefings, and indeed, the last one of the year 2004. So Happy New Year, happy holidays, and Best Wishes to everyone here in the Headquarters Building and those watching us via the Media Briefing Center.
As usual the briefing is embargoed until about 15 minutes after conclusion, and we will set the precise time at that point. Since gentlemen don't wear hats in buildings, I'll take it off now, if I'm a gentleman.
This has been a very busy year, in fact, a particularly busy week at the Fund. I don't want to review all developments, but I think in terms of a couple of items that have gone on, or three or four items that have gone on this week, I thought it would be useful to bring up.
On Monday the Turkish authorities and the Fund staff announced they had reached an agreement, ad referendum, on an economic program that could be supported by a new three-year standby arrangement, which will be reviewed by management and presented to the Board early next year. Yesterday the Fund Board completed the ninth review of Brazil's standby arrangement. Both nations I think have had a great success with their programs, and the Fund is quite happy and proud to have been associated with these very strong reform programs.
I'd like to turn to a couple of news reports within the past week to comment on. We don't make a habit of responding to every news story, but since my last briefing every single question was on Argentina, I thought I might try at least to preempt at least one line of questions that may come up, because there have been a number of inquiries to Media Relations within the last week regarding the possibility of early repayment by Argentina to the Fund. We are aware of these stories, but we really don't have anything to report on it. We certainly don't report on something like this if the authorities have not made any such request, and indeed they have not.
We certainly have a desire and are working with Argentina so that they can regain market access and regularize their relationship with their creditors. I would also note from a broader point of view, that early repayments to the Fund are not unusual. I had a list in the last four years of I think some 14 countries where there had been early repurchases, and in that regard, a number of the Asia crisis countries paid early.
Also last week there was some inconsistent, and indeed some might say, somewhat bizarre reporting on Zimbabwe. For the record, we did have a Fund mission there, led by Sharmini Coorey. It concluded its work on Zimbabwe and met with senior government officials as well as a range of representatives from the private sector and the donor community. The purpose was to undertake an update, technical update of developments in Zimbabwe, and the government's new forward-looking policy agenda. The mission will report back to Fund Management and to the Executive Board in due course.
To alert you, I believe that possibly tomorrow, Friday, if not early next week, the Independent Evaluation Office will post its annual report, and the list of potential topics for future IEO work programs on its external website. The IEO has routinely done this to seek public input on future topics for evaluation. Once we have the precise times, we'll let you know about the posting schedule.
If I can turn now to the Fund schedule for the holiday period. For planning purposes, the Executive Board is not scheduled to reconvene formally until January 10th. However, of course, the Fund is still open for business except on December the 24th and 31st. I do not at this point have any management travel, official travel to alert you to, but we will alert you if there is something that comes up in the early January period prior to the next briefing.
Of course, Media Relations will have the usual duty officer set up, and the press can contact the Fund for comment as may be necessary. I will be around throughout the holidays, and I'll take about the first 10 days of January off.
Lastly, we will be establishing, I'm sure you'll be delighted to know, a formal press pass system for Washington-based journalists, so you can add it to your little collection around your neck. Media Relations will be in contact with you regarding details of the new photo passes that will help facilitate access to briefings at Headquarters. The pass will be similar to what you have for other agencies in Washington, and we hope the new system will be in operation early next month.
With that, let me again wish you a Happy New Year, happy holiday. Be happy to take your questions. Finish the year as you began by observing proper etiquette and identifying yourself and your organization. Please do not eat too loudly your candy cane, since it will disrupt the fine sound system we have here, and at the conclusion of the briefing we'll set the precise time for lifting the embargo.
QUESTIONER: Thank you for the candy. Happy holidays to you and all the IMF staff, that we enjoyed associating with, and—
MR. DAWSON: We're off to a good start.
QUESTIONER: Right. I think I'd like to break with tradition. As you say, most questions are related to Latin America these days, but I wanted to ask about Ukraine. Have you had any contact with the Ukrainian authorities, and do you have any comments about how the current turmoil, political turmoil may be affecting their economy?
MR. DAWSON: I mean clearly, you know the Ukraine has gone through a rough patch following the second round of the presidential elections, clearly visible, and pressures on foreign reserves, sovereign debt spreads and deposit losses in the banking system. Those pressures, though, eased considerably following the agreement—political agreement between the opposition and government—to hold a rerun of elections on December 26.
Fund staff has been in close contact with the authorities, and in particular with the Central Bank over the last few weeks, and is prepared to assist them in their efforts to maintain sustained growth and macro stability.
Looking beyond the elections on December 26th, the authorities will need to tackle without delay the accumulated macro and structural policy challenges and issues, and in particular, by putting in place a sound and prudent 2005 budget.
QUESTIONER: We understand that there was a meeting yesterday at the World Bank about Haiti. The question is if the IMF is considering to assist Haiti in the near future in any way to get stabilized, or you're going to let all the work to the World Bank?
MR. DAWSON: No. We certainly are actively engaged and working with Haiti. I was not aware of that particular meeting yesterday, but I do know that there have been contacts among Directors and staff with the Haitian authorities and with the Bank. I don't have anything more specific on that, but I'll get back to you. I know it's been an issue of some concern.
QUESTIONER: The Brazilian Government is really optimistic with reaching an agreement with the IMF regarding the infrastructure budget. I want you to comment on that. Yesterday, [inaudible] from the Treasury said that an agreement would be reached before April. So I would like your comment on that.
MR. DAWSON: I'd have to check with what Joachim said in what sense an agreement. Certainly there is a process going on and it involves not just Brazil in terms of trying to take a look at how to promote infrastructure investment and how to account for it in budgets, and Brazil was an active sponsor of that dialogue and is an active participant in it in terms of the case of Brazil as well.
I think it is important to note in that context this is not a case of not counting for investment. It's not like somehow it will or won't count. It still will be accounted for. It's the question of the proper treatment of it and how it fits into the primary surplus targets. In the context of Brazil, of course, the Fund had already made some adjustments in that regard, given the particular nature of some of the Brazilian investments and infrastructure—public sector companies and infrastructure needs, and that's the direction in which the work continues.
In terms of—the April timeframe I think sounds reasonable in terms of the overall effort. I'm just not quite sure precisely what Joachim was talking about, but I'm sure that his timeframe, if I could understand it precisely, would be correct. I'm not sure whether he's relating it to the Brazilian discussions with the Fund or the overall study, but I am sure we will have more and more precise information well before April.
QUESTIONER: Thank you. My question is regarding the American economy. Actually yesterday Mr. Bush and Mr. Berlusconi had a meeting, and they referred to possible risks of the devaluation of the dollar. I'd like to know to what extent the IMF is worried about this, and in more general terms what are the IMF prospects for the U.S. economy next year in the short and medium term? Thank you.
MR. DAWSON: This is not the occasion to do country-specific forecasting. You know, we have another format for doing that in terms of our WEO process, World Economic Outlook process. However, I would direct you toward the piece, the speech given by Raghu Rajan, our Chief Economic—our Economic Counselor and head of Research in Sydney, I think, Australia, either yesterday, tomorrow or the day before, depending on how the time zones work. But a version of that, or a condensed version of that was also printed as an op-ed in the Financial Times yesterday.
The Fund has for some time, consistently, throughout, certainly throughout 2004, been noting that the pattern of global imbalances needs to be addressed, that this requires action by a number of the major players. Raghu's point yesterday specifically noted that it's not a matter of pointing to this deficit here or that surplus there, it's a matter of action that is needed by all the major economic actors, and again, I direct you to the speech, but he's cited specifically the actions that needed to be taken by the United States, by Europe, by Japan and by emerging Asia, and I direct you to that.
And certainly the commentary that I heard coming out of the meetings in Washington yesterday was entirely consistent with what the line that the Fund has been taking for some time.
QUESTIONER: What can the Fund do with this developed countries? I mean in general terms. Because the way that the Fund usually uses emerging markets is well known with financial aid. In the case of the imbalances of developed countries, what can the Fund do?
MR. DAWSON: Well, I think—and it is the Fund's obligation to, and it's in our articles to conduct what is referred to in Fund language as surveillance, and it is our, certainly, the tradition in recent years to conduct certainly an aspect of that surveillance in public, and that we do express our views on major economic developments, on global, regional and national developments. That was done in a formal sense most recently for the U.S. economy in the Article IV. The Board discussed last summer, and I think the papers were posted at that—I know the papers were posted at that time. So it is a matter of contributing to the discussion, both public and private.
I mean we have a dual role. We have a role as a policy adviser, confidential policy adviser, and also as public responsibilities, and we exercise both of them in the context of U.S. as well as other major economic powers, are in constant contact with the authorities as well.
QUESTIONER: Are the IMF and the Dominican Republic in a position where the Board could be voting on a new program in January?
MR. DAWSON: Was that the question or a statement?
QUESTIONER: It's a question.
MR. DAWSON: Well, you are—I think the background of that I think is pretty close to that. I mean we reached agreement of the staff—or the staff reached agreement with the authorities in late November on the elements of the program, a new two-year Stand-By. The process is now being reviewed by Management. That's well advanced. The authorities are moving forward with what is needed to contribute to the success of their program, including the passage of a 2005 budget that's consistent with the program objectives, and securing the necessary financing.
I don't have a date as to when precisely a Board meeting would be, but once the elements that I just described are accomplished or in place, and the Management approves the program, the letter of intent would be circulated to the Board and we'd be in a position to let you know.
As I indicated at the beginning, we're in a hiatus for two or three weeks, but if there is something to announce and something is set, we will let you know.
QUESTIONER: I just want to follow up on that. So when the statement was released a few weeks back about reaching an agreement in principle, it's just really pending these actions by the government and—
MR. DAWSON: That's correct, and it's essentially the actions that are needed to flesh out the budget. It's not further negotiations, it's implementation of what was approved.
QUESTIONER: I have a question on Argentina. As you know, the Inter-American Development Bank announced yesterday a loan for about half a billion for Argentina, together with 2 billion for Brazil. Would you comment what that loan means for Argentina in terms of international image and return to recover the markets for the country?
MR. DAWSON: I think that's really a question better addressed to IDB. I mean certainly the Inter-American Development Bank, as well as the World Bank, continue working with the Argentine authorities, and particularly in sectors of great need, and this is appropriate. You know, the Argentine authorities had indicated with regard to the Fund that they wanted to focus their efforts on the debt exchange offer, and then return to our program later once the debt exchange was completed.
It is understood and in fact welcome that the IDB, in this particular case, is continuing to work with the Argentine authorities particularly in critical sectors. But as far as commenting on the loan itself, that's really not my position, but it is—I would just leave it at that. I mean we've expected—this is what was expected to be going on in terms of developing with Argentina. So it's welcome, but not news.
QUESTIONER: Thank you. I was wondering if you could give us any update on the IMF's work with Chinese authorities, in particular on the issue of China moving towards a greater flexibility of exchange rate?
MR. DAWSON: I mean obviously we are in—maybe not to obviously, but we are in regular contact with the Chinese authorities, and recently we had our Article IV consultation, and they—actually for the first time ever, the Article IV staff report was actually published. And in that report I think you can read and get a sense of what the dialogue has been between the Fund and the Chinese authorities on the issues, the issue of exchange rate flexibility and related financial sector issues.
In terms of our view, our views are well established. They're in that report. They're referred to also in Raghu Rajan's speech yesterday. So it is a continuing dialogue. Some of our expressions tend to be in public. Some tend not to be, but they tend to be consistent in public and private.
QUESTIONER: Could I follow up?
MR. DAWSON: Sure.
QUESTIONER: Is there any sense of growing impatience here at IMF about the issue?
MR. DAWSON: The Fund is an institution of great patience and great experience.
QUESTIONER: I wonder if the Argentina authorities need to be in contact with the IMF to discuss a new schedule of repayment if they want to accelerate the cancel of the debt with the IMF?
MR. DAWSON: If they wish to discuss that with us, we certainly would be open to discussing it with them, but as I indicated at that outset, that has not happened at this point.
A couple more question. We're getting a little repetitive.
QUESTIONER: Has the IMF any comment on the new Italian budget? And has [inaudible] already fixed the date for the Article IV for Italy?
MR. DAWSON: On your last—no. All I have in terms of the date for the next—I mean for the Article IV consultation, I simply have early 2005. We will let you know when that is.
And the other question was what? Reaction?
QUESTIONER: To the Italian budget.
MR. DAWSON: To the budget. I mean we think that the deficit target of 2.7 percent of GDP is appropriate, provided that reliance on one-off measures is reduced substantially. Although given the risks of not attaining the 2005 targets, it would have been prudent to take additional measures of about one-half percent to strengthen the budget. The concluding statement for the Article IV consultation mission did stress also that any cuts should be financed by structural spending reductions. And in the medium term, we believe a more front-loaded pace of fiscal adjustment that targets a fiscal balance in the next few years would be appropriate.
Two more. Mr. Sitov?
QUESTIONER: Thank you. I have a question about Iraq and oil. The UN auditors seem to be unhappy with the way the Oil Fund is being managed, irregularities are alleged. I know that the IMF takes part in the monitoring of the situation there in that regard, and I thought that maybe you could throw some light for us on this situation. What's actually wrong there?
MR. DAWSON: We are a participant, a member of the International Advisory and Monitoring Board on the Development Fund for Iraq. But questions should be directed toward them. They did put out a release on December 14th that discussed—basically reported on the meeting that they had had on December 6th. If you need to have a copy of that press release, I'll be happy—we'd be happy to make it available. I have a copy of it right here, but I'm sure Mr. Hawley [ph] can pull it out.
A last question? Okay. The last of the year.
QUESTIONER: Also on the issue of the budget, I wonder how close is the IMF following the situation in Mexico? In the last WEO Mexico was among the countries in Latin America—I mean certainly not the ones who's going to have the best performance next year, but is among—with will have a best performance. The issue now is the budget. Congress approved a budget that was not what the government wants. Now President Fox is threatening to take this matter to the judicial system. How close is the IMF following this?
MR. DAWSON: I mean obviously we follow developments in Mexico closely. The Managing Director was there just, what, about four or five weeks ago? I think less than that. Mr. Hawley I think was on that trip. And we obviously follow it closely, but I don't think it's appropriate for us to comment on the developments within the government, with the government, with the parliament, or with the judicial system. But we certainly do follow Mexico closely, and the strong Mexican performance in recent years is something that we have commented on positively quite often. So I think yes we do. But you're not going to get me to say out of our 184 member countries what is its periodicity.
That's it. Thank you very much. I hope you all have, as I said, a happy holiday. And we will lift the embargo at say 10 minutes after 10:00, which I am told is 15:10 GMT for those watching out there in the ethernet.
[End of briefing.]
IMF EXTERNAL RELATIONS DEPARTMENT