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Gold in the IMF -- A Factsheet
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Transcript of a Press Briefing by Thomas C. Dawson
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MR. DAWSON: Good morning. I'm Tom Dawson, Director of External Relations at the Fund, and this is another of our regular press briefings. As usual, the briefing is embargoed until about 15 minutes after conclusion, and we'll set a precise time at the end of the briefing.
This is the last briefing before the 2005 spring meetings, which will be held here next week. The official agenda of the meetings will be published shortly, and I'll be happy to give you a sense—if you have any questions—on the issues at hand.
Before I do take questions—and in particular with regard to press events—we will have I believe at 9 o'clock next Wednesday, we'll have the WEO press briefing by Raghu Rajan, at 10:30 a.m. on Thursday the press conference by the Managing Director, which I think itself follows the press conference by Jim Wolfensohn, which is held I believe at 9 o'clock Thursday morning, here at IMF headquarters.
Okay. I would like, though, before taking questions to congratulate George Abed, who was Director of the Middle East and Central Asia Department of the Fund until December 2003, when he retired from the Fund. Earlier this week, George was asked to head the Central Bank of the Palestinian National Authority by President Abbas, and it is my understanding that his nomination has been submitted to the legislative body for action.
George is expected to join the ranks of a number of Fund economists in various central banks and ministries around the world. I would note, in particular, that at this time Palestinian Finance Minister Fayyad is also a former Fund economist, and I believe on May 1st, Stanley Fischer, our former first Deputy Managing Director, will be assuming the position as head of the Bank of Israel.
I should also note that the Fund has been providing technical assistance to the Palestinian Authority, which is the extent of our assistance given the fact that the Palestinian Authority is not a Fund member.
I would now be happy to take any questions that you all may have.
QUESTIONER: I wonder if the IMF has been following the events, the recent events in Mexico City, related with the mayor of Mexico City, especially there have been a lot of reports in the U.S. and European press regarding the case of Mr. Lopez Obrador, and what some press media outlets. It seems like not really good news for Mexico. The International Institute of Finance also alluded to the situation about Mr. Lopez Obrador in its forecast released just a couple of days ago, saying that in their view, the situation posed a risk of political instability and maybe some of economical instability. I wonder what is the assessment of the IMF regarding that situation?
MR. DAWSON: I don't think it's appropriate for the Fund to comment on domestic political developments in any of our member countries, and I would just leave it at that.
QUESTIONER: I wonder if you could talk about this issue of the sale of gold. The specific question that I have is how will the IMF approve that? Will there be a vote of the Board, where some percentage of votes will be required or not. I mean I don't know what is the procedure to approve something like that. And if you could give us a sense of what is going to happen regarding this issue during the meetings?
MR. DAWSON: I mean certainly there are number of proposals—I'll start at a slightly broader level. There have been a number of proposals for how the Fund could—for new measures the Fund might take in terms of assisting the debt burden of the HIPC countries and other very low-income—other low-income countries.
One of the suggestions that has been made by some members, by some outside observers as well, has to do with using Fund gold. There have been options considering revaluation of gold; options considered selling of gold.
In response to requests from our members, the Fund staff has prepared the Board has had informal discussions on what various options might be in that regard. There is no proposal on the table for formal consideration at the spring meetings, and the nature of which any proposal might actually take by the time it gets to a point for formal consideration, you know, I just can't say at that point.
But with regard—certainly any effort, whether broadly with regard to additional debt relief for the HIPC and low-income countries is going to require the broadest possible consensus among our members, and that is a process that in some sense is what is going on, is to see whether there is such a consensus.
With regard—as getting a bit more specifically to the use of gold, I direct you to some fact sheets (on the IMF web site) and so on that have been prepared about Fund gold, both the holdings of it as well as some of the history and the nature of it.
But as a general point, if there were a decision—and this is a decision of our members, it is not a proposal of the Fund staff, this would be a decision from the members. So we have to wait to hear from the members in terms of whether there's a consensus. It is my understanding at least of the proposals that I have seen that in general they would required an 85 percent vote of the Executive Board. There may be some other options out there that there may not, but historically, when this issue has come up—I have dealt with this as long as 20 years ago—it required an 85 percent vote. So that's my general understanding.
But as I say, there is no single proposal at this point. And it's something that the staff have been providing technical analysis in response to requests from our members. The issue of whether to provide and how to provide additional debt relief for the poorest countries will be an issue at our spring meetings.
I should also note that while your question was a Fund-specific question, the issue is, of course, an issue much broader than the Fund. The Fund, in fact, is a relatively small holder of the multilateral debt, much less all of the debt of these poorest countries. So that's a question not with regard to bold, but with regard to possible measures that would also need to be addressed to other multilateral institutions.
QUESTIONER: A follow-up question. So if you're saying there's no single proposal at this point, then that means that at the meetings there's just going to be more discussion and no action will be taken?
MR. DAWSON: Firstly, the IMF—as I indicated, the formal decisions would be made in any event, you know. These issues tend to be made by the Executive Board. But some have to be done by the Board of Governors, which is not an IMFC meeting. The IMFC provides us with our policy advice and guidance as to what to do.
They will be discussing these issues, and we will see in the communiqué as to what the next steps that they see will be. At this point, there are number of proposals out there, and I'm sure that the process will be to see whether the number can be reduced or whether there can be a consensus. And I can't say at this point whether there would be.
But, as I indicated, the issues certainly are going to be discussed.
QUESTIONER: I have a question on Uruguay. And, as you know, the new leftist government in Uruguay is going to start talks with the IMF next week. And two questions: Does the IMF have a special policy for talking to a leftist government? And the second question is: And what are you going to talk about?
MR. DAWSON: In this case, we have a one-size-fits-all policy. We talk to all of our members governments. And what was the second question?
QUESTIONER: So what are the issues you are going to talk about?
MR. DAWSON: Well, I mean, in reality, as I think you will recall, the Managing Director did visit Uruguay last year, and in fact, he met with the candidate that actually became president. And we've had meetings with what was the presumptive economic team at that point, and the staff has remained in close contact. I don't have a particular brief to go into detail. We can provide more information on that. But I mean we have been, as is our custom, in touch with a broad range within the country. That's very similar to what we've done in other countries in a pre-electoral situation, and we're well prepared to establish or to launch discussions with the new government when they came in, because we already knew the new government and had good conversations with them.
QUESTIONER: I just want to double check that I'm understanding on the—you're talking about the single proposal. Are you talking about a single debt proposal?
MR. DAWSON: Well, I was responding to the question, which was a gold issue, but also it would go on to whether there's a single debt proposal. I mean the issue—
QUESTIONER: But when you refer to no single proposal, you're talking about no single debt proposal or no single proposal on gold?
MR. DAWSON: You'll have to explain to me what the difference between that is? Some debt—some proposals may involve gold. Some proposals may not involve gold. We are—that shows how far we are from being able to answer a specific question.
QUESTIONER: No. I understand that.
MR. DAWSON: —because the issue has not been framed to the point of view where you have a proposal that then says what resources will be mobilized for it.
QUESTIONER: I know. I just—
MR. DAWSON: So, but the answer to—
QUESTIONER: I mean the last thing I'd like to do is misunderstand you on this one. So if I'm—when you say there's no single proposal, are you talking about no single proposal on—for debt that involves gold?
MR. DAWSON: There's no single proposal in any regard. There's no single gold proposal. There's no single debt proposal. There is no consensus at this point.
MR. DAWSON: Okay.
QUESTIONER: On debt relief?
MR. DAWSON: Yeah. Or on both.
MR. DAWSON: Which is why perhaps, I don't think you should be waiting for something to come right out of it. This is a process that I think people have been expecting will take some time throughout this calendar year.
MR. DAWSON: The hope is that people can begin to have not only a common understanding, but beginning to work toward some sort of a consensus. But we are simply not there yet.
QUESTIONER: My follow-up question is on the managing director mentioned the issue of representation in the Fund in his speech the other day. Has that issue gained momentum for this meeting or is it also still in the works?
MR. DAWSON: I mean it has been an issue at every single IMFC meeting that I have attended, and I think this is what? Our 11th IMFC meeting? I think it's something like that. So that's five and half years, and it was an issue I'm sure before then. It is an issue that is being addressed in the context of the strategic review as well. Voice and representation and Fund governance are regular issues. I think you will see a number of our members when they come here for the spring meetings talking about the issues.
So, yes, it is there. I think we'd have to do some rather fine tuning of calibration as to say whether it's higher on the agenda or lower on the agenda than before. It is always an issue of discussion, and number of our members I think feel quite strongly in that regard, and you probably don't even have to do a Google search. You can just limit yourself to Reuters and see stories almost every week on member governments speaking out on that subject. And in fairness, I should also say an AP search and a Bloomberg search as well. And a [inaudible] TASS search, too.
QUESTIONER: Probably not TASS. Russia is—
MR. DAWSON: Russia likes its quota?
QUESTIONER: Russia is still pining about the days of Josef Stalin, when we could have joined the IMF at the beginning and have had the second largest vote on the—
MR. DAWSON: Indeed, I do remember Mr. Primokoff visiting the U.S. Treasury when the then Soviet Union was getting ready to join and noting in a meeting that I happened to attend, because I was in the U.S. government at the time, that he did indeed think that Russia deserved a 13 percent share, which was I believe is the number that had been negotiated in 1944.
QUESTIONER: I was not asking for that, even though it may come up at some future point. But yeah. About this issue of voice. Building up on the previous question, is there a single proposal? Are there a number of different competing proposals? What's the situation, and do you expect any specific results from this session?
MR. DAWSON: No. I think, as I indicated, it is an issue being addressed in the context of the strategic review. It's an issue being brought up by a number of our members. So the obvious answer to your question is no, there's no single proposal.
There have been, however, in recent years, a number of proposals in that regard. The staff does technical work on different ways the quota formula might work. There have been groups such as the G24 that have produced a paper—Ariel Buira wrote a paper on adjusting basic votes and shares. There have been other ideas elsewhere you'll see occasionally. From Europe, for example, some in Europe are talking about consolidating the chairs. Others are not consolidating chairs. And so that there are lots of ideas out there.
This is even further away from proposal I think than on the other side, but it is definitely an issue being discussed, 'cause, as I say, there are a number of members who feel quite strongly that the pattern of representation, voice and representation is—should be changed.
QUESTIONER: Since I have the mike. The biggest issue of the day in Russia is, of course, paying off the debts to the Paris Club early, and it's a matter between Russia and the Paris Club, even though if the IMF could say that we recommend the Russians pay off the debt without a haircut or maybe even with a surcharge. I just wanted to ask you for a comment on how it's generally done, because people who argue for a haircut say this is logical. People who argue for a surcharge on the debt say it's logical. People arguing for the nominal value of debt repayment say this is logical. How do you do that at the IMF first of all?
MR. DAWSON: We provide technical advice and assistance as requested to the Paris Club and don't provide advice on what approaches should be taken. So I think that question is best addressed to the Paris Club.
QUESTIONER: No. But when—
MR. DAWSON: Paris Club members.
QUESTIONER: But when debts are repaid early to you, how do you do that? Is it repaid at nominal value?
MR. DAWSON: I mean obligations are paid at whatever the payment plus accrued interest is. Yeah. Whatever the accrued interest is.
QUESTIONER: Do you regret that China will send a lower delegation to the spring meetings?
MR. DAWSON: Well I saw the story on that in that regard, and I'm not entirely certain that that is necessarily true. I think you'd have to take a look at spring meetings and the level of representation in the past. I think we just have to check to see whether that's, in fact, the case.
I've seen that comment, but I don't know, in fact, that that is true, because spring meetings sometimes—not sometimes—quite often have different levels of representation than fall meetings. And so there are many cases where countries do not send the Governor or the Minister for a spring meeting. And I just—I honestly don't know whether that is or isn't the case this time.
QUESTIONER: And again, a follow-up if I may—
MR. DAWSON: Following up on his question?
QUESTIONER: Yeah. And a follow-up to the question about China's representation. A while ago, we discussed in these briefings with you, the possibility of the North Koreans attending. Any news on that?
MR. DAWSON: I've heard nothing more on that subject.
QUESTIONER: Since the Argentina press is traveling, I'll take their place.
MR. DAWSON: Everyone is on the way to Okinawa?
QUESTIONER: Yeah. The Argentinean question. Two things. One I imagine that Lavagna, Minister Lavagna, will be coming, and I wonder if there is any meetings scheduled with Mr. de Rato, or what is going to happen with the negotiations that are going on right now? And the second thing: In your last briefing, you mentioned that the IMF wouldn't ask Argentina to reopen the debt exchange, and that that was an issue between the creditors and the government. However, after that, there was a statement regarding, you know, saying that the IMF was reviewing whether it could lend to Argentina, and that's when we suggest that this is an issue for the IMF as well. I mean, it's not only just the creditors and the government that the IMF is looking at this. And that's, you know, what happens with these people who didn't take the debt offer.
MR. DAWSON: I think the problem, though, and there was a very, very specific question, and I gave too specific an answer as opposed to the broader answer, which you have the statement that was put out a week ago, on Monday, I believe. But in addition I would just repeat it and make sure we get it clear is, if there were a future Fund program the authorities would need to develop a realistic strategy to deal with non-participating creditors, non-participating meaning those that did not participate in the swap of debt exchange.
And, I can—besides a week ago Monday's statement, I can also direct you to the Managing Director's speeches that's he given, both at the IIF meeting in Madrid last Friday, as well as earlier this week in Georgetown.
So clearly, the need to have a realistic strategy to deal with the non-participating creditors is important in the context of the future program. It's also obviously of interest to the Fund in any event.
I should note, you know, I guess the first part of the question had to deal with the visit of Minister Lavagna, or the attendance of Minister Lavagna for the spring meetings. And yes, it is my understanding he will be attending. I'm not aware of a specific meeting having been scheduled, but that's simply because I haven't seen the list of meetings at this point. I have no doubt that they will be seeing each other in any event because if the Minister is here, among other things, there's the IMFC luncheon. [Clarification: Minister Lavagna, due to the normal rotation of constituency representation, will not attend the luncheon. But he will participate in the IMFC meeting.] So, if there is such a meeting, I'm sure the authorities will be happy and we'll be probably the first to announce it.
QUESTIONER: Can I ask a quick follow up?
MR. DAWSON: Yes.
QUESTIONER: On this issue of the realistic strategy, can you—do you have any guidelines or what are the principles in the strategy? And will—could it involve reopening the exchange debt?
MR. DAWSON: I think the approach takes place in the context of our lending into arrears strategy, which you can look up and see sort of the basic elements of it, but I don't think I can go beyond that, because we have to do it in that, again, as I said, in that context.
QUESTIONER: On Ukraine. The Ukrainian President just visited Washington. I understand he did have some high-level meetings at the Bank and the Fund. And could you tell us what was discussed and in general whether the cooperation with Ukraine is acceleration now?
MR. DAWSON: Just check my notes. No, I don't have anything—any report on the actual discussions. So we'll have to get back to you on that aspect of it, but, I would reiterate, as I've indicted before that we do stand ready to assist the new authorities in their reform efforts, through both cooperation, technical assistance, and, should the authorities desire, a Fund program. But I don't have a read out on a meeting, and we will get back to you.
QUESTIONER: You went over this at the last briefing we had with you, but what again is going to be at the top of the agenda for the meetings and can you give us little bit on the—just the logistics, the security permit area. Are you expecting protesters? That sort of stuff.
MR. DAWSON: I don't know about permit requests, whether we've had any or the authorities have received any. Obviously, people are free to express their views on the institution. We will be taking, of course, the appropriate precautions. But I don't have any sense of extraordinary or any changes since from previous meetings.
With regard to the agenda for the meetings, as I indicated at the outset, the agenda itself will be formally published, but clearly the meetings traditionally have as sort of the capstone a review of the state of the global economy, and I think you'll get a read out on that on Wednesday from Raghu Rajan in terms of how the Fund views the global economy. Then the—at the Managing Director's press conference on Thursday, I think that issue will be touched on, of course, but as well as the issues that in a more formal sense are facing the Fund itself, where we are, as I think you all know, undergoing a so-called strategic review or medium-term review or medium-term strategy. That is a work in progress that has been going on for—since at least the beginning of this year, and will continue for the rest of the year. And a report on that is being—will be provided to the IMFC in the context of sort of a general report on Fund activities, the so-called umbrella paper, that will be released to you around the time the meeting starts. That's our tradition for it—sometimes the day before the meetings start.
I mean there's been a lot of work within the Fund on various of our, you know, reviews of programs, conditionality, and so on—the IEO, of course, continues to be active, and reports on all of that will take place.
There—as is traditional, of course, will be a specific discussion and review of our activity in low-income countries. And that, while that takes place in the context of the strategic review, it is also an important part of our day-to-day work, and that will be subject of discussion.
And back to the earlier question on voice and representation, as I said, that also is part of the strategic review, but the members certainly will bring that up themselves.
All of these issues were, to a degree, addressed earlier this week when the IMFC deputies, which is a sort of a deputy minister level, met to sort of prepare the agenda, and I think that's a decent sense of what the agenda is coming up. But it all takes place in the context of the global economy, and I think you'll get—well, Raghu Rajan did a briefing on the analytical chapters yesterday, and the embargo was lifted and so there are stories on that. And he'll go more into our views on the global economy next Wednesday.
Thank you very much, and we will lift the embargo at 15 minutes past 11:00 a.m., Washington time, which is whatever it is in—at 1515 GMT time.
IMF EXTERNAL RELATIONS DEPARTMENT