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IMF Quotas -- A Factsheet
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Transcript of a Press Briefing by Thomas Dawson|
Director of External Relations International Monetary Fund
Tuesday, September 13, 2005
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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. As usual, the briefing is embargoed until about 15 minutes after conclusion, and we will set the precise time at that time.
As you know, the World Bank and IMF Annual Meetings officially convene on September 24th and 25th here in Washington, and I would like to remind you that the deadline for press registration is September 16th. The Annual Meetings will include in the International Monetary and Financial Committee on September 24th, Saturday, which will touch on the state of the global economy and what the Fund is doing to strengthen its activities in the world's poorest countries. The IMFC which is a ministerial level body will also discuss the Managing Director's medium term strategic review which is I think a work as you know has been under progress for much of the last year. It is being finalized now and in fact will be made public early next week and we will give you some information about having it on an embargoed basis for the actual release date.
I would like to remind you that the initial press schedule for the meetings is posted on the meeting's Website and will be updated as various briefing details are finalized, so keep checking at the site for the most up to date information.
There are several public events between now and the Annual Meetings that are fixed and I would like to draw your attention to. On September 14th, that is tomorrow, the Managing Director will speak at the United Nations 2005 World Summit in New York. I expect that we will release the text after the address. There is also a Summit related round table on Thursday, September 15th that the Managing Director will participate and which will explore issues surrounding financing for development. Press should consult the U.N. Press Office for full details about the Summit. Mr. Murray will be up there for those of you who are traveling or those of you who are watching who may be in New York as well.
The World Economic Outlook will again be released in two parts. The analytical chapters of the latest WEO will be released publicly at 11:00 a.m. Washington time tomorrow, September 14th. Journalists have already been given advanced embargoed access to the chapters via the Media Briefing Center. Just a gentle reminder that embargo breaks will mean that future access to the center will be blocked for those who break the embargo.
Chapter 2 looks at existing global economic imbalances through the lens of savings and investment across the globe. Chapter 3 focus on how developing countries can build the sound political and economic institutions that are essential for promoting economic growth. And Chapter 4 analyzes inflation targeting in emerging market countries.
IMF Economic Counsellor and Director of Research Raghu Rajan along with the authors of those three analytic chapters will conduct a telephoned conference call on September 14th with the press, to review the chapters before the embargo expires, and if you are interested in that, touch base with some of the media officers.
The Global Forecast Chapter 1 and Table 1 of the WEO which includes the staff's projections and policy analysis will be released at 9:00 a.m on September 21st. That is a week from tomorrow. Mr. Rajan will also conduct a live press conference starting at 9:00 a.m. on that date, September 21st, here at Fund headquarters.
Later this week, Thursday, September 15th, Gerd Häusler, Counsellor and Director of the Fund's International Markets Department, and Hung Tran, the Deputy Director of the Department, will hold a press conference in Frankfurt at the European Central Bank to review the Fund's latest Global Financial Stability Report, our semiannual publication that examines trends and issues that influence world financial markets. Contents of the report and Mr. Häusler's press conference will be under embargo for release at noon Frankfurt time on Thursday the 15th. Again, advance access to the report will be made available under embargo through the Media Briefing Center, and Media Relations has I believe circulated the details on that.
Now I would be happy to take any questions that you may have. I know a lot of attention is focused on the meetings up in New York this week which is why we held the briefing here on Tuesday.
QUESTIONER: I have two questions. The first one, the economic oulook. Does the economic outook take account of the impact of Hurricane Katrina or not? The second one is an Italian question. Will Mr. Fazio be welcome at the meetings next week or—anticorruption applies in this case?
MR. DAWSON: I think I will not answer that latter question. Who is in the Italian delegation is of course up to the Italian authorities.
With regard to the first question, yes, the World Economic Outlook does indeed incorporate our views as to the impact of the devastating Hurricane Katrina both in terms of the immediate impact as well as for projections. You can understand I am not in a position to indicate what that is, but certainly the Fund's staff have been updating their estimates to take that into account and Mr. Rajan will be speaking to that next week.
QUESTIONER: [Inaudible] which is controlling the exchange rates—what is your response to that?
MR. DAWSON: The IMF in fact has no mandate to control exchange rates, and perhaps you're paraphrasing Mr. Bergsten.
Mr. Bergsten and any number of outside observers have a variety of views on causes, effects, consequences and measures to be taken in the broad picture of global imbalances. The Fund, I think, has a well-articulated view, and we certainly do not believe that we have dropped the ball. Those are good questions that you might wish to ask Mr. Rajan next week or the Managing Director, a week from Thursday, at his pess conference.
Certainly we take seriously our responsibilities for multilateral surveillance. Indeed, if you take a look at both staff and management's speeches and commentary and analysis on global imbalances, you will see that we have been very, very active in terms of calling for action on global imbalances. So I just quite frankly think that Mr. Bergsten is incorrect.
QUESTIONER: I have a question on debt forgiveness, the G-8's plan. Are you at all concerned that it is in danger of falling apart? What would you say are kind of the sticking points, the points of concern from your organization's standpoint? And what do you think will be accomplished at the meetings?
MR. DAWSON: Well, I think that a little bit of historical perspective on this proposal is appropriate.
At the finance G-8 meeting, back in June I believe it was, the ministers put forward a proposal for debt relief that in particular was directed at the Fund and World Bank, and they asked that the institutions consider their proposal at the Annual Meetings, and those Annual Meetings will be taking place approximately 12 days from now.
As far as the Fund is concerned, we are on track for precisely that. We will be considering their proposal during the course of the Annual Meetings. Work has been going on in that regard. And I certainly do not see from the point of view of the Fund in working on this issue that anything is falling apart. In fact, I do not even think that things are off track. I do expect that discussions will take place.
The Board as you know has had informal and as well as formal discussions on this subject—and when I say Board I mean our Executive Board—and they are continuing to do so. If there is additional news from our point of view prior to the Annual Meetings, to be held on the 24th and 25th, we will let you know. It is entirely possible we will have a little bit more to report.
But as far as I can see and as far as I say, we are essentially on track for the timetable that was set forth by the G8 Finance Ministers in calling for the Fund to consider their report, their proposal at the meetings. It is a matter of some urgency, but I would also note I think we continue to be on track.
QUESTIONER: I have also two questions. One is a technical one about guests. We normally check with you before the sessions about any unusual visitors. Do you expect, for instance, the delegation from North Korea to attend?
MR. DAWSON: I'm not aware of any unusual visitors.
QUESTIONER: Just checking. And obviously I am more interested in my own country which is Russia. I wanted to ask you about draft budgets submitted by the government and especially in regards to raising the cutoff of oil price for the stabilization fund, and also raising expenditures in the budget. Thank you.
MR. DAWSON: In terms of the present context in Russia, fiscal policy has offset so far much of the oil stimulus arising from the recent developments. However, the underlying fiscal stance, in other words, abstracting from the windfall, is being relaxed rapidly. And this loosening, which was more moderate until recently, is set to increase significantly following the amendment of the budget for 2005 and the draft budget for 2006.
I think the latter involves, and I am sure you know this, the increase in the benchmark price above which oil revenues are put into the stabilization fund from $20 a barrel to $27, thereby increasing the amount of money that can be spent.
This relaxation is taking place at a time of tightening general resource constraints and we do think that it is likely to contribute to inflationary pressure and the faster pace of real appreciation of the ruble.
Once inflationary pressures abate, there could be considerable scope for some fiscal relaxation in Russia. I would note that the oil windfall offers a unique opportunity for accelerated structural reform including social sector reforms.
So I think that is where I guess I would leave it. It is certainly something we are taking a look at, but there are clearly some concerns on the inflation front, but obviously there is a substantial amount of resources that have become available and I think it is incumbent on the authorities to make sure it is used in an appropriate fashion that does not contribute to inflationary pressures but also allows some of the structural reforms that have been a bit delayed to be pursued.
QUESTIONER: How soon do we expect a ruling from the IMF regarding Zimbabwe? A ruling on whether or not they should be expelled from the IMF?
MR. DAWSON: We put out a press release on the 9th of September on the Board Meeting and that basically indicated that we did in fact consider the complaint and that the Board has decided to postpone the recommendation to the Board of Governors for 6 months, and I would draw your attention to Press Release 5/205 from the 9th of September that goes through that.
So essentially this is a process that has been on sort of a 6 month review and it will be postponed for another 6 months, indeed, reflecting the fact that there were payments of some $131 million since the last review and the authorities have indicated a desire to fully eliminate arrears in the next couple of months. And we have been of course in discussion with them on policy measures, although there is clearly a lot of work remaining to be done in that regard.
QUESTIONER: Are the negotiations with Argentina stalled, and which kind of signal are you expecting from the government? What do you expect in the next Annual Meetings?
MR. DAWSON: Well, certainly the authorities will be up here. I'm not quite sure who is attending. I was actually with Guillermo Nielson yesterday and I know he is going to be here.
But to be quite frank, there have not been any specific developments since my last press briefing. As always, we maintain an active dialogue with the authorities both through our Buenos Aires resident representative office and with our headquarters based staff, and when there are additional developments I will let you know.
But as I said, there has not been anything in terms of any announcements. Clearly we continue in contact with them.
QUESTIONER: In terms of the debt relief, just to jump back again, what would the IMF like to see in terms of resources being made available to it to pay for total debt cancellation?
MR. DAWSON: I think you best go back and look at some of the comments we have had in the past, but to summarize it, the bulk of the resources for debt relief involving the IMF under the G8 proposal come from resources that are within the Fund itself, either the Fund's own resources or contributed resources from donors and various trust funds that exist. That is where the bulk of the assistance would come from, so in that sense, much of the money is already there.
There are some issues regarding some of the protracted arrears cases, countries that are not under this proposal but for whom there are substantial arrears, some issues regarding possible needs to top up assistance in certain cases, possibilities of needs for--facility and so on, all of which are described in the G8 communique, but also we have commented on that this also could, conceivably, require resources at some point.
But the case of the Fund, unlike other institutions, is that the bulk of their resources are already identified within the Fund. We do need to assure that we can go forward with our activities in countries, with our low income member countries going forward. But it is, as I say, a different issue than with other institutions because we are largely dealing with financing that already is within the Fund and it is a question of how it is allocated.
There are some issues regarding additional financing that might be necessary, but it is not something I would lead you to believe is what the issues are right at this point. I think at this point it is rather more of a discussion with technical implications and coverage of the proposal which is why I think we are in the situation where I am hopeful that we will be able to meet the sort of time line that we've already indicated we would like to.
QUESTIONER: Can you use these quotas to help—not quotas, but resources, without increasing quotas?
MR. DAWSON: Yes. That is a good question because these are in fact segregated, resources that are concessional in their nature, so they do not come out of ordinary resources.
One of the lessons learned over the last 30 years in this institution was that ordinary resources being made available for the very low income countries is not a very effective way of providing assistance because they cannot afford those terms, and that is why we have these special funds, some of the Fund's own resources, some as I say donated resources, trust funds, that are earmarked particularly for those purpose.
So it is separate from the issue of what we call ordinary resources or what I think your question would have said, quota resources.
QUESTIONER: On Zimbabwe, is there any precedent for a Central Bank Governor coming as Mr. Gono did last Friday to present his case to the Board? How does the Zimbabwe situation compare with other overdue debtors like say Sierra Leone or Sudan or Zaire earlier?
In terms of the policy measures, it is said that Zimbabwe has had to gather up this foreign exchange to make that payment you referred to by going after really money that was going to pay for food imports, et cetera.
What specific items does the Fund want to see from Zimbabwe? Mr. Gono said after the meeting that he has got a whole package of things that he indeed will put into place. What does the Fund want to see happen next?
MR. DAWSON: In terms of the areas where we think activity is needed, I would direct you to our press statement from the 9th which indicates the areas. It is a wide range of policy measures that need to be addressed in the fiscal monetary, exchange rate, structural, social safety net areas particularly for the most vulnerable groups in the society. So it is a wide range of actions that need to be taken.
With regard to the precedent question in terms of a country making its case in the context of compulsory withdrawal, there have been few occasions where compulsory withdrawal has actually come to a head, but I do believe in fact—it is established under our rules that the representative of the government can and indeed has the right to come to the Board or come to the Board of Governors in certain cases to make their case, and this has happened in the past. We can research that for you. It has not happened recently because this has not been an issue that has come up.
With regard to some of the countries that you mentioned that were perhaps comparable, I would also note in some of those cases it has been clearly been complicated by the fact that for substantial periods of time and in some cases on a continuing basis there have not been effective established governments. And in terms of the three protected arrears cases, that is something that has distinguished much of their record over the past few years.
I think the only part of the question I have not answered—and certainly they came forward with these resources. I do not have details as to—I have read in the press stories as to where the funding came from and so on. I am not in a position to characterize them or to qualify them and say whether they are active or not, but some of the press stories indicated that they came from export earnings that had not yet been remitted to the government, but that is all I know in that regard. That did, as we noted, make the payment.
IMF EXTERNAL RELATIONS DEPARTMENT