Transcript of a Press Briefing by Thomas C. DawsonDirector of External Relations Department
International Monetary Fund
Thursday, January 12, 2006
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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 press briefings. As usual, the briefing is embargoed until approximately 15 minutes after conclusion, and we'll set the precise time at that point.
This is our first briefing of the New Year, and I'd like to wish everyone, including those of you who are here virtually, happy new year and a prosperous new year. I'd like to flag a couple of items before I take questions.
The visit of the Managing Director to Brazil concluded yesterday, and the Managing Director's remarks in Brasilia entitled "Brazil Resurgent" and a concluding press release have been posted on the Fund's external website. At this point I don't have any further travel or public engagement plans to bring to your attention, although also to flag for you I do expect we'll have another briefing in two weeks.
A brief comment about events at the Fund. On Friday, the 13th, tomorrow, at 12:30 here at the headquarters, the Fund will hold a Book Forum entitled "Growth and Poverty Reduction in Armenia," led by Mohsin Khan, the Director of our Middle East and Central Asia Department; Enrique Gelbard, one of the book authors and former mission chief to Armenia; and Johannes Linn, Executive Director of the Wolfensohn Initiative at Brookings and, I think many of you may know, a long-time World Bank senior official; and finally, Saumya Mitra, Lead Economist in the Europe and Central Asia [Region] of the World Bank. And as usual, information is available on the Fund's external website. The Forum is open to the press and you're all invited to attend.
I would also —before turning to questions, I'd like to welcome the press watching via the Media Briefing Center's webcast. Please feel free to submit questions. I'll do my best to answer them. But if I don't get around to them, a member of the Media Relations staff will follow up after the conclusion of the briefing. Thank you very much, and I'll be happy to take your questions.
QUESTIONER: Predictably, this is about Turkey and bird flu. Anne Krueger the other day told Reuters that she wouldn't worry about Turkey [inaudible] limit the spread of bird flu. Now, given the fact that the disease has spread to more than one-third of the country, do you think it's [inaudible] enough to pose a threat, and are there any comments, any updates?
MR. DAWSON: Well, I don't think I am or the institution is in a position to talk about the public health aspects of it, but certainly the recent outbreak of avian flu virus in Turkey is of concern and is being closely monitored by the staff, and we welcome the authorities' close cooperation with the relevant international organizations and the steps taken to increase public awareness of the disease. It is, of course, an issue that we are following not only in the Turkish context, but for the possibility of further spread of it in other regions.
QUESTIONER: Does this have to do anything with the program? Do you think [inaudible]—
MR. DAWSON: At this point we don't see a program impact, but obviously we're looking at it to see how things develop.
QUESTIONER: Russia, Ukraine, the price of gas. I guess I could talk for a while about how often—
MR. DAWSON: Are you pretending that you're Senator Biden?
QUESTIONER: Senator Biden? [inaudible]
MR. DAWSON: You're not spending enough time watching the Supreme Court hearing.
QUESTIONER: Right. I just wanted to say the IMF has called for world prices on energy resources quite a number of times, so I guess the question is very simple. Should the prices be raised to world levels?
MR. DAWSON: Well, I mean, certainly—first of all, with regard to the present dispute, we are obviously not a party to the dispute and do look at it to make sure that it doesn't wind up having adverse economic impacts. With regard to the general approach toward energy market prices, we do believe the prices, domestically as well as internationally, should aim toward being world market equivalent prices. That is not something, however, that, of course, is done overnight, and there often are various balancing considerations into it, and we think that it's an approach that needs to be worked out on a mutually agreeable basis, and when I say "mutually," it isn't necessarily that there are just two partners, as well. Obviously, in the context of Ukraine, there are various suppliers, there are transshipment issues, et cetera, et cetera. So I think I would just leave it at that.
QUESTIONER: You briefly referred to adverse economic effects. How can one actually work this into the calculation? If it—
MR. DAWSON: When I was referring to adverse economic effects, I was in terms of unanticipated and disruptive effects. I wasn't necessarily referred to particular levels. I mean, our views over time on the role of market prices in energy and the appropriateness of market-oriented prices to assure the good allocation of resources, that is a longstanding position of the Fund. When I was talking about disruptive effects, I was talking about uncertainties, cutoffs, et cetera.
QUESTIONER: Tom, the impact of the bird flu on not only Turkey but generally on economies, where would the Fund be looking at very specific things to ensure that governments are prepared for this, such as the public finance-
MR. DAWSON: Well, as I indicated, other multilateral agencies, such as the World Health Organization and the World Bank, are better placed to address the public health aspects of avian flu and of any possible further outbreak or epidemic outbreak.
However, the Fund is, of course, monitoring the situation in our member countries where cases of flu have been identified. We're doing work to examine potential economic and financial implications and addressing preparedness and contingency planning in our discussions with member countries and indeed in our own operations.
Our responsibilities, to repeat, don't relate to the public health aspects, but we can help contain adverse economic and financial impact by supporting member countries' efforts to put in place contingency plans for the functioning of vital economic and financial entities as an example, providing policy advice, if necessary and where needed, financial support in the event of an epidemic. And this would help ensure that inappropriate macro policies and financial constraints don't aggravate what could be an already difficult situation or in some countries already is a difficult situation.
QUESTIONER: If I could just come to Chad. We saw [inaudible] from Anne Krueger regarding Chad. There is support, obviously, for what the World Bank has done, and the question now is: Does it effectively suspend as well the program—I mean, the program has been off track since last year. But does this effectively suspend that program? Is there any more work going on with Chad?
MR. DAWSON: As you noted, Ms. Krueger, as acting Managing Director on Friday, I believe it was, did issue a statement, and management does support the decision by the Bank. We have been working with the Bank for several months in discussions with the Chadian authorities on the issue of the Petroleum Revenue Management Law.
In terms of our own role, which is, I think, the new part of your question, we have been supporting the Chadian government's policies under a PRGF arrangement approved in February of last year. The First Review under this arrangement, which included an assessment of performance through end-June '05, has not been completed, largely because of a deterioration in fiscal performance. Satisfactory resolution of the issues surrounding the amendments to the Petroleum Revenue Management Law, coupled with actions to address the deterioration, correct the deterioration of fiscal performance—that has already occurred—would be an important step toward completion of the First Review under the PRGF arrangement.
So, indeed, the review has not been completed. There were fiscal issues already outstanding. The Petroleum Revenue Management Law is an additional issue that will need to be addressed as we try to go toward completion of the review. And we are committed to continued dialogue with the authorities in the hope that a resolution of the issues can be reached as soon as possible.
I'd like, by the way, after six and a half years, to commend my staff for finally having my country briefing all aligned in the same way, so I no longer have to make the 180-degree rotations of the book. So thank you very much, Media Relations staff.
MR. DAWSON: I won't touch that one. Okay. Back here?
QUESTIONER: I have two questions. The first one on Iran. Could you just remind us if there are any programs or activities of the IMF going on in Iran? And the second one is on Italy. Do you have any comment on the new situation in [inaudible] Italia and on the nomination of Mr. [inaudible]?
MR. DAWSON: In Iran, in terms of the economic situation, it has been and remains favorable, although we have been indicating a need for monetary and fiscal tightening to deal with inflationary pressures and the vulnerability to a possible decline in oil prices. I think that's basically all we have. We take note that the new cabinet is in shape and that's it. I guess part of your question, just to remind you, it's publicly—the history, at least, is known. We have an Article IV process with Iran, as we do with all countries. A mission took place late last year, and at some point in the near future, there will be a Board meeting to discuss the Article IV consultation. We don't have a date for you now, but, you know, we will be indicating when that would be.
As far as Italy goes — [indicating his briefing book] this is proving, by the way, that I think the European Department now may be the largest department by countries that we have— the Article IV mission [inaudible] concluded, as I think you know, on November 2nd, followed by a press conference. Our assessment of the situation is that cyclical conditions are improving, although some more tentatively, and growth is, in fact, expected to strengthen in 2006. The policies until the April election should focus on expenditure control, as envisaged in the 2006 budget. Our view is that the next government's main priority should be fiscal consolidation and passage of the structural reforms necessary to enhance the flexibility in competition and create a more competitive Italy.
We obviously take note of the resignation of the former Governor and the appointment of Mario Draghi, someone very well known to this institution, as the new Governor, with a fixed term introduced by the concurrent reform of the financial oversight system. As I think you know, as I think we noted, the Managing Director sent a message of congratulations to the incoming Governor.
The passage of the long-delayed reform of the financial oversight in December, including with respect to the Bank of Italy's governance, is welcome and we think should help restore credibility in the financial system in particular.
QUESTIONER: The Japanese Finance Minister Tanigaki has met with the Managing Director—
MR. DAWSON: I think he's meeting with him right now, actually, yes.
QUESTIONER: Do you have any comment on this meeting? And I'm wondering if they are talking about the Japanese deflation and the Japanese financial policy?
MR. DAWSON: It's my understanding this is, you know, a normal visit, and in that context it obviously would discuss not only the global economic situation but the situation of the Japanese economy as well as of the region, and possibly other issues as well. I will see if we can have you a press line after the meeting.
I'm not quite sure when the meeting was supposed to start, but they were still gathered outside—I think it was supposed to start around 9:30, but they were still gathered outside the last time I walked by the Managing Director's office. So it may be a little while before I get an answer for you. We'll get back to you.
QUESTIONER: Can you speak a little about Argentina and Brazil? With the debts being paid off, are there any plans for a new direction for the IMF, having $25 billion more in the bank that you guys didn't anticipate having this time last year? Or are you just planning on holding onto that and waiting for a rainy day?
MR. DAWSON: Well, actually, the way the financial structure works at the Fund is we don't hold onto it. It goes back to our member countries. I mean, we are a credit union, as it were, and when money is repaid, it's credited to the members' accounts. So the Treasurer's Department, which used to worry about being repaid, is now making sure that we repay the people that we got the money from to begin with. So, indeed, our liquidity ratio is at a high I think basically not seen since 1990 in terms of the ratios, adjusted for the size of the institution.
As I've indicated before, there's a certain cyclical element to this. If you have a global economy that has been growing rather strongly for a number of years, you would hope that Fund exposure declines. We are supposed to be an institution that lends money to countries when they enter into difficulties, often because of a difficult situation in the global economy generally. And when the economy improves, it certainly is our desire to be repaid. We are not in that sense a development institution whose raison d'etre is to have a portfolio of projects that in one way or another may even always be growing. That is not the way the Fund is. We are a revolving credit institution, and that our loan exposure may decline from year to year is unambiguously a good thing, not a bad thing.
In terms of our relationship with the countries involved, I think I can do no better on this question or almost any other question than direct you to a speech by the Managing Director, comments by the Managing Director in Brazil yesterday, which noted—as well as President Lula da Silva, in terms of noting that, yes, indeed, in the context of Brazil, this is an opportunity for the Fund and Brazil to go forward with a somewhat different relationship than in recent years, although Brazil has, again, not always been a borrower from the Fund.
And we have a surveillance responsibility in working with Brazil. We have a variety of cooperative arrangements, with a training center, for example, in Brasilia, and so they will be, as they have been, one of our member countries with whom we work quite closely. And given the prominence of Brazil, both in the region and, in fact, globally, I think there will be plenty of opportunity for mutual work together, and I think President Lula indicated that yesterday. Brazil, among other things, is interested in the issue of governance and representation in the Fund, and that's an issue that is high on our agenda here going forward. So I think there's plenty to be going forward.
You asked also on Argentina. Indeed, they also repaid us. Again, the Managing Director has indicated that this is an important turning—an important point for Argentina going forward in terms of how they develop, attempt to strengthen and continue the recovery of the Argentine economy, and that's the challenge that they're facing.
So a non-lending, non-borrowing relationship with the country doesn't change the fact that we have an ongoing relationship with the country in the context of the obligations of membership, as looking at Mr. Sitov, who is shaking his head, not because I think he's falling asleep, but he's nodding because in the context—the same question I believe he asked in the context of Russia when Russia repaid, and we have continued having a close relationship and involvement with Russia, including voicing our views on the developments in the economy. So I think you might look to the relationship with Russia as an example—a country who also paid us back when everyone actually had said the money had been stolen.
QUESTIONER: Do you have any meetings scheduled today with the Russian Finance Minister, Mr. Kudrin?
MR. DAWSON: Not to my knowledge, but I'll have to get back to you. Do we? No? Okay. I don't believe so. If that's not correct, we'll let you know.
QUESTIONER: And if you could—on the Ukraine and what is in the mystery book, what is the latest update on the Ukrainians, who seem to be going from crisis to crisis? This current government has been in place for a few months only. The previous one was not long-lived either. And now they have this gas thing. So what's the immediate expectation for the—
MR. DAWSON: Okay. I'll give you—you asked me to refer to the book. Growth eased significantly in 2005, reflecting a less buoyant external sector and slowing investment demand. And inflation, despite some recent deceleration, is still a pressing concern. And so we think attention to the short-term macro policy is needed, and we think the key short-term challenge is to stem those pressures, inflationary pressures, while preserving growth. And we think critically to that will be a prudent fiscal stance in 2006, a monetary and exchange regime that allows the National Bank of Ukraine to recover autonomy in conducting monetary policy, and a rapid improvement of the business climate.
On gas prices, staff has noted in the past that Ukraine's economy is very energy inefficient and receives a substantial portion of its energy in ports at the low market prices—a point that I indicated. As a consequence, the economy is extremely vulnerable to price or supply shocks. Therefore, we have advised the authorities to modernize the energy sector and move gradually toward more realistic pricing—a more realistic pricing structure for domestic energy use, which would also enhance the economy's flexibility in dealing with shocks. We stand ready to assist the authorities, the new authorities, in their reform efforts as they should desire.
I have a question from the online Media Briefing Center. Did the new Bolivian President-elect Evo Morales get in touch with the Fund or the IMF contacted him after his election?
The Managing Director has, in fact, congratulated the President-elect for his decisive victory in the recent elections, and we stand ready to work with the new authorities, and the Fund will be represented at the presidential inauguration. Scope, timing of policy dialogue will depend on decisions by the new elected Government of Bolivia.
QUESTIONER: Returning to the bird flu thing, you said two things. You said, on the one hand, that at this point you don't see a bird flu impact on the program. And on the other, you said that for related countries, you would be ready to provide policy guidance-
MR. DAWSON: If there is an impact.
QUESTIONER: And if there's an impact, if there's a need, financial support as well?
MR. DAWSON: If appropriate, yes.
QUESTIONER: What kind of talks are you having with Turkey on this bird flu matter?
MR. DAWSON: We have a resident representative. I'm not aware of what other contacts we have behind that, but Turkey is one of the countries that we are in very regular contact with because we have an active program relationship. So it is continuous, but I don't have particular meetings, dates, and so on to give you.
QUESTIONER: Do you have a timeline about when you can decide if there's an impact.
MR. DAWSON: No. It depends on the developments. But it's something we are keeping under constant, you know, review.
QUESTIONER: Mine is regarding the IMF reform. When can we see any sort of development coming out of—
MR. DAWSON: As you will remember from the Managing Director's report and subsequently there were a number of sort of—I will call them staff working groups that were set up, I think six or seven. They are continuing to work. Their process is to conclude the staff work end of this month into February. I'm not quite certain what the next—and, of course, discussions will be held with the Board in the context of a review of the reform at the Spring Meetings.
So that's sort of the timeline we're on. I think you could certainly expect at the Spring Meetings there will be a sort of follow-on document that would present, you know, some of the conclusions and implementation of that. So that's basically where they are.
Now I'm involved with a couple of the working groups, and we're basically all in the position of getting ready to have a paper that management will go over and that will then be discussed one way or another with the Board aiming toward the Spring Meetings as sort of the next checkpoint. But I'd be reasonably confident that there will be something for you to chew on in the public sense prior to the Spring Meetings, and not just, for example, a Managing Director speech on the subject, which I think we can also expect. But I, of course, will be looking at this from the outside since I am leaving at the end of the month. But this is not my last press briefing. There will be one in two weeks.
One last question.
QUESTIONER: Just precise information. After Brazil and Argentina paid back their debt, and after the debt agreement at the end of last year, how many countries are today in debt with the IMF?
MR. DAWSON: We'll have to get back to you. Again, we'll post it for all of you, but we'll give you an answer that will have sort of two parts. There are—because when you mentioned the Multilateral Debt Relief Initiative, I think it is useful generally, for the purpose of answering a question like this, to give the PRGF, kind of state of play, number of countries, etc., sort of in one column, and the ordinary resources, which are the quota resources in a different column. But we will provide that information in terms of number of programs in both categories, recognizing, of course, that in some cases programs are precautionary, i.e., they are not intended to be borrowing programs in any event.
QUESTIONER: And if you can put on the answer also the estimated global amount of the debt.
MR. DAWSON: We'll put out our total—again, we'll put out our outstanding credit from Fund ordinary resources, which are quota resources, and we'll also put out our outstanding loans to the low-income countries in a separate column, because they are different pots of money, and I find it most helpful to be able to put them in different pots.
MR. DAWSON: But we can provide updated material. Thank you very much. We'll lift the embargo at 15 minutes of 11:00.
IMF EXTERNAL RELATIONS DEPARTMENT
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