Transcript of a Press Briefing by Thomas C. DawsonDirector of External Relations Department
International Monetary Fund
Thursday, January 26, 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 about 15 minutes after conclusion, and we will set a precise time at that point.
I'm sorry to have gotten some of you here under false pretenses since you thought this was my last briefing. But as you may have noticed in a press release issued yesterday, Mr. Masood Ahmed has been appointed by the Managing Director to succeed me as Director of External Relations. Masood will assume the position on May the 1st, and the Managing Director has asked me and I have agreed to stay on until that point.
My notes here say that, "Therefore, you will have to be nice to me for another three months." What it actually meant to say was, "Therefore, my staff has to be nice to me for another three months." I have absolute confidence that I will continue to be treated by the press corps as I have been treated in the past.
Let me flag a few things before I take questions.
The Managing Director is traveling, actually today, to Davos, Switzerland, to participate in the World Economic Forum, January 27th to 29th. On January 30th, the Managing Director will have meetings with the Swiss authorities in Bern, and there are plans for press availability, which we will let you—give you further details on once the plans are finalized.
In addition, there is other travel that will be announced within the next sort of two-week window. I expect the next press briefing will be on Monday, February 6th. That is a little bit off cycle, but I have annual leave planned starting that evening, so we will do it a couple days early that week.
Now we will turn to questions, but before that, I'd like to welcome the press watching by the Media Briefing Center's webcast. Again, please feel free to submit questions. I'll do my best to answer them, but if I don't get to them, or if I can't answer them, someone from the Media Relations staff will follow up after we conclude.
And now I will be happy to take any questions that you may have. Again, observe proper etiquette and identify yourself and your institutional affiliation.
QUESTIONER: I have two things. Turkish authorities have admitted that there are fresh delays regarding the social security reform program. Will this affect the program?
And, secondly, do you have an update about the bird flu situation in the country?
MR. DAWSON: Okay. Let me take the second part of that question first. No, I don't have any new information or update from the Fund's point of view on the bird flu in Turkey or, for that matter, elsewhere. We continue to follow it, but I think the current developments are best—questions about those are best directed to the relevant institutions.
With regard to your first question, I should note that the authorities remain intent on pursuing early passage of the social security reforms, and we actually—we think we don't have any reason to expect unusual delays in completing the next program review. I think the record in Turkey is quite strong of pursuing their program and getting the measures that they have decided they need adopted. The reality is sometimes it takes longer than anticipated, but I think the track record of Turkey is exemplary in terms of being able to get their program approved in their legislatures.
QUESTIONER: `After Mr. Morales took office, I wonder if there has been any contact between the IMF office of Mr. Rato and Morales. And, also, I would like to know how—what's going to be the position of the IMF regarding Mr. Morales' government. How close are you going to watch his policies, especially since he has made very clear that he doesn't support some of the policies promoted by the IMF, and he made some people nervous when he said that he will nationalize the gasoline industry?
MR. DAWSON: Well, as I think I noted in the last briefing, the Fund was—intended to be and, in fact, was represented at President Morales' inauguration. Our mission chief and resident representatives were there. We look forward to working closely with the new administration to support their efforts and Bolivia's efforts to raise living standards and promote growth. And we look forward, when the new government wishes, to, you know, work with them and maintain even closer contacts than we have through our resident representative. And new governments and the Fund have a tradition of sitting down and working together, and I have no doubt that this will be the case with Bolivia and the new administration.
QUESTIONER: Talking about new governments, Liberia, has the Fund started any discussions with the new Liberian Government on a possible new program?
MR. DAWSON: Certainly we have congratulated the new President on her election and stand ready to assist the authorities in any way they wish. In terms of program negotiations or whatever, I don't—I'm not aware of anything. Obviously, there's the issue of the arrears, and I know the new government will be in contact with us on how to deal with that long-standing issue which they have inherited.
I don't have any more information on Liberia, and if we have any more beyond that, I will let you know.
QUESTIONER: I have two questions, if I may. One on Bolivia again. What is the relationship right now between the Fund and Bolivia? Is there a program? And if not, will there be a program?
And the second question is, you know, Argentina and Brazil have paid or plan to pay all their debts outstanding to the—
MR. DAWSON: Have paid.
QUESTIONER: They have, okay. And so these are really two big borrowers from the Fund, and the Fund makes money lending to countries. I wonder if these payments are going to have any kind of impact on the Fund and whether the Fund is considering other alternatives. I remember there was some talk about charging country for advice at some point. I don't know if this is a discussion that you're having on how to make money.
MR. DAWSON: In terms of the present state of play with Bolivia, as I recall, there is a program that expires within, I believe, the next couple of months. So that is the legal relationship. We, of course, did recently conclude the debt relief under the Multilateral Debt Relief Initiative for Bolivia.
In terms of a new program, I think it is inappropriate for me to be talking in that context. That is up to, of course, the new government. We do, of course, stand ready to work with them in whatever fashion they see as appropriate.
With regard to your second question regarding the impact on Fund finances, if I could phrase it, of the repayment by Argentina and Bolivia—I'm sorry, Argentina and Brazil, I would note that in the strategic review paper of the Managing Director published last fall, it was noted that indeed the Fund would be needing to take a look at Fund finances in the context of a period of relatively low demand for Fund resources. That period of low demand has now become more evident. In some sense of the word, it may have come somewhat earlier than previously anticipated, but that was coming—was, in fact, previously anticipated. And indeed the Fund is taking a look at those implications.
I believe we did release the midterm—or midyear, rather, review of the Fund's income position with a press release attached to it that touches on a number of those issues. The next phase of work under the strategic review of the Managing Director is underway now, and I think you will expect by the Spring Meetings there will be additional reports on that, and the issue of Fund financing will be examined in a bit more detail in that.
The current state of play is that the Fund's income position and reserve position is adequate for us to continue as we are doing now and take a look at what medium-term implications they are, whether it is in terms of broadening the revenue base, which is a way of describing what you just talked about in terms of charging for various forms of assistance or whatever, or other forms of work. One issue is investment of Fund reserves, which has been an issue that has come up in the past.
So those options are under consideration and under review, and you will be seeing on a continuing basis more in that regard. But for your first cut at that, I would take a look at the midyear review that was released—was it yesterday? A couple of days ago, probably on Tuesday. I think that's right—with the accompanying press release.
We are aware of interest in this subject, and we are making sure that we are open and transparent in that regard. In fact, I would note a press release for the midyear review is itself a somewhat unusual—I think it's the first time we've done that, and we did that precisely because—to draw attention to the fact that there are these implications and we're working on them.
QUESTIONER: What should be the alternative, Tom, to this problem? Because as I understand it, the IMF cannot invest the money they have, for example, in treasury bonds because of complications of being at the same time investing in a country and having to, you know, perform the reviews?
MR. DAWSON: I'm not entirely certain that what you've just said is correct. There are possibilities on investing Fund reserves, and—
QUESTIONER: But they are not doing it now.
MR. DAWSON: They're not doing it now because, frankly, it has not been necessary. But it is an issue that has been addressed in the past in the Fund and has been something that has been considered in the past, has proven not to be necessary.
What are the options you ask? Well, the options are new revenues or dealing on the expense side. That's fairly clear. And—
MR. DAWSON: Structural adjustment.
MR. DAWSON: Structural adjustment, sure. I'm planning my own structural adjustment.
QUESTIONER: Restructuring. Restructuring and adjustment.
MR. DAWSON: So let's be a little—you know, you can—I mean, those are the options, and those are what are being looked at, and I can guarantee you by the time of the Spring Meeting in April, you will be seeing more on that because this is an issue that is important for the membership to take a look at.
It is not something that is urgent in the sense of requiring any sort of immediate actions, but, you know, we are a prudent and a cautious and a conservative institution financially, and it is incumbent on us to do that, and we are doing it, and it was anticipated.
I saw a very interesting headline of yours this morning, Ana—
QUESTIONER: You don't have any deficit for the moment.
MR. DAWSON: I certainly don't, no.
QUESTIONER: I mean the IMF.
MR. DAWSON: No, and indeed, you know, the Fund will continue accumulating reserves, for example, on the projections. That came out in the paper that was released, I think on Tuesday.
QUESTIONER: How large is the expense side? What does it cost to—
MR. DAWSON: I don't have it right in front of me. Take a look at the midyear review. It is in there, what the expenses and the revenues are, and expenses. Just to make sure when you look at it, you need to look at it including capital expenses because we have, of course, the building and there are some other capital expenses that take place. So you should include all of that. It includes, of course—I mean, it's done according to internationally accepted accounting standards, and it is fully audited by an independent accounting firm, including set-asides for such items that are of particular interest to some, like Fund pensions. We have a fully funded pension plan, I should say for the record.
QUESTIONER: Yes, still, but the vast majority of the costs are personnel, obviously.
MR. DAWSON: I believe a majority, but I'm not sure whether I would say "vast majority" or not. That's one of the reasons why I made that point about capital costs.
QUESTIONER: So if savings have remained, it's probably [inaudible].
MR. DAWSON: Well, as I say, we will look at that. You know, those issues will be looked at. The Fund is an institution of—what?—approximately 2,700, I think, staff plus 300 in Executive Directors' offices. So it's 3,000 people. It's not an enormous institution by international organization standards or even governmental standards. But we are an institution that has a 60-plus-year record of being financially responsible, prudent, and successful, and I have every reason to expect that that will continue.
QUESTIONER: A couple months ago when the Treasury Department released their report about China's currency, they asked the IMF to look into the matter. I was wondering if there have been discussions between the IMF and the United States at this point as far as measures that could—
MR. DAWSON: Well, I don't think it is appropriate for me to talk about discussions between two member governments that are—a member government and the institution that are by their nature privileged.
With regard to the first part of your question, though, in terms of the Treasury's interest in that subject, as I believe I indicated at the time, a core—part of the core mandate of the Fund is surveillance and is, in particular, surveillance of exchange rate policies. That is—that applies to all of our member countries. It is part of our job, and we are indeed doing our job, and that includes, as I said, developed and developing country currencies, in particular, of course, those with systemic implications or impact. And I think you can expect that we will continue both doing that and speaking out on it as we have been doing in the past. And, again, as we're now sort of in the warm-up toward the Spring Meetings, I'm sure you'll be hearing more of that.
I see press speculation, of course, that the issue will be coming up in Davos, et cetera, but you should talk to those people about whom it is speculated they will be raising it.
QUESTIONER: I just need to stay with this income issue for a second, because I looked at the press release a couple of days ago, and it says the Fund's one-year-forward commitment capacity is at a record high. So obviously you have a lot of money for lending. So what we are talking about is—
MR. DAWSON: We are talking about the operating expenses of the institution. That is correct. It is the operating expenses, which, as I think the first question on this subject indicated, you know, we have throughout most of our history—not all of our history. This issue came up in the 1950s as well. But throughout most of our history, we basically have been working like many financial institutions on the operating expenses being covered by a spread between the borrowing and lending costs.
I should also note, without making any prediction to contradict the World Economic Outlook, there is a tradition, of course, of cycles in the global economy. Our very high forward commitment capacity, very high liquidity ratio is, in fact, a reflection of the fact of the good news in the global economy. So while it has implications for the Fund's operating budget that we were taking a look at, I repeat, as I've said in a couple of other contexts, this is basically unambiguously good news for the global economy that the Fund is not lending money.
QUESTIONER: I guess this is related in many ways. Tom, you seemed unhappy with my [inaudible] regarding proposals on the compensation, benefits, and so on, issue. How soon—
MR. DAWSON: I think I read a story about that in Reuters.
QUESTIONER: Quoted with quotes from Mr. Hawley. When—
MR. DAWSON: He's quite quotable.
QUESTIONER: How quickly is this going to be resolved? And is this in any way affecting morale in the institution?
MR. DAWSON: I think the Fund staff also has a 60-year record of commitment to the institution and the goals and purposes of the institution, and I do not think it is affecting our commitment and our work and our work product.
In terms of your—and if you want—I am not—I am authorized to speak on behalf of the management of the institution and at times on behalf of the Board. I am not authorized to speak on behalf of the staff, so it's your job, you know—as you do well—
MR. DAWSON: But I think that it is a serious issue. The Board did, in fact, meet to discuss what we call the ECBR yesterday. There will be further discussions, I am sure, and when they are concluded, we will have, as we do, a release and a summary of the Board discussions. And I expect that we are on a time frame in which this issue will be concluded within the next few weeks.
QUESTIONER: So would the Board have sent that back again for further discussion? How does it work?
MR. DAWSON: It's all an iterative process where the Board looks at it and then they may ask questions. They may want to reflect further on issues, particularly on an issue like benefits and compensation—or compensation and benefits. It is quite often an issue where they ask more questions and aspects of it or things that were not necessarily right for decision right away, they will say go out and look at the implications of what we do on X, Y, or Z.
But as I said, the discussion took place yesterday. There will be, as I understand it—I wasn't in the whole meeting, but there will be more discussions, and I expect within the next several weeks, you will see a conclusion on it. When I say conclusion, though, there clearly will be additional work, because you may recall that some of it—there may be studies on benefits in terms of possible changes. There may be studies on looking at—on the compensation side, the Fund essentially runs a comparator-based compensation system so people look at the comparators, look at different ways of weighting comparators, different ways of choosing comparators, different frequencies for adjustment. I mean, it's a complicated issue. But we will have a conclusion of this stage of it, you know, in the near future, we fully expect, and when we do that, it will also indicate what additional work is going forward.
QUESTIONER: Haiti is going to have presidential and legislative elections this year. There is a lot of hope about the outcome of those elections because many people, including the OAS, suspect that after those elections, the country will be on a path of recovery.
The question is: According to the IMF assessment, the likelihood of a favorable outcome of that process, how close is going to be Haiti to start receiving financial support from the international community, especially the Fund? Or is that going to be primarily an issue for the World Bank?
MR. DAWSON: First of all, I don't have an up-to-date briefing on Haiti, so I really can't—in one sense I can't answer your question. It is also a bit premature since it will be a new government that would fundamentally take the decision in terms of what kind of a relationship they want going forward with Haiti.
We have a resident representative who at times has been in-country and not in-country, but we have been following the situation carefully and working with our two sister institutions, the Inter-American Development Bank and the World Bank in particular.
I think I should try—we should try to get you a little bit more of a briefing on it, but we have been following it. But since it has not been in a situation where we've been able to work with the government that has that sort of mandate, we haven't—I don't have more for you. But we'll get it for you.
And to answer a question that came up, I believe, at the last briefing, we will make sure when I take these sort of bilateral questions, we will make sure that all of you get the answers. That question came up the last time.
Maybe two more questions.
QUESTIONER: Going back to Argentina again, also, [inaudible] is now trying to do some [inaudible] arrangements with companies about prices. Does the IMF have any kind of position regarding this topic?
MR. DAWSON: Well, I mean, I think, as I've indicated, we have been following the, you know, somewhat elevated inflation in the country, and we are concerned on that and think that it is important that the government pursue, you know, a policy approach that can sustain the strong growth that the economy has had and contain the rising inflation. In terms of particular measures and so on I don't think it's appropriate for me at this point—I know there's a lot of talk going back and forth about various measures by the government, but, you know, I don't think it is for me to be talking about what I've read about in the last two or three days in this or that report.
So, you know, I would—our view is essentially what we indicated two weeks ago in terms of, you know, it is for the Argentine authorities to be able to design a policy approach that allows them to sustain the very strong growth that they've had in the last few years in the context of also dealing with other issues in the economy, including the elevated level of inflation. And I think the authorities clearly recognize that.
I'll now take one last question or one follow-up.
QUESTIONER: It's just a minor question. I was told that the IMF representative in Buenos Aires is about to meet with Felisa Miceli, the Minister.
MR. DAWSON: You may know more than I do. You may also not know more than I do. I don't know.
That's it? Okay. Well, thank you very much. As I said, we will—the next briefing I expect will be on Tuesday, February the 6th, and we will lift the embargo—Tuesday, February—I'm sorry, you're right. Monday, February the 6th. Thank you very much. Monday, February the 6th, and we will lift the embargo at quarter of 11:00, 10:45. Thank you. I might have missed my plane for my vacation if I hadn't—thank you.
[Whereupon, the press briefing was concluded.]
The following question was submitted during the briefing via the IMF's Media Briefing Center and the following answer was sent to the questioner:
Question: How are the current relations between the Fund and Haiti? How close is the country from receiving some kind of aid, and will it be more a case for a Fund program or rather for the World Bank?
"On October 19th, the IMF approved a Emergency Post-Conflict Assistance to Haiti, worth about US$14.7 million (See press release), adding to the SDR 10.24 million (about $US14.7 million) in IMF Emergency Post-Conflict Assistance provided to Haiti in January 2005 (see Press Release No. 05/4). Looking ahead, additional assistance from the international community will be required to support the authorities' 2006 economic program, the ongoing electoral process, and Haiti's longer-term development needs. In addition to providing a framework for donor support, the objective is to build on the continued success in policy implementation under the EPCA-supported program to provide a basis for a possible PRGF-supported program and HIPC debt relief. As the electoral process is completed, the Fund looks forward to work with the new government.
The Fund has the primary responsibility for macroeconomic and financial issues and the World Bank in the area of development. Looking ahead, and assuming favorable performance under the present economic program, both institutions would be supporting a strategy that underpins growth, macroeconomic stability and poverty reduction. In that context, we would also jointly work on preparing HIPC debt relief. As a full member of both institutions, Haiti can pursue separate agreements with the Fund as well as the World Bank."
IMF EXTERNAL RELATIONS DEPARTMENT
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