Transcript of a Press Briefing by Masood AhmedDirector, External Relations Department
International Monetary Fund
Thursday, February 1, 2007
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MR. AHMED: Good morning. I am Masood Ahmed and this is our regular press briefing embargoed until 11 o'clock Washington time, 1600 GMT. Before asking you for questions, I have a couple announcements to make both relating to travel. First, just to let you know that the Managing Director is in Costa Rica today and tomorrow where he is going to be attending a high-level conference on investment in Central America which is being co-hosted by the government of Costa Rica and the IMF. His address will be posted on our Website and there will be a press conference at the end of the conference itself, and we can give you details on that. While he is there he is going to meet with Costa Rican authorities.
Next week the Managing Director is going to go and participate in the G-7 Finance Ministers' meeting in Essen, Germany, and there he will have an opportunity to brief ministers in the G-7 on the IMF's Medium Term Strategy, current reform agenda, as well as our views on the economy. Again, I think the agenda for the G-7 meeting is on the website of the German Finance Ministry.
One other item, just to bring to your attention a press release we issued on Monday this week which sets out the fact that we have just published data and metadata for financial soundness indicators which is the first batch of results on a pilot compilation that we have conducted with participating countries. I bring this to your attention because we do think that this is a major step in our effort toward strengthening surveillance of financial systems in member countries, improving transparency on financial sector issues, and promoting cross-country comparable data. Again, that is all set out in the press release. If you have more queries on it, we would be happy to put you in touch with the relevant experts.
I will take questions now. I see a number of people are online already in the Media Briefing Center, so welcome to you and we encourage you also to pose your questions. Please as usual identify yourselves and your affiliation.
QUESTION: I have a follow-up question to yesterday's press conference. The Managing Director spoke in kind of broad terms in regards to the timeline of how long it would take for any of these reforms to go into place. Aside from weeks or months after meetings are held, is there any other timeline? Is he hoping to have anything in place by the Annual Meetings? Are we talking a year down the road? Is there any ballpark?
MR. AHMED: The reason he spoke as he did yesterday is because we are now at the stage where we have just got the report from this eminent person's group. The chairman of that group, Andrew Crockett, presented the report to Executive Directors yesterday morning as a sort of initial presentation. As the Managing Director said, we are going to have a more detailed discussion of the report with the Executive Board in the coming weeks and I suspect that will take place during the month of February.
There will probably also be subsequent discussions in the Board itself, and there will be consultations. Spring Meetings is a sort of natural point at which the IMFC Ministers and Governors will want to take an initial view on this, and as the Managing Director said yesterday, he was hoping that Mr. Crockett and maybe some other members of the committee would be able to participate in that.
At some point after that, the Managing Director will need to put together, will want to put together, his own proposals which will need to be considered formally by the Board. At this stage it is hard for us to take a view on precisely when that point will be. We clearly do see this as part of the medium-term strategy which is as you know a three-year program that got launched last year and that is within that time frame. Exactly when that will take place, I cannot really be more specific now, but I think we will get a better sense in the coming weeks, and as we do I will certainly come back and let you know.
QUESTION: Again on the theme of yesterday's press conference, some of these measures could increase the cost of doing business with the Fund for members and I wondered if there was a sense that this might exclude some people, some countries, who had been coming to the Fund before and were getting services for free and would have to now pay a charge. And there was also a bit of discussion of examining the costing of the loans. I wondered whether there was a general sense that this might see the loan prices rise at all.
MR. AHMED: Just to be clear on that, I think their proposal as the committee has put it forward is to in fact move away from a model of financing which relies primarily on one source which is charges on lending, to a diversity of sources and some of which would then help to ensure that the charges that you have on loans, and as the committee I think pointed out in this report, need to be set in relation to market conditions rather than be driven by the need to finance the IMF. So if the committee's recommendations are endorsed, then what that would do on the charges side for lending is to make them more predictable and more stable rather than reflecting the need to finance the IMF and, therefore, unpredictable because it depends then on the volume of loans as well. That is one side of it.
In terms of the charging for services, for technical assistance in particular I think you are referring to, clearly, and the committee's report sort of raises this tension, on the one side there is the merit of introducing some charging for services not so much as a revenue-raising measure because the committee can kind of says that but, rather, as a way of introducing more transparency, more discipline and a greater sense of cost-effectiveness on the part of users of those services. So from an efficiency point out view and an incentive point of view, you can make the case that there is some merit in charging.
The other side, the tension that they have identified in their report, is that you want to first of all recognize that quite a lot of the technical assistance that the Fund provides has the public goods I mentioned to it, so it is not simply a fee-for-service kind of exercise, it is really contributing to either financial and economic stability in the country or strengthening capacity with spillover effects for the rest of the world, so there is a public good dimension.
And since 80 percent of our technical assistance goes to low and lower-middle-income countries, you want to make sure that any mechanism for charging is put in place in a way that does not exclude them on the grounds of ability to pay, and that is a point also that is laid out by the report. I think that Mr. Crockett yesterday and the Managing Director have both take on board the motion that the fact that you have charges may also mean that there is some sort of mechanism for financing them, and Mr. Crockett I think referred to in the press conference, but certainly the report does, to the possibility of donors financing it.
So to come to what the bottom line of your point is, as far as charging for TA is concerned, there is some argument as to why that would be useful from an efficiency point of view, not so much for revenue-raising, but there are also concerns about public goods and about not excluding countries that would not otherwise be able to afford it. I think that is a debate that will go forward in terms of finding the right balance on it.
I have one question here from the Media Briefing Center, it is about Ecuador. It asks, "Did Ecuador make any contact with the IMF on its new government plan to negotiate the country's foreign debt?" And it also asks, "Did the country make any early payments to the IMF?"
Let me take the second part of that question first, which is that as you know we have been informed and have welcomed the decision that the Ecuador government has made to repay a fairly small outstanding balance to the IMF which is about US$23 million, and we look forward to maintaining a good relationship with the authorities as we move beyond a creditor relationship into a normal dialogue based on the surveillance relationship that we have with all our members.
I can also say to you that two weeks ago my colleagues met with Minister Patino and began a dialogue with the new authorities in which he indicated his desire to maintain normal relations with the IMF based on the Article IV process which we very much welcome.
On debt management, what the minister has emphasized and the authorities have emphasized to us is that no decisions have yet been taken and we are obviously engaging with the authorities on trying to discuss economic and macroeconomic plans, and part of that as I have said earlier, in due course debt is part of that discussion, but as far as we understand it, there is no decision yet on it and so I cannot really give you any more on it than that. Please?
QUESTION: I have a question on Italy, please. The IMF will be discussing the Italy report on February 7th. I was wondering on something that the Minister of Finance said just yesterday regarding Italian economic growth. He is saying Italy is growing at a greater pace than expected and I was wondering if you have a comment on that. Also on pension reforms in Italy. Thank you.
MR. AHMED: Welcome to your new assignment and welcome to this press briefing. One of the things I do not do is comment on reports of what ministers have said at these press briefings. However, as you said, we will be having a Board discussion next week on Italy and the outcome of the Article IV process, and as soon as that Board discussion is over, that will be a good time for us to come back to you on the substance of the findings of the mission and of the discussion of those findings in the Board, including on the questions of both growth, on the short- and medium-term macro prospects, and on the question of pension reform. So I will happily come back to you on those issues after next week.
QUESTION: Last week the Managing Director was in China meeting with leaders there. I was wondering if the subject of China's currency came up in conversations. The Managing Director has said repeatedly that he thinks that they should loosen their currency. Could you characterize their conversations that came out of this? Was there any progress that the Managing Director made, or was this something that just kind of got glossed over during the meetings?
MR. AHMED: I think what I can say on that is that as you say when he was there he discussed with the Chinese authorities both overall macroeconomic and financial programs and prospects, but within that context obviously the issue of the exchange rate. In the press release that we issued at the end of that, there is quite a section that deals with his assessment of that conversation of the exchange rate. He talks in that press release about what he had heard from the authorities which is they have reiterated their objectives of advancing exchange rate reform and allowing greater flexibility over time in the exchange rate to reflect market conditions. He sets out our views on how faster movement on the exchange rate would provide more space for the authorities to use monetary policy and why the use of monetary policy is more important as an instrument to deal with credit growth and to curb investment.
He has also set out our views in those discussions on why greater flexibility in the exchange rate is more important from a medium-term perspective because we see greater reliance on market forces in both exchange rates and interest rates as being a way of helping to rebalance the sources of growth in the Chinese economy more from domestic demand. So I think they have had that discussion. He set that out. We have had a good discussion on those issues, and that is set out in the press release, and that is very much consistent with the views that we have set out before.
QUESTION: Could you tell us what message Mr. de Rato is going to going to bring to the G-7? Does he have anything specific in mind to talk with his minister colleagues about?
MR. AHMED: Mr. de Rato will bring to the G-7 the current state and sort of next steps on the implementation of the reform agenda of the IMF. There, as you know, we had one element of that looking at the income of the Fund, and that is obviously what the discussion was yesterday. The G-7 ministers will no doubt have advice and views on that. The second discussion item going forward for us on the reform of the IMF is the discussion of quotas and voice, again on which I have talked in earlier press briefings and which we want to see movement on during the course of the year.
Then there is the discussion around what we are doing in the IMF which, as you know, the operational part is the third part of the Medium Term Strategy, the other two being governance, finances as well. In the context of operations, there is an ongoing discussion about surveillance, including the question of whether and how we should strengthen the framework of surveillance in a way that brings it more in line with current best practice. So there is that discussion to be had.
So there is going to be a pretty full agenda, if you like, on that set of issues. Finally, also as part of what we do, there is a discussion about the Fund's continuing role in support of low-income countries on which again there is ongoing work.
So I see that the focus of those discussions that the Managing Director will want to have will be partly to brief them and get their advice on the Fund's agenda. But of course the G-7 ministers have an agenda for their meeting, and on the different agenda items to the extent that they want and find it useful to have input from the Managing Director, he will be prepared to make his input and contributions.
I see there are no questions from the Media Briefing Center, so I thank you all very much. Our next press briefing is going to be in two weeks time, which is going to be the 15th at the same time, 10 o'clock, and today we are embargoed until 11 o'clock.
Thank you very much.
IMF EXTERNAL RELATIONS DEPARTMENT
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