Transcript of a Press Briefing by Masood Ahmed, Director, External Relations Department, IMF

Washington, DC
Thursday, September 4, 2008
Webcast of the press briefing

MR. AHMED: I'm Masood Ahmed, and I'd like to make a couple of announcements before taking your questions.

First, I'd like to make one announcement about the governance framework of the Fund. The Managing Director is announcing today the appointment of a group of eminent persons who will assess the Fund's current decision-making framework and advise on modifications to the framework. The committee will be chaired by Trevor Manuel, the Finance Minister of South Africa. There's a press release on this which we will be releasing shortly.

A couple of announcements on travel: Mr. Lipsky will be speaking at a financial sector conference on Tuesday in Frankfurt, organized by Die Zeit and on September 18 he'll be giving a speech here in Washington at the Center for Strategic and International Studies.

I should also say that Mr. Portugal is in Accra at the Forum on Aid Effectiveness and will be releasing a statement there today.

I think that's all I have for announcements. So I'll take your questions. Please identify yourself.

QUESTIONER: I'm just wondering whether the IMF had got any guidance or clarity about what Turkey wants to do next, whether they want a post-program arrangement or a new program.

MR. AHMED: On Turkey, the authorities are exploring the option of a possible format of a program relationship with the Fund. They haven't made a final decision yet. I should also say that separately from this, we expect that a mission would visit Turkey under the IMF's post-program monitoring procedures early in the fall.

QUESTIONER: Do you have anything, any comment on Argentina's decision to pay off the Paris Club from its reserves and what implications that might have?

The other thing is, Argentina has not had an Article IV with the IMF since July 2006. Are there any plans for a follow-up and what sort of implications does that have for overseeing that economy?

MR. AHMED: First, I should say that we do welcome the normalization of relations between Argentina and its creditors. Our dialogue with the authorities continues, and we hope to make the Article IV visit in the next few months.

QUESTIONER: I notice that Mr. Lipsky made some comments recently on the growth outlook being sort of iffy. I know we're not getting the WEO until the second week in October. I was wondering if you can comment on the direction of the forecast right now, how you see if there's been any movement, any change likely in that.

MR. AHMED: Our view on the outlook remains broadly along the lines of the April World Economic Outlook and the update in July. We do think that the global economy will be slowing significantly this year for the reasons that we've outlined, financial crisis, commodity shocks, and so on, and we also do see risks to that outlook. And, as you say, we are revising our WEO forecasts which will come out in October, and those risks will likely show up in the outlook for 2008.

We also see, however, a recovery in 2009, a moderate recovery but a gradual one, and that also will be reflected in the forecast. We don't have the exact numbers yet because we're in the process of fine-tuning our forecast and that will come out in October.

QUESTIONER: Do you have any update on when the China Article IV is going to the Board, please?

MR. AHMED: The expectation is that the Article IV discussion for China will be done in the next few weeks before the Annual Meetings, but I don't have a precise date for you.

QUESTIONER: And can I have a follow-up on Pakistan, please? You know there's a lot of volatility going on there, and there's some discussion. It was reported yesterday that the economic situation is pretty bad and that Pakistan might have to come back to the Fund. Are there any sorts of discussions like that with Pakistan on a possible program and do you have any updated comments on Pakistan's economy?

MR. AHMED: I don't have any updated comments on Pakistan's economy beyond the ones we've already made recently, except on your specific point. The authorities have not requested a Fund program, and what we have said is that in terms of the next year that the authorities have announced that, in principle, Saudi Arabia has agreed to provide an oil facility which would defer the payment of part of the oil import bill for Pakistan, and they've also announced a series of policy measures to correct the situation. We have said if these are implemented and the external financing to fill the financing gap is secured, then this would go a long way towards addressing the country's macroeconomic vulnerabilities.

QUESTIONER: Well, my question is also on China. Just to clarify, that Article IV review for China is going to be two years? The 2007 was not done?

MR. AHMED: Yes. As you know, the 2007 review has been delayed. So it would now be rolled into the year for 2008. Yes, that's correct.

QUESTIONER: So that's two years.

MR. AHMED: That's our expectation. Your question on China then, this is a good moment.

QUESTIONER: Actually, mine was simply when do we get it? I'm afraid that was it.

MR. AHMED: As I said, we expect to have the Board discussion in the coming weeks before the Annual Meetings, and then there's a process for getting the PIN out and subsequently the staff report, once the authorities have consented to that. That'll just follow its normal course.

QUESTIONER: This is related to China but not only. Recently, the United States Treasury asked a very clear statement from the IMF on the exchange rate, and so I was wondering if you think, in the context of evaluating the Article IV for China, the IMF is planning to give a clear signal for what concerns the exchange rate. And, on the same token, I wanted to hear your comment about what is happening between the euro and the dollar which is reversing.

MR. AHMED: On the exchange rate in China, well, I think we have already set out in many places and on many occasions our view on the exchange rate in China, and of course the surveillance function of the Fund does have a very strong dimension of also looking at exchange rates. So I would expect that in the context of the Article IV discussion, one of the issues that would be considered would be the exchange rate policy in China, as it would in any other country.

Now, as to your question about the euro and the dollar, I think our view on that is that notwithstanding the recent moderation we still do see the euro as being on the strong side, and we also do think that the dollar is now closer to its medium term equilibrium value. So that's kind of been our view on it.

QUESTIONER: Can I just come back to the Argentina issue. You welcomed normalization with creditors, but this does not address the issue of the private creditors at all. This is just creditor nations. So the question is, what sorts of steps, once Argentina has paid off the Paris Club, does it need to take especially with regard to the inflation data, to normalize that situation?

MR. AHMED: As I said, I think our dialogue with Argentina continues, and I don't really have anything more specific to give you on that beyond what I've said on it.

QUESTIONER: I was reading Mr. Lipsky's statement about a certain optimism for inflation. I was reading Mr. Blanchard's article on more optimistic scenarios for the future, the global economy and inflation. Could you articulate on that?

MR. AHMED: Our view on the outlook, is that we have been, below the consensus forecast for this year, and we do think that there are risks to the outlook this year. But we also do see the beginning of a gradual recovery in 2009. So I don't know whether you'd call that optimism or not, but that's our view. And, as I said, we'll elaborate that in the context of the WEO when we come out and of the GFSR, which of course we'll look at in more detail, at the financial markets and the functioning of the crisis in financial markets, which is one big part of the risks that have been weighing down on the economy.

QUESTIONER: Do you have a date for the release of the WEO?

MR. AHMED: October 8, and I think the GFSR is a couple of days earlier. So it's in that week and in the run up to the Annual Meetings that those documents will come out.

QUESTIONER: Can I just clarify something that's from the statement? Is this looking obviously beyond further quota increases? Are these sort of other areas that the MD hopes to explore where you can balance the voice in the Fund? What is he hoping to achieve with this?

MR. AHMED: Well, you've all now got the press release. So let me take a minute on that, because we do see this as a very important initiative in the Fund. I think the background to it is that we have embarked on this process of reforms for the governance of the Fund, and an important part of this process was to begin the realignment of quotas so that they better reflected the current shares of members in the world economy. That reform of quotas, as you know, went through a process that's concluded in the sense that there's been a decision and it's now in the process of being ratified by a number of member countries. So that's kind of an important building block. But the Managing Director had said before coming to the Fund, and has held the view since then, that we need to also look not only at the voting power, but also at how this voting power is actually exercised. So, it goes beyond the issue of simply looking at shares but looking at the way in which the decision making structures in the Fund operate. That, for us, means we should look at the respective roles and responsibilities of the Executive Board, of the IMFC, of the Governors and also, clearly, of management of the Fund. So, the Managing Director has asked this group of eminent people headed by Trevor Manuel with the other members listed in the press release, but for those of you who haven't got it yet on the Media Briefing Center, I'll just give you their names, and their full affiliations and titles are in the press release. They include Michel Camdessus, Kenneth Dam, Mohamed El-Erian, Sri Mulyani Indrawati, Guillermo Ortíz, Bob Rubin and Amartya Sen. So this is the sort of group that will be looking at it, and what they will provide is going to be very important input into our reform efforts going beyond the quota and realignment. Of course, they will build on and be complementing inputs from other sources which includes the work that's being done by the Executive Board itself which has set up a group of seven Executive Directors that have been looking at ways in which you can take forward the recommendations that have come from the review of the governance that was done by the IEO, the Independent Evaluation Office. I should also say that there are a number of people outside the Fund, academics, think tanks and civil society groups, that are actively looking at ways in which we can strengthen the governance of the Fund.

So all of these are inputs to which now this eminent persons group will provide another perspective, and we see their report coming to the Managing Director by April, enabling us then to begin to pull together these concrete proposals from this large body of work by September 2009. So that's the next phase of governance reform, and this committee which is being appointed and which we are announcing today would then be an important part of that agenda.

QUESTIONER: You mentioned the quota reform, and you said it's in the process of being ratified by a number of countries. Is there some sense of how fast that's moving along? Do you have an update? How would we know how far it's moved?

MR. AHMED: I don't have a sort of country by country update that I can give you now, but I'll certainly find out, and if we have more specific information on where it stands across the membership we'll come back and make that available.

QUESTIONER: Do you have a date for when the Georgia program is going to the Board, please?

MR. AHMED: I believe the Board meeting is scheduled for September 15, and that's the current date for it. If there are no further questions, our next press briefing is going to be on the 18th and the same time. Today's is, of course, embargoed until 10:30. Thank you very much.



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