Transcript of Regular Press Briefing by David Hawley, Senior Advisor, External Relations Department

Washington, DC, Thursday, November 13, 2008
Webcast of the briefing

MR. HAWLEY: Allow me to make a few announcements. Today and tomorrow, the IMF is holding here at headquarters its Annual Jacques Polak Research Conference. The title of this year's conference is Macro-Financial Linkages, and as part of the conference the annual Mundell-Fleming Lecture this year will be held by Professor Jean Tirole of the Institute d'Economie Industrielle in Toulouse, who is also a visiting professor at MIT. If you wish to join the conference, get in touch with Media Relations.

The Managing Director, Dominique Strauss-Kahn, will participate on November 15 in the Summit on Financial Markets and the World Economy, which is going to be held here in Washington, hosted by the U.S. Following the conference, he will have an availability for the media. I expect that will be at around 5:00 p.m. Next week on the 17th and 18th of November, the Managing Director will take part in the Fourth Annual Conference on Progress in Regional Integration in the Maghreb which this year is taking place in Tripoli, Libya, and following his trip to Libya he will travel to Tunisia on the occasion of the 50th Anniversary of the Creation of the Central Bank of Tunisia.

On November 17 here in Washington, the First Deputy Managing Director, John Lipsky, will give a speech which is entitled "Towards a Post-Crisis World Economy". This will be at the Johns Hopkins School of Advanced International Studies. Media Relations will advise on the availability of text beforehand.

On November 21, Deputy Managing Director Murilo Portugal will be speaking in a conference in Yerevan organized by the Central Bank of Armenia. The topic of his speech will be The IMF Response to the Global Financial Crisis.

Before going to questions, let me note that the new Director of the Western Hemisphere Department, Nicolas Eyzaguirre, will take up his position on November 24. At that point Anoop Singh, who is currently Director of the Western Hemisphere Department, will move over to the Asian-Pacific Department, where he succeeds David Burton.

With those opening remarks, I'm happy to take questions.

QUESTIONER: David, do you plan any talks with the Dutch prime minister on the sidelines of the G-20 Summit this weekend, what's happening?

MR. HAWLEY: I don't have information about bilaterals that may be taking place this weekend. Should they occur, we'll to the extent possible keep you informed.

QUESTIONER: David, the Japanese newspaper Nikkei writes that the Japanese government plans a $100 billion package for the IMF. Do you know about that?

MR. HAWLEY: We understand that the Japanese authorities are considering some options to supplement the IMF's resources. We are waiting to hear details of the proposal.

I would note that about a month ago at the meeting of the IMFC, the ministerial policy guidance body for the Fund, Japan's finance minister, Mr. Nakagawa, told the membership that if the Fund requires additional resources, Japan stands ready to supplement the needed funds.

QUESTIONER: Just carrying on from that, is the Fund expecting any other countries to make such pledges to finance the IMF? British officials were saying yesterday that this would be something that the Fund needs to work out, so I was interested to hear what you have to say.

MR. HAWLEY: On that I would say only that the Summit is an opportunity for the international community to signal its willingness to ensure that sufficient resources are available to the Fund. As the Managing Director has noted on a number of occasions, with upwards of $200 billion at its disposal the Fund is well positioned to meet immediate financing needs, but should there be a call down the road for financing beyond that, the question of increasing the Fund's loanable resources would become relevant.

However, I don't have specific further country examples to offer you.

QUESTIONER: Could I have follow-up on that one? What exactly is the IMF expecting from the Summit, to come out of the Summit? What is its contribution to it, and I believe Mr. Strauss-Kahn will be issuing a statement to the G-20 calling for more fiscal system units.

MR. HAWLEY: The IMF is participating in the Summit in the person of the managing director, Mr. Strauss-Kahn. He wrote to G-20 leaders a few days ago, and you will have seen the letter. In that letter, in which he looked forward to the discussion of this weekend's Summit, he stressed two main tasks: dealing with the immediate fallout of the financial crisis in which he stressed coordinating policy responses and providing financing to restore confidence in growth.

And then, looking forward, he spoke about the need for dealing with longer-term global architecture issues, finding and fixing an inadequate regulatory system and developing a reliable early-warning and response system.

If I may, I'll take a question that has come in on the Media Briefing Center which is along the same lines. This is from the Shanghai Oriental Morning Post, and the question is: "The G-20 Summit has been compared to the Bretton Woods Conference. Is it time for a new Breton Woods system?".

The Managing Director has noted that in recent months there have been numerous calls for a new Bretton Woods Agreement, and he's gone on to say that he strongly endorses this. He cautions, however, that one important lesson was that the foundations of the original Bretton Woods Agreement were carefully laid through serious and vigorous discussions of the underlying issues. He therefore welcomes the initiative taken by the President of the United States to bring together G-20 leaders to follow up with various working groups and looks forward to a process that will elucidate these issues.

QUESTIONER: The absence of President-Elect Obama, will this have a negative impact on this Summit?

MR. HAWLEY: That is not a question for the IMF,

QUESTIONER: In regards to the recapitalization plan, what do you expect from China, and do you have some number at the moment? Thank you.

MR. HAWLEY: Are you asking about the China contribution to the IMF?

QUESTIONER: Yes.

MR. HAWLEY: I'm not aware of details of a China contribution to the IMF, so I can't answer that question.

QUESTIONER: David, I wonder if you could elaborate a little bit on what's going on in Iceland at the moment—other than winter, of course. But you said two weeks ago that there was a board meeting, I believe, on November the 4th or 5th—I can't remember quite right now. There are now delays going on. Is that because of the British and the Dutch and others requiring an agreement on Icesave, or is this because there is still money needed from additional countries to make up the whole package?

I'm asking this just because we really need clarity on this, and I think the IMF has not shown us a lot of clarity on what is going on, and the markets are reading that quite widely and differently, which has caused the crown to fall. So if you can give us a clear answer on what exactly is holding this up.

MR. HAWLEY: As you know, there was a staff-level agreement with Iceland reached on October 24 which in due course is to come to the Board, like any other staff-level program for consideration and approval.

The program, like any program, needs to be fully financed before we can take it to the Executive Board, and we are still in the process of ensuring that we have the needed financing. We're making progress and we expect a board meeting in due course.

QUESTIONER: But, David, what does "fully financed" mean? I mean I'm sorry, but it is open to complete interpretations. Does that mean that there is more money needed from other countries for this package? Does it mean that the IMF needs more money? What does that mean, please?

MR. HAWLEY: Well, without offering too much more, let me say that we're discussing a number of issues raised by potential creditors, including the process-including the process for determining Iceland's obligations with regard to foreign deposits taken by three intervened banks.

QUESTIONER: What's the IMF opinion about the last position taken by United States, namely Secretary Paulson yesterday about not taking on toxic assets?

MR. HAWLEY: We welcomed the thrust of recapitalizing banks.

QUESTIONER: I want to ask you on the next restrictions imposed on loans to those countries in need of financial help compared with those in Asia in 1997?

MR. HAWLEY: The thrust of the conditionality, the terms of those, the policy terms attached to those loans, has been—increasingly over a number of years—to focus on what is absolutely needed to address the problems that caused the country to turn to the Fund for support in the first place.

That has led to an increasing streamlining of conditionality over the years, and that is reflected in the conditions attached to recently-agreed loans.

QUESTIONER: I had a quick question about the liquidity arrangement that the IMF put in place a couple of weeks ago. Have you guys had much interest in this yet?

MR. HAWLEY: I haven't got any information about countries that have expressed an interest or not in the SLF.

QUESTIONER: Dave, do you have any update for us on the Pakistan talks. I heard they might—they're going to reconvene in Abu Dhabi.

MR. HAWLEY: The discussions are well advanced, but there are still a few issues on which work is continuing in order to reach understandings.

We have been discussing with the Pakistani authorities their proposals for addressing the serious economic and financial challenges facing the country. From our perspective, a successful program needs to meet two equally important objectives: First, to restore confidence of domestic and external investors by addressing macroeconomic imbalances in a decisive way.

And second, protecting the poor and preserving social stability during the adjustment process through well-targeted and adequately-funded safety net. Both of these objectives would be an integral part of any IMF support for the country.

I can't be more specific, however, on the timing of an eventual agreement.

QUESTIONER: No, but can I just ask if those talks are currently happening, or are they about to resume?

MR. HAWLEY: I'll get back to you with more specifics on timetable after, if I may.

QUESTIONER: I just had a quick question about Belarus. I wonder if you can tell us something about the state of talks. There has been some skepticism expressed that if we can reach agreement with a country whose economic system is so far out of the mainstream.

MR. HAWLEY: Well, in the middle of October, Belarus, facing weakening in its export performance and access to foreign financing, requested balance of payment support from the IMF. A mission is currently in Minsk to discuss a possible Fund-supported program.

Before I take another question, I've been asked through the Media Briefing Center to repeat plans for the media availability at the weekend.

As I said earlier, the Managing Director, Mr. Strauss-Kahn, is likely to be available to the media after the conclusion of Saturday's Summit. The briefing would take place here at IMF headquarters, and, tentatively, it's a 5 o'clock briefing, but we'll confirm that later.

QUESTIONER: Just a general assessment, if you have not given it at the beginning, which I arrived a bit late, on the role that the IMF is ready to take, a central role as financial architect, or coordinator, is the IMF ready, and what does the IMF expect out of this G-20 meeting with this regard?

MR. HAWLEY: Well, I took that question earlier, and so, in telegraph fashion, I repeat the two points that the Managing Director has raised with the G-20, stressing in particular the need to deal with the immediate fallout of the financial crisis, and then, in turn, deal with longer-term global financial—global architecture issues, with the G-20 Summit this weekend being perhaps seen as the start of the process.

QUESTIONER: I'd like to come back to the short-term lending facility. If no country were to request funding for this facility, would the IMF consider it as a failure?

MR. HAWLEY: That's a hypothetical question.

QUESTIONER: I had a quick one about the financial sector assessment program, and I've had a couple of officials from on the Executive Board and various other places talking about the possibility of making those much more likely Article IV assessments, having them every year and maybe even integrating them into the Article IV.

And I just wondered if you could give me any thoughts on whether you think that would be a good idea.

MR. HAWLEY: Let me frame it as how the question currently stands, a question which remains to be answered.

The Article IV is an annual analysis of the member countries' economic situation and its prospects. It is a requirement of being a member of the Fund that this analysis takes place at roughly a 12-month interval. The FSAP, the Financial Sector Assessment Program, is not an obligation of membership but it's an analysis of financial sector issues that many members have found useful.

The question being raised here is whether, given the prominence of financial sector issues in the context of the current crisis, more countries should avail themselves of the analysis under the FSAP and whether FSAP should become closer to an obligation.

Let me stress, that's the question, and I don't have an answer to where we'll end up on that. It is, of course, a question for the membership.

QUESTIONER: I have a question about the Article IV of China, which has been delayed several times. Do you have any update on that?

MR. HAWLEY: I don't have an update for you on that.

QUESTIONER: Will IMF expand its agreement to enhance its monetary role. I know just recently IMF was cutting its employment.

MR. HAWLEY: Will it increase its recruitment?

QUESTIONER: Yeah.

MR. HAWLEY: The Managing Director has mentioned that in that something like 500 staff will, over the course of the next year, leave the Fund in the context of a downsizing; however, since the business needs called for a downsizing of closer to 400, there is scope in the future to recruit, as needed, some additional staff.

Again, it will be driven by business needs.

All right, if we don't have any more questions, I'll bring this briefing to a close.

Thank you very much.



IMF EXTERNAL RELATIONS DEPARTMENT

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