Transcript of a Press Conference of the G24April 24, 2009
|Webcast of the press briefing|
MS. NARDIN: Good afternoon. My name is Simonetta Nardin. I am with the IMF Press Office. And this is the press conference of the G24 which held meetings here in the past couple of days. We have a list of all the speakers and their titles for the press, so I will not go through it right now, but I will pass the microphone directly to Governor Mayaleh of the Central Bank of Syria, who chaired these meetings of the G24. Governor, please.
MR. MAYALEH: Thank you. Okay, I shall be speaking in French.
MS. NARDIN: You have translation.
MR. MAYALEH: Excellent. Well, good afternoon, ladies and gentlemen. It is not necessary to recall that the economic and financial crisis originated in mature markets and it continues to have a disproportionate effect on developing countries. It has been clearly noted that there are falling prices for our primary commodities. Exports are contracting sharply. Remittances have declined to the developing countries and all of this has given rise to a loss of resources and a decline in growth rates as well as rising unemployment.
As you are fully aware, these countries are, indeed, the innocent victims of a crisis which originated, as I said, in the mature markets; the United States, for example. And, at present, all the developing countries are calling for aid from the international institutions in order to attempt to remedy problems they did not create.
These problems stem from shortcomings at three levels: market shortcomings, institutional shortcomings, and supervisory shortcomings. Bank supervision and financial institutions supervision were not adequate. And the same applies for those countries where these institutions did not [inaudible] to have adequate information for consumers and in many of these countries there were shortcomings in the stock markets in general.
So, now, the developing countries welcome the action taken by the IMF and the World Bank, as well as the G20, and commend the most recent decisions taken by them, in particular as concerns the credit lines and the doubling of credit lines provided to the developing countries as well as an effort to provide substantial credits to these countries.
This is an unprecedented global crisis and, as such, it calls for unprecedented exceptional solutions. And these exceptional measurers cannot come from the developing countries themselves. Solutions must come from the international institutions, the major countries, the G20 countries as well, so as to try to find a remedy to the terrible damage that has been wrought because of this crisis.
Now, I don't want to be unduly lengthy in my presentation because I wish to give you, and also give my First Vice Chair, an opportunity to address you, so I, without further ado, would like to give the floor to--well, rather, in order to move forward and to hear your reactions, we will now open the floor for your questions.
MS. NARDIN: Just want to remind you that we have here the First Vice Chair of the G24, Mr. Rogerio Studart; and also, Smair El-Khouri, who is the Alternate Executive Director here at the IMF; and then, of course, Amar Bhattacharya, who is the Director of the G24 Secretariat.
QUESTIONER: I wondered what you make of all the attention being given to the G20, whether you think your role has been eclipsed? Do you still think the G24 has a voice in this international debate on the financial situation?
MR. EL-KHOURI: Well, allow me to say that in our communiqué we welcomed the commitment made by the G20 leaders to take the requisite measures precisely to stimulate demand and restore confidence in the international financial system. The expectations of the G20 have, in fact, been welcomed by the G24 group of countries. And the meeting of the G20 at the highest level, heads of state and prime ministers, is something that's truly unprecedented.
And this was decided--that is to say, the heads of state making up the G20--decided to send out a message to make it clear that these G20 leaders are determined to find solutions which would make it possible to remedy the consequences of the crisis.
MR. STUDART: Thank you. I'm Rogerio Studart. I'm representing Brazil and I'm fortunate enough to be a member of the G24 at the same time G20. And I want to share something with you from this perspective, and I also represented Brazil at several meetings of the G20.
First of all, we have to respond to your question: not at all. I mean, it really has increased the need in the present role and the future role that forums for, like, the G24 has. First of all, because there's a clear understanding of the international community that in order to get out of the crisis, not only this crisis that we face here at the moment, but the crisis that we had before and that continue the crisis of poverty--underdevelopment, the crisis of climate change--the international community has got to be engaged in a more cooperative way.
The crisis that we have now that we are facing only made everyone see clearly the need for their cooperation. Brazil and other developing countries that are both part of the G20 and G24 understood that, by the way, that most of the faces, most of their ideas, that the G24 had in relations to voice and representation in the multilateral system, most of the ideas are about the need for flexibility of the instruments and more partnership in the multilateral institutions, have prevailed in the discussion of G20.
That's not a coincidence. First, because I think the G24 has been right for a significant period of time and that history is showing that. And I don't say that with any pride or happiness, but because the crisis has allowed us to say this is too overwhelming. But not only because its ideas were correct, but because those members of the G20 that are also members of G24 have done incredible work together in order to increase inclusiveness. We understand, being developing countries participating in those forums, we understand the role of participation solidarity, and so any of the challenge that we have in front of us.
So, just to complement the Chair, I think we agree that not only the role of the G24 has been seen as very relevant, but it's going to be even more important in the future in these deliberations.
MS. NARDIN: Thank you very much. Let me welcome Mr. Ismail Momoniat from the National Treasure of South Africa, who's joined us now. And just to remind you, also, that we have copies of the communiqué in English, Spanish, French, and Arabic already translated at your disposal.
Any other questions? Yes?
QUESTIONER: You’ve spoken here about your welcoming the statements by the G20 to increase financing for the NAB of the IMF. What do you say about none of the emerging economies have actually come forward to lay down money for that increase?
And we've heard Brazil and we've heard rumblings that China's going to come. But there seems to be some opposition that some of the emerging economies aren't happy with the way the NAB is structured at the moment. Neither are they happy with how the bond proposal is being laid out. Could you maybe just talk about that?
And, also, Mr. Boutros-Ghali said recently that he had sensed reluctance to discuss the issues of quota and voice at this meeting. Could you just give me a sense of how you want that to move forward and how emerging economies think that that should move forward in the next months or so?
MR. EL-KHOURI: Thank you. On the question of the NAB, first of all, the April G20 Summit in London was just on April 2nd, and it called for an expansion of the NAB. So it's premature at this time to say who or who will not participate in the NAB. I mean, there are some countries--well, like the United States--who have already expressed publicly that they will subscribe to the NAB. But my understanding, also, is that there was preliminary meeting this morning, chaired by Japan, in order to explore the issues relating to the NAB. And at the IMF there have been various discussions about the tools and which you would be able to lend to the IMF to augment its resources, including the notes. But these discussions are just starting now, so really, the thing is now gathering momentum. This is one.
The reluctance of what you describe about things related to the NAB and other financial contributions from countries is the question of what constitutes the resources of the IMF? We believe that there is broad agreement among all countries that the quotas remained the main source of financing to the IMF. And so there is also, I think, broad agreement among everybody that if you resort to bilateral--if the IMF resources are now, for the time being, being augmented through the NAB and other bilateral contributions to the IMF, it is simply that you need to generate resources immediately. And the nature of the quota exercise does not lend itself to any results very soon.
By definition, the quota exercise is a long exercise. It usually would take five years to complete and, actually, the schedule as determined in the G20 communiqué has pushed the quota exercise forward to be completed at the beginning of 2011.
So, if I think from your question there is any reluctance, it is that everybody wants to make sure that these bilateral arrangements through the NAB and everything are simply a transitory mechanism and they should not be a substitute for the quotas. And the discussion of the voice and representation of the countries comes through the quota exercises. It cannot come through the NAB.
So that would be the short answer to your question. Thank you.
MR. STUDART: I could add something.
MS. NARDIN: Please. Sorry, we have something to add to this question.
MR. STUDART: Thank you. Yes, I completely agree with my colleague that developing countries are particularly concerned about this not sending the signal that it is a--we have two priorities if you look at the G20. One is to address the crisis because, you know, it's spreading and the suffering that is exposing, particularly to those most vulnerable, is incredible. But we also want to send the signal that there's no quick fix when it comes to the multilateral system. It has to be reformed for good if we want to have that balance very clear. In particularly in the case of Brazil, we are trying to find a way to deliver it quickly, what we have committed. But we also want to guarantee that this is going to be seen as a step towards a more profound reform. That is needed not only to address the crisis--this is not going to be a short crisis--but to avoid or to mitigate possible future crisis.
QUESTIONER: It is true that the global economic crisis is severe enough [inaudible] developing countries. It is also true that the developed countries are being affected most severely. So, in the light of this, is it realistic to ask the developed countries to give more aid to the developing countries? Shouldn't we rather be asking them if, for instance, to sell a better part of its gold holdings so they're about to give more money to the developing countries?
MR. MAYALEH: Okay. Well, first, a contribution is necessary by the institutions and the developed countries who have the resources. And everybody's saying that it's a very difficult year to come and we haven't yet seen the problem bottoming out. We haven't reached the bottom yet. And it's quite likely that every day we are liable to surprises, bad news. We expect bad news every day.
We still haven't been able to plumb all the depth and resources of countries, the funds, international institutions. None of them have yet exhausted all their resources. Every day there are novelties, new things, new problems that arise. Every day there are needs. Everybody is trying to contribute. But if what you are meaning is that the Fund needs to participate more and contribute more via digging in to its own funds and resources, well, I think it is going to be difficult today to say that the Fund, for example, should immediately sell its stock of gold.
If the Fund sold its gold today, or if it drew down on its own resources, its own funds, it would really affect its solvency later. We do have needs and, especially in developing countries, we need there to be strong international institutions, a strong IMF to really be able to face up to these problems. So we can ask the Fund and the developed countries, and they, of course, are affected by the crisis. But even so, as we've seen, their recovery plans, which are costing trillions, hundreds of trillions of dollars, are devoted to the recovery and to overcome the consequences and effects of these crises in developed countries. And what we developing countries are hoping is that aid to the developing countries will not stop short and that the developing countries will be able to overcome this crisis as well. So we certainly need long-term aid even after the recovery of the developed countries.
QUESTIONER: All we have been hearing about the stimulus all over the developed countries. The G24, I don't know what is happening with developing countries? Are we waiting for our institutions and countries to collapse before we can think of stimulus, to have companies that are not doing well beside the stock markets?
MR. MAYALEH: It's obvious that most G24 countries have started on their recovery programs. We've heard about their programs and these programs are supported by the Fund--the IMF--and the World Bank, and we have seen that there is a weakening of the conditionalities of the institution's loans. The conditions are less harsh than before. Funds are being doubled, as we have heard from the Managing Director of the IMF yesterday and the day before. Credits are being doubled towards developing countries, so--problem countries, and their programs and plans need to be appropriate and adequate and must be owned by the countries with the support of international institutions.
QUESTIONER: Can you please tell me what is your position in respect to the clampdown on tax avoidance? That was very much talked about during the G20 Summit in London recently. And also, taking into consideration the fact that some of the countries that are involved are from developing countries, what is the position of the G24? Thank you.
MR. MAYALEH: Well, yes, in the communiqué there is no reference to tax evasion, but it's clear that G24 countries are not involved in this matter.
QUESTIONER: Thank you. I just want to come back to the quota issue because I don't think I was pretty clear. Just what steps do you think are necessary, that you think is finally going to resolve the issue of the relevance and the legitimacy of the IMF, including--I mean, you know, I've been following this personally for like five years now, and what specific steps do you think are necessary to change and to rebalance the Fund?
MR. BHATTACHARYA: The G24, actually, has been saying precisely what is necessary to achieve legitimacy on the issue of voice and quota. It's basically that you need to recognize two things. One is that there's a big democratic deficit in terms of voice and representation, and second that the world has changed in terms of the relative roles and weights of countries.
So, towards that end, the communiqué is very clear. It calls for a more equitable distribution between the developed and the developing, and it says that that more equitable distribution has to be based on a reformed quota formula.
You know, if you don't have a reformed quota formula--
QUESTIONER: [Off microphone.]
MR. BHATTACHARYA: No, we do not believe that it is adequately reformed. I mean, for example, it places a very, very high weight on something called openness, which gives Europe a very high weight. But that, as we have seen in this crisis, has nothing to do with what the IMF is about. It misspecifies the thing called variability. If you correct for those--and also if you fundamentally recognize that this is also about democracy in terms of the role of states and the role of, you know, countries in the system, then you would get certainly a much more equitable distribution. And the G24 has done a lot of technical work, which shows that if you actually got your specification right, you would get a very different kind of distribution.
MR. EL-KHOURI: If I might add something. It's not actually related directly to quota and voice, which Mr. Bhattacharya answered, but you could also have certain other steps that enhance also the role of the developing countries. For example, the kind of majorities that you need to have in the Executive Boards in order to take certain decisions--
QUESTION: [Off microphone.]
MR. EL-KHOURI: Well, it's not only the U.S. vote, but in terms of majority there are some things that require 85 percent majority, there are some things that require 70. You could talk about the concept of lowering these limits, you could talk about the concept of double majorities, which take into account, you know, other factors. So, the quota is a very important component and it should be the first one that has to be addressed up front, as Mr. Bhattacharya said. And then it has to be complemented by other steps which take into account a greater role for the emerging and developing countries.
QUESTIONER: [Not interpreted.] Well, I think the meeting of the G20 in London, the question of nationality of leaders of the Bank and the Fund was raised. Since April to now, and during the former meetings and the G24 meeting, has any progress been made in this area? In other words, is there an impetus to raise this question?
MR. MAYALEH: Not really. This issue was not advanced and all that one could really say was that a number of proposals were discussed, but nothing more.
QUESTIONER: I didn't attend this conference from the beginning and I don't know if this was answered. If not, I would like to know, at the last G20 meeting, 2nd of April, many of your countries are there. And I could not, one, reach the conclusion if we have to spend more money on stimulus programs or if we have to improve the regulatory environment to the markets. What's your opinion on this? Thank you.
MR. MAYALEH: This, as we said earlier, is an exceptional crisis that calls for exceptional solutions and proposals. We cannot really simply trust our recovery plans and regulation. We need all components. We need a lot of effort to be made at all levels and on all sides to be able to overcome this crisis. And as I said, it's a year ahead of us that's going to be even more difficult than the last year, especially for the developing countries because the developing countries were affected later by the crisis. We've seen the developing countries which reacted to the consequences of the crisis several months later than the others, and I think that the consequences are going to be much longer in duration in developing countries than in developed countries. And I was saying earlier that we need exceptional assistance and aid for a very long period of time for the G24 developing countries in general.
MR. STUDART: I'll respond actually in English. I think that the--and I follow closely, like others, the discussion in the G20. I think there is no disagreement that you have to do both. While you [inaudible] the discussion, we all know is the capacity of some to do a stimulus package, mostly in the cases of developing countries, they’re resistant to do more stimulus, and that has to do with the political resistance to do that and it has to do with the politics of each country. But I think that all countries agree that there is a need to do both. And clearly, as the crisis deepens, there is more consensus about the need even to break with the resistance within some countries, and also in the cases of developed countries, and also expand the capacity, particularly of developing because you do countercyclical policy.
And, of course, we all understand that without, as I said before, without significant reforms of the international financial architecture, also the multinational system, you cannot fix the problem in the long run. But I don't think that there was a disagreement of the need to do both at the same time. It's just a question of the emphasis that is given to each of the instruments.
QUESTIONER: [Off microphone.]
MR. STUDART: Please.
QUESTIONER: I think what most of my colleagues are trying to find out, I did ask this question as well at the G20, is that-- The issue is, for instance, here in America, the American government can easily afford to pour billions within the banking, the car industry. The same applies to the UK, France, and the other several countries in Europe. As one of my colleagues was saying right now, is there a framework, for instance, to say, well, apart from what aid has been designated to Nigeria or to Ghana or to Mexico, is there a framework whereby IMF or World Bank can say today, we are going to pour, say, $5 million into the Nigerian economy or $10 million into the Mexican economy? That is what people--that is what we are trying to find out. Is there a framework? Has that been discussed? Thank you.
MR. STUDART: I think the need to expand the capacity of developing countries to do countercyclical policies has been a major proposal of the G24 for a significant--since the beginning of the crisis. Now, is there a framework? There are things that are emerging. There's a consensus emerging within the multilateral system that you have to provide developing countries with resources, both for balance of payment, but also for budget support; should do that. But don't forget, this crisis has been significant, and in order to adopt some of the ideas that we have had in the G24 for a long period of time, you need a change of culture in the multilateral systems. This is why we've been pushing for an increase of changes in voice and representation. It's not just because it is a problem of legitimacy of these institutions, but also it's a question of efficiency of these institutions in dealing with the challenge that we have like that. It's a change of culture and changing culture takes time. But since the crisis is so severe, I see myself things moving so fast you wouldn't believe. You know, some things that I hear from the IMF nowadays and from my own World Bank, if people--if I said that a couple of times in the past, only two years ago, I would be--I don't know what I would be, but you can imagine.
And I think the G24 has been very consistent with these ideas. It's just time to push more. And this is why this group is so important and this is why it's going to be more important in the near future. QUESTIONER: I'm sorry, but if I don't ask this one, I'll regret it. I was wondering whether there was a discussion regarding the proposal by China recently on a new reserve currency, great and wider use of the SDRs please?
MR. MAYALEH: Well, China did make a proposal which you've just quoted. And we have called on China to have an in-depth study of this question so that we can examine it ourselves because it really is a suggestion or a proposal or an idea that deserves to be studied and thoroughly analyzed and examined.
Many countries that have started seeking another currency than the dollar or a basket or the SDR, some kind of started with the SDR. I decided for Syria three years ago to take the SDR, the reference currency, instead of the dollar. And that is a basket that reflects external exports and imports relationships and it does reflect that balance. And [inaudible] could be--is more realistic in terms of exchange rates in the final analysis.
MS. NARDIN: Thank you very much. This concludes the press conference of the G24.
[Whereupon, the press briefing was concluded.]