Transcript of a Press Conference by G-24 MinistersApril 18, 2013
H.E. Mr. Luis Videgaray, G-24 Chair and Secretary of Finance and Public Credit, Mexico
Dr. Ashraf El-Araby, G-24 First Vice-Chair and Minister of Planning and International Cooperation, Egypt
Nada Muffarij, Senior advisor at the World Bank (Lebanon)
Mr. Amar Bhattacharya, Director, G-24 Secretariat
Mr. Bosco Marti, Head of International Affairs at Ministry of Finance, Mexico
Mr. Alistair Thomson, Senior External Relations Officer, International Monetary Fund
MR. THOMSON: Good evening, and welcome to the G24 press conference. I'm Alistair Thomson of the IMF. Before we start, the interpretation channels are one for English, two for Spanish, and three for French.
The G24 ministers had their meeting this afternoon. Here on the podium for this press conference, we have the G24 Chair, Mr. Luis Videgaray, the first Vice Chair, Dr. El-Araby. From the World Bank, we have Ms. Nadia Muffarij, from Lebanon, and from the G24 Secretariat, Mr. Amar Bhattacharya, and from the Mexican delegation, Mr. Bosco Marti, Head of the International Affairs at the Ministry of Finance.
And, first of all, before we go to your questions, I'll ask Minister Videgaray to give some introductory remarks, and then we'll take the floor.
MR. VIDEGARAY: Thank you very much, and thank you for being here. We just had a good ministerial meeting for the G24 countries, where the three main topics were the following:
First, trying to set up a post-crisis agenda, based on productivity and growth, and this means that while we still face very important challenges, stemming out of a crisis -- financial imbalances, fiscal imbalances that create relevant risks for G24 countries -- we need to, in parallel, push forward a pro-growth, productivity-based agenda. That is what the countries represented in the G24 agreed, and we had a useful discussion on specific ways to move towards that.
Second, we addressed the reform of the IMF, and the enactment of the 2010 reforms that are still pending, and the future of the IMF system -- and, particularly, how to have a better reflection of today's world and the representation of middle income and poor countries in the IMF system, with some specific recommendations to follow in the next months and years.
And finally, the third topic of discussion is long-term infrastructure financing. And both through existing institutions, and through financial mechanisms, and institutional development mechanisms -- and, also, we were briefed about the progress towards creating a new financial institution by the BRIC countries.
The communiqué will be here with us shortly, and it reflects a consensus -- which makes it relevant, because the G24 group is a very diverse group culturally, economically, but, still, we're able to put together a good consensus with the specific items and actions for the next months and years to come.
We welcome your questions now.
MR. THOMSON: Thank you, Minister. In asking your questions, I'd ask you to identify yourself by name and your affiliation. I believe you've all received the communiqué now. Do we have questions?
QUESTIONER: Did you tackle the whole issue of automatic information exchange, as far as tax havens are concerned?
MR. VIDEGARAY: It was not a specific topic discussed at the ministerial level. My personal view is that if we are to address tax evasion globally, we need to enhance significantly our cooperation mechanisms -- and, particularly, information exchange. And this is not the view of the G24 -- I would like to be very clear -- This is our view, from Mexico. We think that there's significant room for progress in sharing information. In a very globalized economy, where multinationals can shift around profits, sharing information among tax authorities can be very important for efficient tax collection. And we very much support what the OECD's doing in the BEPS project -- the base erosion and project shifting project. But this is something that was not addressed at the ministerial level of the G24.
QUESTIONER: Have you talked about the spillover effect of the huge scale monetary easing policy of advanced economies? And what's your thought on that? Is it still not at a serious level, or are you still concerned about the spillover effect in the future?
MR. VIDEGARAY: All right. This was discussed here in the ministerial meeting -- and particularly the IMF Director, and so the participants addressed the issue. It's clear that we're still in a process of getting out of crisis, and the effects of the unconventional monetary policies are still unfolding. I think that there are two things to keep closely monitored.
First, the risk of having asset price bubbles, where the excess liquidity can lead to a misalignment of prices, which is temporary, but can lead to distortions in resource allocation. This does not only include exchange rates, but other assets in development in countries and emerging markets. So, this has to be a priority for all our countries, given the fact that most of it is caused by external factors that are out of domestic control.
And second, from a policy perspective -- and this was discussed in the meeting -- it's key to enhance financial supervision, and the strength of the domestic financial system, because of the capital inflows that the monetary easing are causing into developing countries. So, the call for strengthening financial regulation is more timely than ever, because of this environment, which is unlikely to recede quickly. So, G24 countries -- are we prepared for this unusual but not-going-away-soon circumstance?
QUESTIONER: I would ask Mr. Ashraf El-Araby -- the Egyptian government has always, you know, said that it's waiting for the IMF's loan so that it can be said that there is more confidence in the Egyptian government, and this will mean more FDIs. Now, as you can see, you are speaking here about the spillovers in the countries you are expecting the FDIs from, in the euro zone, and United States, and those are all uncertainties there. Can you still speak that you are waiting for the FDIs regarding the IMF's loan? You also always said that it's not just the money from the IMF; it means the confidence. Now what will the confidence do, even if you take this loan? Because the spillover, I guess, is more than this.
Actually, I want to ask something else. Are there any other spillovers, other than the FDIs? I mean, regarding the Egyptian exports and so on?
MR. EL-ARABY: In fact, the most important thing for the Egyptian economy nowadays is to increase and encourage private sector investment, especially the national investments, and we have our plan to do this. In fact, we are facing some challenges in this regard, but that is why we keep saying that reaching an agreement with the IMF is very important in this regard, and not only for the FDI but even for the national investors themselves. Of course, we have some other plans to encourage and to support the exports. So, I believe these are the two major spillovers that we are focusing on these days and I hope we will succeed in this.
QUESTIONER: You say there are some spillovers regarding exports but at the same time you are waiting for more exports?
MR EL-ARABY: No, I am not saying that we are waiting for more exports. I am telling you that we have our plans to encourage and support our exports in the coming few months, and we have already succeeded in this based on that. If we compare the figures, Egyptian exports jumped by almost 22 percent, or so, during the last three months.
QUESTIONER: Thank you for doing this. On the BRICS, can you give us a sense what was discussed inside and what is the G24’s expectations on BRICS?
MR. VIDEGARAY: We were briefed by the Minister of South Africa on the progress being made on the creation of a new international development bank for developing economies that in the beginning we will serve the BRICS, but it might evolve to serving other countries outside the BRICS. This institution is still in the early stages of its creation. I think that all members of the G24 look favorably to this initiative. Again, this was just at an informative stage, where members of the BRICS that are also part of the G24 were kind enough to inform us of the progress that has been made, which is still in the very early stages.
QUESTIONER: In your communiqué, on paragraph 13, you mentioned infrastructure financing. As you know, for global economic growth, that is the topmost priority every government is facing. In fact, India’s Finance Minister today is visiting the United States and other countries to attract foreign investment into infrastructure facilities. But governments have limitations in raising funds so they want private partnerships. What will the World Bank institutions, including the IFC [do] to encourage public-private partnerships so that infrastructure development can rapidly take place?
MR VIDEGARAY: As I said in my introductory remarks, long term financing, and particularly infrastructure financing, was at the core of the discussions of the G24 Ministerial Meeting. It is widely acknowledged that, although the scale of infrastructure financing provided by multilateral institutions such as the World Bank is increasing, there is still a large scale of financing needed. There is an opportunity to address that through the proper structures that combine the public and private sectors.
I think an interesting comment was brought up at the table by the Minister of the Philippines, reminding us all that it is not just a matter of funds available but also of having the institutional arrangements in each country in order for assembling properly the projects. Many countries experience not the lack of funds but a lack of suitable projects for the funds to come in and support.
So, it has got to be a comprehensive approach toward long-term infrastructure financing, where we do need more funds, and one of the agreements in the communiqué is to demand a more active and timely response from institutions such as the World Bank and other regional multilaterals, but also the need to strengthen not only the financing but the institutional environment in things such as project preparation.
QUESTIONER: You were talking about the negative spillover effects from monetary easing. Did you find any examples of countries that are already experiencing asset price bubbles? Secondly, are you making any particular request to advanced economies regarding the coordination and communication of their entry and exit from these sorts of unconventional policies?
MR. VIDEGARAY: Perhaps the most obvious example of appreciation of assets is manifested in exchange rates. In the case of Colombia, it is obvious where you have a slowdown in growth very much due to an inflow of capital that is largely due to monetary easing in the U.S. and in other advanced economies. There is a call from the G24 members to have clear coordination and better communication between advanced economies and emerging markets and developing countries, towards using coordination as a way to mitigate these potential asset appreciation bubbles.
It is a very difficult issue, and there is no simple answer. I think the consensus is that this is something that has to be closely monitored and called for action, as I said, not only in looking at asset prices but at strengthening financial institutions domestically in every G24 member country.
QUESTIONER: I have a question regarding your grasp on the World Bank and the climate change focus. There seems to be some reservations on the part of the G24 on the new climate change. Could you elaborate a little more? Are you worried that the Bank is going to spend too much on renewables? Are you worried that they would stop financing any coal projects?
MR BHATTACHARYA: No, that is not the intent of that paragraph. It is basically to say that for an institution which has limited resources and a clear focus on poverty reduction, that should really be the primary driver in terms of what it does, but also the lengths through which it does it. So, it is not saying sustainability and climate are not important. Indeed, if you read the first part of that sentence, it says that the impact of climate and natural disasters fall disproportionately on developing countries so it is very important to tackle it. It is what the role of the World Bank is. Particularly on the climate, broader climate agenda, it is the UNFCCC that takes the lead, but in terms of the Bank’s comparative strength it very much comes from the growth and poverty reduction side.
QUESTIONER: You say here that more is needed to reduce uncertainties in advanced economies. What more do you think that they should be doing now? As you know, in the G20 and in the IMFC there is this discussion on more austerity, fiscal consolidation, and whether they should relax it a little bit more. So, was there an opinion on that?
No. 2, I was wondering whether you had any message for the United States regarding the delays in the quota reform or are you just willing to tolerate it and let the process play its way through. Was there a discussion on when you were going to try to move forward on an agreement on the formula as well?
MR VIDEGARAY: Well, it is a balancing act what the world is facing, particularly advanced economies, achieving at the same time fiscal consolidation and sustainable growth. The case of the U.S. is very evident. You can see it in the budget that President Obama sent to Congress a few days ago. It is trying to find a balance between these two goals.
Basically all of the advanced economies, with a few exceptions, are facing this challenge to one degree or another. The problem seems to be that not all are doing it with the same emphasis or with compatible strategies. So therefore, the call from G24 countries is to have better communication between the advanced economies and also between developing countries and advanced economies in order to have a more coordinated, more global approach to balancing these two very important goals of growth while consolidating our fiscal balances.
We obviously all think that it will be a good thing for the U.S. to move forward on the IMF reform. Managing Director Lagarde was very emphatic on the fact that it is only one vote away and that vote is the U.S. So it’s an internal discussion -- we understand that President Obama is pushing in this direction. It is something to be decided by the U.S., but it is obviously something that would benefit the U.S. itself. When we are facing uncertain times, having a strong IMF is a good thing for us, for all the world, including the U.S. So, yes, of course, this is something that is part of the reform. We have talked about the coming reform not being stopped by this issue, but we need to start making progress on that.
Again, the key points coming out of the G24 is to have a better representation of today’s global economy in the governance of the IMF. You can see it in the communiqué; it is very specific on that. And we look forward to continue working with advanced economies toward this goal, which we think is in the mutual interest of everybody.
QUESTIONER: Once again, regarding the advanced economies’ monetary easing, did any participants mention specifically Japan’s recent announcement of the decision of massive monetary easing? If not, can I have your opinion on that?
MR VIDEGARAY: Well, it was not specifically mentioned, Japanese monetary policy, course of action. But it is part of the global phenomenon that stems out of a historical event, financial event of historical proportions and that now Japan is contributing to this monetary easing through unconventional policies.
I think that Japan has been lacking growth for many years and this is something that the Japanese authorities are doing as an alternative approach, and obviously we hope that it works well. For the rest of the world, the consequences are just adding to a trend arising from advanced economies. It is part of a broader trend that will continue for the foreseeable months and perhaps years of having an expansionary monetary environment with the consequences we already talked about.
MR THOMSON: Thank you very much for your participation in tonight’s G24 press conference and we wish you well over the next few days of the IMF-World Bank meetings. Good evening.