Transcript of a Press Briefing by William Murray, Deputy Spokesman, Communications Department, International Monetary Fund

January 23, 2014

Washington, D.C.
Thursday, January 23, 2014
Webcast of the press briefing Webcast

MR. MURRAY: Good day. I'm Bill Murray from the Communications Department at the International Monetary Fund here in Washington. This is our biweekly press briefing. Let me remind everybody that we're under embargo until 10:30 a.m. Washington time, that's 2:30 p.m. GMT.

Let me start off with a few points before I take questions. First, I want to take a moment to remember our colleague Wabel Abdallah who was our resident representative in Afghanistan. As many of you know, Wabel was killed in an attack last Friday in Kabul. We are mourning a colleague, a friend to many of us, above all a dedicated civil servant who gave his life in the line of duty helping the Afghan people. Our hearts go out to his family and to the many victims of this brutal attack.

Now to management travel and some public events. The Managing Director, Christine Lagarde, and Deputy Managing Director, Min Zhu, are representing the IMF this week at the World Economic Forum in Davos. The MD left last night, and she arrived in Switzerland today. There have been and will be various broadcast interviews and other events. Media Relations can give you specific details on those activities in Davos. The Managing Director will have two public panel discussions on Saturday, one on the global economic outlook and another panel on the role of gender-driven growth.

I also want to point out that if you haven't seen it yet that Deputy Managing Director Min Zhu published a blog yesterday on the emerging markets’ need to do more to remain engines of global growth. It's posted on our blog site IMF Direct. I think you should give it a look. It covers some of the themes and issues that were flagged this week by Olivier Blanchard, our chief economist and director of the research department, as part of our latest update of the world economic outlook. Min Zhu elaborates a bit on some of the emerging, key emerging market issues in this blog. Give it a look.

Back to some public events. Next Tuesday, January 28th, the Managing Director will be in Brussels to launch an IMF book entitled Jobs and Growth: Supporting the European Recovery. This book launch event is organized by the European Policy Center and will start at 8:00 a.m. local time in the Thon Hotel EU in Brussels. The Managing Director will deliver opening remarks and will participate in a follow-up discussion with German finance minister Schäuble and Spanish finance minister de Guindos. Contact Media Relations for more specific details on this book launch. On February 3rd, the subsequent week, the Managing Director will deliver the BBC's Richard Dimbleby Lecture in London's Guildhall. In her address, Ms. Lagarde will discuss the IMF's perspective on major challenges facing the global economy. This lecture will be broadcast on February 4th after the BBC's 10:00 p.m. news program. The IMF Western Hemisphere Department Director, Alejandro Werner, will hold a press briefing on the outlook and challenges for the Americas on Thursday, January 30th. The briefing will be available via the media briefing center. Media Relations will be sending out an advisory with full details. Again, that's Thursday, January 30th.

One other thing regarding a topical issue for the Hemisphere. There was an address earlier today in Tokyo by Deputy Managing Director Naoyuki Shinohara on unconventional monetary policy issues. That address has been posted on our website. If you have not seen it get, go take a look at it. It's on the home page.

Lastly, just a reminder, our next briefing, our next communications department briefing will be here on February 6th. And I look forward to seeing everyone again.

With that, let's take some questions. We'll start here in the room, and then I'm going to go online. Do us a favor and identify yourself for the viewers.

QUESTIONER: Good morning. I have two questions following up on the world economic outlook update. One is, obviously here the IMF is noticing the danger of deflation and most notably in the euro zone and most notably in the countries of the south of the euro zone. To what extent does the IMF think that this deflation danger that is increasing, from what I understand you're saying, is undermining the efforts to bring down the debt of countries such as Greece?

MR. MURRAY: Thanks. A quick reminder, Olivier Blanchard gave a press brief, a press conference call, unfortunately, due to the snowstorm that blanketed Washington earlier in the week, but in his remarks on the world economic outlook, he talked about the deflation in the context of a risk, -- we're not forecasting deflation in Europe in the euro zone. It's a risk. So therefore, it's not present yet.

It's something that monetary policy authorities need to be cognizant of and do whatever they can to avoid. I can't really answer your question because we don't see deflation in the euro zone. What it is, it's a risk of deflation and monetary policymakers need to be aware and ready to react.

QUESTIONER: Well, it is a reality in Greece. Deflation is already happening in Greece.

But not to the whole of the euro zone from what I understand.

MR. MURRAY: Right.

QUESTIONER: But Greece has the particular challenge of bringing down the debt.

MR. MURRAY: Right.

QUESTIONER: And the other question would be also, your suggestions to the ECB is to provide direct financing to the small- and medium-sized enterprises. Is there any mechanism that you've recommended to the ECB on how to do that or anymore on that? Thank you.

MR. MURRAY: I don't think our recommendation is just that specific. There are a number of policy tools and levers that the ECB and policymakers in general should consider. And let me remind you what Olivier said on Tuesday. He talked about the risks, one risk being deflation. I'm going to quote from Olivier, "I think there are two pieces in the world which are -- two places in the world which are places where there's reason for concern." Again, we don't forecast deflation. We're talking about risk. One being Japan where this risk may be present. He also noted in his remarks that the part of the world where we worry more is in the euro zone where you have nearly a recovery in the core, but you have a very weak demand in the south.

And we are looking at inflation. Inflation has been decreasing. And the question is, where do we stabilize at a positive level or continue to decrease. So he also offered up a whole range of options on unconventional policies that could be undertaken, but I don't think we have any one solution to deflation in the zone.

QUESTIONER: Bill, I have the usual question of when the mission and Mr. Thomsen are going back to Athens.

In December you guys told us that they are going back in the middle of January, January 15th. Now we have January 23rd. What are the problems or what is preventing the mission to go back?

MR. MURRAY: I don't have a specific mission date to offer you at this time. The mission is going to return once we have clarified a number of technical issues, and we expect this to happen soon. Let me just say that there are differences in a number of issues; fiscal, structural, and in the financial sector; that will need to be bridged before a staff level agreement can be reached, but there has been some progress at the technical level.


What are the economic reasons for the big jump in the WEO update forecast for Spain? What has happened in the last four months?

MR. MURRAY: Thanks for that question. I'm going to have to get back to you on Spain. {After the briefing, the following lines were shared with the media:} Recent data show the recovery gaining momentum more quickly than we expected at the time of the October 2013 World Economic Outlook. While it is difficult to assess the speed of the recovery at the turning point of the cycle, we are now more confident that the growth momentum will be sustained. The revisions reflect stronger domestic, rather than external, demand. We also see some improvement in unemployment, but we continue to expect unemployment to remain unacceptably high for many years.

Let me just take one question from the system, and then we'll get back to you guys. This is from two Argentine publications.”Will the IMF supervise any kind of agreement between Argentina and the Paris Club creditors as it has done in the past with other countries?” This characterization isn't quite on the mark, but I believe what this question is driven by is that there was news yesterday out of Paris from the Paris Club that Argentina had submitted a proposal to the Paris Club.

We are an observer to the Paris Club, not a member, so we're aware that the Argentines have submitted a proposal, but as I think the Paris Club said, there's some more work to do, and we have to see how that plays out. And again, I think the Argentine press should inquire directly to the Paris Club about how the discussions with that group works going forward.

QUESTIONER: Can you give us an update on status of relations with Ukraine and Egypt? And also India's oil minister, I believe, said that India might need an IMF program. Can you say whether there have been any missions other than Article IV? Have there been any technical discussions?

MR. MURRAY: Let me go to the first one, India, I'm not aware of that whatsoever, I'm not aware of any such issue or discussion, so I will leave it at that on India.

Egypt, you know, we maintain contacts with Egyptian authorities. I don't have anything fresh to report there. We're ready when they are if they choose to enter into a program with us, but I don't have any further updates on that.

And your first question was Ukraine. To let you know where that stands, the authorities have yet to clarify their intentions regarding discussions on a possible Fund supported program. We, as an institution, remain ready to work with the Ukrainians on a plan once it's brought to us.

QUESTIONER: Yesterday the U.S. Secretary of Treasury urged once again the Congress to raise the debt limits.

Does the IMF think that it would be a good idea for the U.S. to repeal that mechanism for good and to get rid of the debt-limit system?

MR. MURRAY: Fiscal management ultimately is up to each sovereign, whether it's the United States or any other country. So I can't really address that specific a question, but let me just state, and we've said this before, that certainty, policy certainty is critical however you look at it. And the more certainty there is and transparency there is in budgetary practices in the United States and elsewhere, the better off everybody will be.

So the sooner the United States deals with its debt-ceiling issues, that adds a degree of certainty. And we think that would be a useful thing 

to the U.S. and the world economy.

QUESTIONER: Don't you think that this debt-limit system is a huge source of uncertainty for the U.S. fiscal policy?

MR. MURRAY: Like I said, each sovereign has to manage its own house, its own fiscal house. How it does it, it's going to vary between countries. There's certain standards of best practice, basically what you want is to have a fiscal practice in place that adds certainty, not takes it away. So the sooner uncertainties are resolved in the United States, the better off the U.S. economy will be and the world economy.

We have a question online from Pakistan. “Is the IMF mission considering changing the venue for the upcoming round of talks with Pakistan in the wake of the recent wave of attacks? If yes, what would be the new venue?” Thanks, for asking that question.

We have made the decision to hold the consultations for the second review of our current program in Pakistan outside the country. We remain fully committed to the IMF program in Pakistan and look forward to holding future meetings inside the country as the security situation permits. In terms of venue, I'm kind of disinclined to get into details here, but we expect a comprehensive meeting with the authorities around February 1st.

QUESTIONER: According to Eurostat the debt in euro zone fell for the first time for the last fix years.

But the debt in Greece went up. Do you think that the Greek debt can be sustainable without a haircut?

MR. MURRAY: This is a reoccurring question of course. This is an issue that I think you're very familiar with as well. We do not envision any new debt-relief discussions at this juncture. Public debt is projected to remain high. Greece's European partners have agreed to provide debt relief if necessary, and contingent on Greece being fully on track with meeting its program commitments.

So that means that the debt to GDP ratio declines to 124 percent of GDP by 2020 and to significantly below 110 percent of GDP by 2022. As long as Greece is delivering on its program commitments, the Europeans have said they stand ready as needed to help Greece hit these numbers that I just mentioned.

QUESTIONER: The finance minister of Greece, Mr. Stournaras told the Financial Times and I quote, that Ms. Christine Lagarde and Mr. Poul Thomsen put pressure on him to ask other euro zone leaders, including Mr. Schäuble, to accept haircut losses on their bailout loans.

And he continues, Poul and Lagarde said I had to stand by their side. He recalled, Mr. Stournaras, I said, okay, but if I come by your side, it is what will really help Greece, but is something which is totally out of the question. He spoke of talks with Schäuble, Schäuble told him, to be honest, forget it.

So it cannot be done, so what can I do, Stournaras said. So my question is, is Mrs. Lagarde going to continue pressing for the help? Because the fact [is] that she asked for it.

MR. MURRAY: I can't verify those facts. But what I can tell you is that we do not envision any new debt-relief discussions at this juncture.

QUESTIONER: So last year you all were saying publically that you did not expect anything until this spring in terms of debt discussions, but now you're saying you don't expect any at this point at all. Does that mean that -- and I may be misreading it -- but are you saying now that that spring discussion timeline for debt discussions is off the table?

MR. MURRAY: No. I'm just saying that at this time we do not envision any new debt-relief discussions. I have nothing further to add to that. Good question, but I don't have anything to add.

QUESTIONER: Two separate things. Can you give us an update on the IMF's investigation of the claims of surveillance of IMF, U.S. surveillance of IMF?

MR. MURRAY: I don't really have anything further than what we said when the report first surfaced. I don't have any additional information.


MR. MURRAY: That was a couple of months ago, if I'm not mistaken. It was a report. That's all I've seen.

QUESTIONER: And you haven't confirmed or --

MR. MURRAY: I have nothing further to add.

QUESTIONER: The IMF was criticized by its Independent Evaluation Office for not raising, warnings sufficiently ahead of the crisis. Not that it didn't raise flags, but that it didn't make sufficient [unclear] calls. At this point in time, given all the unconventional monetary policy and the shifting of risk to, you know, potentially hidden markets is the IMF concerned at all about risks building up in the financial system because of unconventional monetary policy?

MR. MURRAY: I think you're right about risk in the financial system in the sense we are always watching that. And I think our Financial Counsellor, Jose Viñals, has been pretty consistent for some time now about flagging concerns and pressures that could potentially build in the financial system. The Global Financial Stability Reports are all geared around that, so broadly speaking, yes. I believe, and we can check with Media Relations, Mr. Viñals will be publishing a blog on concerns he has about financial stability.

There's a question online “In Afghanistan, after the killing of IMF resident representative Wabel Abdallah, are there any changes in or impacts on the IMF's program there? Can you briefly describe the IMF's program there?”

I can't draw a straight line to what happened last week to the status of the program. I don't think that connection can be made at this juncture, but let me tell you about what the status of our program is with Afghanistan. Program implementation to date has been mixed, primarily due to issues about capacity and just program ownership. We had a mission, a formal mission visit Afghanistan in September for the 2013 Article IV discussions. We have ongoing discussions or will be having continued discussions on the second and third review of our program with Afghanistan. Those are just ongoing.

I can't get into the status of where we're at in terms of completing those discussions, but they are ongoing. The first review of the program, which is financed by an Extended Credit Facility, was completed back in June 2012. The combined second and third reviews, like I said are now ongoing.

We've got a question here ”Can you speak about the relationship with Iran? Any plans for an Article IV?” There is an agreement to undertake an Article IV review with Iran. We've had ongoing Article IV reviews in Iran for sometime. There was a bit of a break in recent years, so this will be a resumption of Article IV consultations.

An IMF mission will visit Tehran for the Article IV consultation on January 25th. There was a staff visit that took place in November to learn about the new government's economic plans and reform priorities. This obviously feeds into the analysis that we'll do as part of the more formal consultations with the authorities on the status of their fiscal monetary policies and what not. The overall focus of this Article IV consultation will be on how to restore macroeconomic stability and begin addressing longstanding weaknesses in Iran's policy framework and economic structure.

QUESTIONER: Can you say how long, when was the last Article IV published by Iran?

MR. MURRAY: The last Article IV mission took place in July 2011.

QUESTIONER: And what was the reason for not going since then?

MR. MURRAY: I'm not exactly sure, but, you know, basically it's up to the host government to say, come and do a review. So you'd really have to ask the Iranians.

QUESTIONER: And just to be specific, this is only an Article IV mission?

MR. MURRAY: Correct.

QUESTIONER: One clarification on Greece.

You don't discuss the haircut now, or you are not going to discuss it again, period?

MR. MURRAY: I think you're going to just have to quote me, at this juncture is what we have, and that's all I'm going to offer on that one. I think this is not a fruitful line of questioning to be honest. You've got to keep on asking, and I understand why you are, but I think what we're saying right now is what we're saying.

Okay. Let me get one more question here from the screen, and then I'll go back to the room because I know there's probably some more interest. I have a question here from Turkey, “The Turkish lira depreciated 12 percent since mid-December. How does the IMF assess the recent depreciation of the Turkish lira and its effects on the Turkish economy? “

We really don't comment on specific levels of exchange rates, particularly in spot, day-to-day, tick-tock-type fashion. But Turkey has had a flexible exchange rate system for a long time, and we believe it has served Turkey well. What matters is that monetary policy avoids second-round effects to inflation by ensuring a strong nominal anchor.

Let me also mention to help you out a little bit in terms of exchange rate issues, annually we've been publishing a thing called the external sector report. If you go to our website and search ESR, you'll find the latest report which was published last summer. We're in the process now of the analytics which goes into publication of the next external sector report. And in that there's fairly detailed foreign exchange analysis.

QUESTIONER: I have a question about Cyprus. Can you tell us at least for Cyprus when the mission is going back? And another question I have is if you can tell us, if you cannot, please take the question. When will the IMF and the Troika allow the relaxation for restrictions on capital movements? If you can.

MR. MURRAY: Let's go with the mission, and then we'll get into the capital-control issue a bit. An IMF staff team along with representatives from the European Commission and the European Central Bank is scheduled to start discussions with the Cypriot government in Nicosia on January 29th. It will be the next review of the Extended Fund Facility. The talks are expected to last about two weeks.

Let me just note for the viewers that the purpose of this mission is to reach agreement on the policies that will support the completion of the third review of the program with Cyprus. These talks during the mission will cover a range of issues including recent economic developments, financial sector policies, fiscal policy, and Cyprus's progress on structural reforms.

Your second question was on, not necessarily a related matter, but Cypriot-related matter, is on capital controls. What I can say is that additional steps to relax domestic payment restrictions can be expected this year in line with the government's roadmap. The roadmap provides for gradually easing restrictions in an orderly and predictable manner linking key relaxation steps with tangible progress in bank restructuring strategy and also retaining adequate flexibility to respond to changing conditions as needed in order to safeguard financial stability.

So the bank restructuring strategy, where that stands, and then looking at what's needed if controls need to remain in place or not.

QUESTIONER: And then if I may, there are some accusations to Cyprus that your projections, especially on the recession, were wrong. Because of that, do you plan on any changes in the program?

MR. MURRAY: I don't have a direct answer for that. The last program review before the mission that will go later this month concluded at the end of December and we have the staff report that's published on our website. Our projections currently are negative 7.7 percent real GDP growth in 2013, negative 4.8 percent in 2014, and growth returning in 2015 at 0.9 percent.

MR. MURRAY: I do have one last question, I think this is going to be the last from the online, and then we'll wrap up. “What do you see as the U.S. strategy for getting IMF quotas passed? And do you see it as likely to get passed before 2015? If not, what can the IMF do to assuage the concerns of emerging markets who worry their voice is not getting heard?”

Well, first of all, for you those of you who haven't followed this closely, there's an ongoing effort to secure approval for the 2010 reforms that will implement an increase in the size of the Fund's quota, you can call it share capital, if you want, that will raise the role and holdings of dynamic and emerging and developing countries in the IMF, bring a number of them into the top ten of our quota ranks.

But it will also lead to changes in the complexion of our executive board, which has day-to-day oversight responsibilities for the institution and create a dynamic that will enhance Fund governance going forward and reflect to a large extent the rising role of emerging markets in the global economy. It's an ongoing process. We've been assured by the U.S. authorities that they are going to do what they can to secure approvals necessary in the U.S. Congress.

And as we noted a few weeks ago, we were disappointed that wasn't possible under the omnibus, but we have been assured by the U.S. authorities, the U.S. administration, that it's working, will work to secure the necessary approvals. In terms of speculating about a likeliness of 2015, I'm not going to speculate. We want to see this done expeditiously, so as soon possible and as quickly as possible.

With that I want to thank you all for joining us. We're embargoed until 10:30 a.m. Washington time, that's about 15 minutes from now, 2:30 p.m. GMT.


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