Transcript

By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, July 18, 2002
Washington, D.C.

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MR. DAWSON: Thank you and good morning. Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings.

A couple of housekeeping points and then one minor specific announcement. I expect that we'll have one more of these briefings before the Executive Board recess begins on August 12th. After we return from the recess, which is August 22nd—23rd, we are considering moving to more frequent briefings, and I would appreciate your response, thoughts to Media Relations. What we have in mind at the moment is the possibility of doing a briefing like this every other week, and then on the odd week doing a telephone hook-up. For those of you who are interested, you could dial in, and that might also allow organizations further a field to be able to dial in. But this is a thought on our part, and there are times of the year, such as now, where every other week seems to work, but much of the year I think we find it might be more useful to have a weekly briefing. So, again, any thoughts you may have we'd appreciate it.

As you may know and it's been reported, at least in the Argentine press, the IMF's First Deputy Managing Director Anne Krueger spoke yesterday at a National Bureau of Economic Research—NBER—conference in Boston. I believe we'll be making her comments public later today. The topic of her remarks was "Crisis Prevention and Resolution: Lessons from Argentina."

I should also wish to announce that the First Deputy Managing Director Ms. Krueger will be in Brazil next week. She has a longstanding invitation to appear at the end of next week at the Latin American meeting of the Econometrics Society, where she was asked to present a paper, which she will be doing. She will also, therefore, earlier in the week be meeting with the authorities and private sector in both Rio and Brasilia. When we have more details on the precise schedule, we will let you know.

That's all I have, and now to questions.

QUESTIONER: A few questions on Turkey, and some might be slightly politics-related.

Turkey's heading for early elections, apparently. Does this mean that the IMF-backed program would be or could be suspended, and how would the elections affect the economy? And what's happening to the current review? Do you expect the release of the third tranche? And, eventually, Minister Dervis is still in government, although he's working with an opposition splinter group. Are you happy with his presence in the government?

MR. DAWSON: Well, I think as you know, we make a practice of not answering political questions of that sort. But let me give you the thoughts of where we think we are now.

First of all, we don't comment on political developments in Turkey or elsewhere. We are watching the situation closely, but as we've said before, our main concern is that the program is implemented and that progress continues. In that regard, the mission in Turkey is continuing discussions with the authorities on the third review under the program. The discussions are going well, and we expect the mission to complete its work next week.

QUESTIONER: What about the release of the next tranche before the recess?

MR. DAWSON: We will have a statement to make when the mission completes its work next week. The timing is rather tight for that, of course, because the Board recess starts on Friday, August 9th.

QUESTIONER: Anne Krueger is said to have met yesterday with the Argentine central bank, and there was talk in the Argentine press that they were having some sort of head-to-head talks about a monetary anchor. I wonder if you could update us on what they may have discussed.

MR. DAWSON: It was described to me that this conference in Boston had basically every senior Argentine economic leader for the last 12 years present and sometimes even almost on the same panel, so there was an extensive discussion of Argentina there yesterday. And I am aware that the Argentine press corps was in some fashion covering it. She did see the new central bank Governor yesterday. I believe actually we will be seeing him here in town today as well. That is in the nature of a get-acquainted session with him with the staff.

With regard to the need for a monetary anchor, I think we've already made that rather clear that that is an important part of what we see the task ahead in Argentina, and that indeed is—the development of such an anchor. That is one of the reasons that the group of eminent people or wise people or wise, eminent people was appointed and will be working. I believe they'll be in Buenos Aires next week.

Next?

QUESTIONER: A couple of other questions about Turkey. Apparently the interest rates are higher than expected, higher than planned. Does this put the debt rollover situation into jeopardy? And for how long—and if not, if your answer is no, for how long can Turkey endure those high rates without a major danger? And the second thing is J.P. Morgan released a report predicting a $10 billion financing gap for next year. Anything on that?

MR. DAWSON: Well, I think as far as the interest rates go, we have made it clear that we do think the program is broadly on track and that is still our view. We don't comment on individual market reports, but I think certainly you can expect the mission will, as I indicated earlier, have a statement next week when it finishes up. And of course—those issues we always have in mind, and I think our experience—or your experience in dealing with us on the Turkish case is we are quite diligent about having a reasonably complete mission statement at the end, and then on occasion having staff available to comment on background and so on. So we will be continuing that, and I think you'll have plenty of material.

QUESTIONER: Tom, I wonder, the eminent persons group that is going down to Argentina, will they also be addressing stabilizing the banking sector and—because that seems to be tied to having a monetary policy that can function. You need to have a banking sector that has some sort of intermediation where people have access to their funds. And, second of all, is a credible plan to stabilize the banking sector and make it somewhat more normal going to need to be—is that a requirement before a final program can be agreed upon?

MR. DAWSON: Obviously, normalization of the banking sector after what they've gone through is going to take a considerable amount of time. You know, your question sort of implied that things have to be completed. No, I mean, obviously it's a part of a process that will go on for a while.

In terms of the mandate of the eminent persons, the major focus is on the development of a monetary anchor, also discussion of central bank independence. But it is correct that that relates to the banking system. We have active discussions, negotiations going on with the authorities on a wide range of areas, including the banking sector. So it all fits together.

The primary genesis for the eminent persons was the need to develop a monetary anchor. But these are all related. They're not just in the financial sector. They're closely related even within the financial sector.

QUESTIONER: Does the IMF have a comment on the new strength of euro? And does the new parity between the euro and the dollar affect the economic outlook for Europe?

MR. DAWSON: Clearly, we've had the view for some time that by most traditional measures and most measures, the dollar appeared overvalued vis-à-vis the euro, and in that context, the adjustment of the dollar is something that economists have been predicting for a long time, including Fund economists expecting it. So it's not an unexpected development, and it has some positive effects. For example, in Europe it should dampen what inflationary pressures there are. So I think it's something that we view as not unexpected and, by and large, it is appropriate.

QUESTIONER: The new Minister of Economy of Peru said that his country was going to comply with the goals of the IMF. Would you update on this situation?

MR. DAWSON: I don't really have an update on what has been going on in Peru. We are, of course, aware of the change within the government. But we'll have to get back to you on that.

QUESTIONER: Argentina just closed, I think on the 16th, their offer for bonds for deposits in the banking system, and only a small fraction of those bonds were taken up. Does the IMF see an alternative to a mandatory swap, deposits for bonds, or—

MR. DAWSON: This is exactly the issue that has been going on for some time. The authorities have made a decision they wish to pursue this voluntary approach. You know, it was well known, is well known that we had thought that it was not likely to be successful. The authorities are now assessing what their options are, how to go forward.

Indeed, the selection of the group of eminent persons was exactly to attempt to come in and give an independent view on precisely this issue. And so they, going forward, I think that they will contribute to a view on that issue because it is important to have a stable banking system which contributes to the monetary anchor and makes the establishment of a monetary anchor possible so that we can go forward.

So, it does highlight, I guess, in a sense the importance of this group, the eminent persons going down there, but it also highlights the need to develop a monetary anchor since the voluntary exchange did not achieve their desired results.

QUESTIONER: My question is about Brazil, and earlier this week former IMF economist Michael Mussa recommended that the agreement to Brazil be extended after it expires in December. I'm wondering if that's something under consideration. And, secondly, how confident is the IMF that any subsequent administration is going to be able to uphold or will be willing to uphold repayment agreements?

MR. DAWSON: You know, we have the program that expires in December, and the Brazilians have been faithful, aggressive, and complete in their fulfillment of the program. We have noted previously, including in this forum, that a broad spectrum, political spectrum in Brazil has indicated that they remain committed to continuing the sort of policies that have served Brazil well to this point, and we look forward to dealing with any government in Brazil, any future government in Brazil that is committed to such policies as well.

We will not—we don't comment on more political questions. That's as close as you'll get me in that regard, although I have a suspicion that Ms. Krueger may be asked that question next week.

QUESTIONER: How are the negotiations with the Ecuadorian government going?

MR. DAWSON: Minister Arosemena and Vice Minister Perez traveled over the weekend to Washington to discuss their plans about a possible Fund-supported program. The authorities have made progress toward meeting the four prior actions that had been contemplated for a program, and they expect to complete them shortly. They're working toward closing the fiscal gap under the program, and on the other hand, there have been some new wage expenses that have been identified and the gap needs to be closed taking those into consideration. The staff has been and remains in close association and consultation with the authorities to help them, and the mission to Quito could be envisioned when the prior actions have been completed, and we would let you know when that happens.

It must be awful hot out there. You came in very timid.

All right. I guess if that is it, I will see you all in two weeks, and I would expect that there will be—in the context of Ms. Krueger's visit to Brazil, there will be at least one press conference. And once we have the schedule, we will let you know.

Thank you.

[Whereupon, the press briefing was concluded.]