Transcript of a Press Briefing By Thomas C. Dawson, Director, External Relations Department, IMF

August 29, 2002

Transcript of a Press Briefing
By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, August 29, 2002
Washington, D.C.

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MR. DAWSON: Good morning. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings, although it is our first briefing since August 1st. We'll be moving back to a two-week schedule at this point now that the Executive Board recess has ended.

I expect my next briefing will be around September 12th when we can delve into more detail about the Annual Meetings and related events, particularly the weekend of September 28th and 29th.

But let me give you some information now for planning purposes. On September 12th, at the Bank of England in London, Gerd Häusler, Counselor and Director of the International Capital Markets Department, will launch the latest quarterly edition of the Global Financial Stability Report. I expect that the Bank of England will be issuing an advisory to the London press regarding access to the briefing, and we will also post a transcript of the London event, which is a first in terms of the venue for this report.

On September 17th, First Deputy Managing Director Anne Krueger will hold a press conference on the IMF's latest annual report. Her briefing will be held at IMF headquarters.

On September 18th, Economic Counselor Rogoff will conduct a telephone conference call with press here and abroad to review the analytic chapters of the World Economic Outlook, which will be released publicly on the evening of September 18th.

On September 19th, the Managing Director will address the Council on Foreign Relations here in Washington. Press are welcome to attend, and I anticipate that this will be his keynote event ahead of the Annual Meetings.

As the schedule currently posted on the website shows, we will release the global forecast section of the World Economic Outlook on September 25th, and the Managing Director will have a pre-meetings press conference on September 26th, also here at headquarters.

Media Relations will circulate a note soon which will explain the logistics related to these events in more detail. And now let me take your questions.

QUESTION: It has been quite a long time, so could you give us a Turkey update? And the last time we talked, you said that before November elections you had no intentions to ask for a letter of guarantee from the leaders of major parties. Does this policy remain in place?

MR. DAWSON: Yes, that still remains our view. It is our understanding that the broad thrust of the program has widespread support, and with the program fully on track, we are proceeding on that basis.

We would, of course, welcome tangible expressions of that support, but it is also important for voters' preferences to be heard.

QUESTION: What about Nigeria? Do you have any more information about the fact that Nigeria defaulted on its debt or part of its debt? And what is the IMF position on that?

MR. DAWSON: The basic information I have is that this is not a fact. I think this was perhaps a bit of over reporting. Indeed, Nigeria has had a great deal of difficulty meeting payments this year. This is not news. And I believe yesterday the central bank Governor was sort of updating people on the situation regarding the difficulty of making payments, and we do understand there has been a difficulty in that regard.

I would just like to note that there has been at least one major wire service report that raised the issue of a possible default or lag in payments to the International Monetary Fund. Inasmuch as the International Monetary Fund has no outstanding loans to Nigeria, that is not a likely scenario.

QUESTION: I have a follow-up. Where does the relation between the IMF and Nigeria stand right now? Because I think it was last May or last spring, I mean, there was--apparently the Nigerian authorities decided not to go along with the IMF program. Are the discussions still going on?

MR. DAWSON: We do remain in close contact with the authorities. We had a precautionary stand-by that did lapse. As we remain in close contact with them, we have been counseling them on a wide range of issues. It is not a situation of a program nor have they expressed interest in a program, but we do, as I say, keep in close contact, reflected in the fact that we were in consultation with the authorities shortly after these initial news reports, which I would cite as essentially worthy of note but not particularly news.

QUESTION: I understand that the IMF gave a response to Argentina on its letter of intent, or the draft of the letter of intent. Could you comment on that?

MR. DAWSON: We have been in continuing contact, both written and otherwise, with the authorities, both in response to the draft letter of intent that was sent up by the authorities but also in response as part of our continuing dialogue on a wide range of issues.

I would note that we expect next week, or perhaps actually I believe it is over the weekend, another mission to be going down to Buenos Aires. There has been a series of missions down there. Stefan Ingves, the head of the Monetary and Exchange Affairs Department, will be going down there to discuss, not surprisingly, the monetary program where we continue to believe that the need to develop a workable anchor for the monetary program is essential.

I would note there are a range of issues. The "amparos" are obviously an issue as well. There are issues where some progress has been made. I think the fiscal situation has certainly stabilized. But I think there is a wide range of issues that are being discussed both in the context of the authorities' draft letter of intent sent to us but also in--also issues that were developing prior to that.

Accompanying Mr. Ingves on this mission will be John Thornton, who is the mission leader for the overall relationship with Argentina, and I think it is reasonable to expect that he will be discussing with the authorities a wide range of issues as well. So this is not a mission just limited to the monetary area. That is why John Thornton will be going down as well.

QUESTION: A follow-up on Argentina. Are you any closer to signing a deal with Argentina at this time?

MR. DAWSON: I would not change what I have indicated before. We are continuing to work intensively on a wide range of issues, on a number of which progress has been made, while in others progress has been less.

Since the last press briefing, it is certainly fair to say that the authorities did submit their letter of intent, which is a helpful part of the process. But I do not think we are in a point now where we can be talking about any kind of a timetable or implying a timetable when this might be done. But we are working as intensively as we can, and this continued, I should note, throughout the Board recess.

QUESTION: You say that there were some areas where there has not been as much progress as others. At this point which are the major areas that are still--

MR. DAWSON: I think it would be misleading to cite particular areas. The problems in Argentina are widespread. I have noted -- I did note a few minutes ago some areas where it does seem that the situation has stabilized. But in the monetary area and the banking area and some aspects of the legal side, clearly there are major issues remaining. So I do not think it is fair to cite -- you know, if I were to cite two areas and somehow they got resolved, that would not necessarily mean that everything was accomplished. So that is why I think it needs to be looked in this broader perspective. And, again, I would cite the fact that Mr. Thornton is going down there is to indicate that we have a number of areas which we are discussing. But the presence of Mr. Ingves in there indicates this is a particular issue of importance to us at this point.

QUESTION: You mentioned the legal aspects. Could you tell us which are the laws that cause concern?

MR. DAWSON: No, I can't really because, among other things, we have discussed a number of legal issues over the past, and legal issues aren't necessarily just laws. The "amparos" are a legal issue, but I do not think this is necessarily a law issue. And, indeed, a number of those issues were resolved with new legislation, but then there are occasionally reports about potential other forms of new legislation developing. So it is a situation that requires on our part constant monitoring, and that is what we are doing. We are in regular touch with the authorities.

But, again, even in the legal area, I think it would be very misleading for me to cite one or two areas because things do change. It is a fluid situation. But we are indeed in close contact with the authorities in that area, as well as in others.

QUESTION: Managing Director Köhler will attend the September 10th symposium in Tokyo to mark the 50th anniversary of Japan's entry into the IMF. Would you give some more details of his trip? Will he meet Finance Minister Shiokawa or BOJ Governor Hayami to discuss Japan's economic situation?

MR. DAWSON: Indeed, I can confirm that the Managing Director will be in Tokyo the week after Labor Day for a series of meetings, including on the occasion of the 50th anniversary of Japan joining the Fund -- and the World Bank, I might add; it was both -- but not the WTO, which was a little late in its gestation. And there also will be, just as a matter of interest, a meeting of our Capital Markets Consultative Group, which is this informal group we have that meets with major financial institutions. That will be meeting at that time as well. There will be bilateral meetings, of course, with the government.

I do not have the schedule in front of me, although I know people are working on it. I think it is fair to assume that he will be meeting indeed with both the Minister and the Governor, but I do not have details. When we have them, we will put it out in a timely fashion.

QUESTION: I'd like to actually stay in the same region. My questions are about North Korea.

First, do you know if the North Koreans will be attending the Annual Meetings? Second, they seem to have started some economic reforms. Have you been consulted? Do you want to be consulted? Do you have any news there?

MR. DAWSON: As you know, over the last couple of years, there have been some indications at times of North Korean interest in possibly being an observer at particular Annual Meetings. I am not aware of any developments in that regard this time around. We will be back in touch with you and others who are interested. We will put a press line out to say what the situation is.

QUESTION: But, in general, their efforts at reform...

MR. DAWSON: I am not up on that. It is, of course, difficult for us to have fully formed opinions since we do not have a formal or informal relationship.

QUESTION: Just quickly on the mission to Argentina that John Thornton is leading. Is that...

MR. DAWSON: No, no. I thought I made it clear. Mr. Ingves is leading. Mr. Thornton is going as well. It is a mission of the Monetary Affairs Department to discuss some particular monetary issues. But because we have a number of issues that we are engaged with the Argentines on, we thought it would be useful for Mr. Thornton to go down there as well.

The Fund has its own particular protocol and format, but--and if you want to talk about him going down for somewhat different purposes, you can, perhaps. But I would get in serious protocol trouble if I said that Mr. Thornton was leading the mission that Mr. Ingves was part of.

QUESTION: Okay, fine. I stand corrected. On that mission-

MR. DAWSON: Thank you. I [inaudible]--

QUESTION: it open-ended? Is there a time frame? How long with John Thornton be there?

MR. DAWSON: I do not know. Typically, these missions are on the order of around a week, or perhaps sometimes a little bit more.

QUESTION: A question regarding Colombia and Ecuador. Colombia overshot its fiscal deficit goals for the year, and Ecuador did, in fact, a cut in government spending of 250 million. I think the IMF wants it to be closer to 500.

What is the state of negotiations with those two countries?

MR. DAWSON: In the case of Colombia, in the next few weeks we will be continuing discussions for the fourth and final review under the current EFF and start negotiations on the Fund-supported program when the current arrangement expires in December.

You are correct, the authorities have revised the fiscal numbers for this year and projections for the rest of the year, and as a result, the President has announced that the combined public sector deficit could reach more than 4 percent for this year, if the fiscal measures his administration are proposing are not approved by Congress and the spending reduction effort is not successful. So that is the area in which I think I would direct attention.

The Fund staff believes that sound fiscal measures, additional structural reforms, in particular pension reform, and a further strengthening of the banking system are central elements of the strategy to strengthen Colombia's economic performance and raise its defenses against contagion.

With regard to Ecuador, the discussions are progressing, but as my children would have said, we are not there yet. The fiscal objectives and macro framework for 2002 and 2003 have been essentially agreed, but details need to be worked out to strengthen assurances that the program will deliver the intended objectives.

We look forward to the authorities' paying off their remaining arrears to the Paris Club and to receiving from the authorities the policy details that need to be reflected in a draft letter of intent before we can circulate the latter to departments and go forward.

QUESTION: Would you care to comment on the developments in Brazil these past few weeks?

MR. DAWSON: Certainly, we need to go back to the announcement of the enhancement of the program earlier in the month, and we have gone to--discussing and then finalized--I think it is known--a letter of intent, memorandum of economic policy. And there have been--the expectation is that indeed, while the formal paperwork has not been circulated and the formal approvals received, we do expect that we will be having a Board meeting to review and presumably approve the program next Friday, September the 6th.

In terms of market performance, the markets seem to have digested the news of the international--broad international support for Brazil. The exchange rate has remained in a relatively narrow band. I think the performance, the government's ability to increasingly be able to do refinancings in the market seems to also to be encouraging. We had the meeting on Monday between the authorities and a group of international banks that produced a quite strong expression of support by the international banks for Brazilian program and for the Brazilian economy.

So I think we are in much the position that we had hoped to be when we announced the program a few weeks ago, and we do expect that the meeting will be, as I said, on September the 6th.

We will in that regard--since, as I say, we do have required procedures to go through in terms of notifications and scheduling for the Board, we will let you know in a formal sense when the Board is scheduled. But as I say, I do believe it will be September the 6th. And we are aware that it is a Friday and there is some need for reporters to have it in a timely fashion, to say nothing of directors of EXR.

QUESTION: Going back to Argentina, there have been some moves both in Congress and by the courts over the past weeks that the government there has said it is going to hinder their ability to negotiate with the IMF. Are you concerned that the government there isn't able to deliver on the kinds of reforms that you are asking them to?

MR. DAWSON: First of all, I do take a slight exception to the kinds of reforms that we are asking them to. I think actually we have a fairly good understanding with the authorities of what is needed, and I think we are not in the demander position in this regard, particularly in that area. I think they understand the concerns, and they have heard from a broad range of the international community about some of the concerns in the legal/legislative area.

As I stated earlier, however, I do not think it is appropriate to go through individual items. It is a somewhat fluid situation. But the need to have a stable set of ground rules for market participants, investors, institutions, citizens, domestic and international, to participate I think is an essential prerequisite in any country. And that has been a concern and remains something of a concern. But I think the authorities understand that perfectly well.

QUESTION: But if that is the case, how come it is taken eight months to get a program? I mean...

MR. DAWSON: That is not the only area. It is a very, very difficult situation. There is not a political consensus on where to go forward. Your question makes it sound as if it is something that can be written down and passed and approved. This is a country of many millions of people, of provinces with strong traditions, political traditions, a democracy, and we need to respect that process going forward and see how we can best support the authorities in their effort.

As I said earlier, it is important to do it as quickly as possible, but it is also important to try to get it done correctly. But as I say, it remains a difficult situation.

QUESTION: My question might not be a new one, but I think it is very important. In your views, which sectors in the U.S. economy have been most negatively influenced by the terrorist events last year?

MR. DAWSON: I think we are sort of in the blackout period prior to the publication of the World Economic Outlook, and I think I will leave it to Ken Rogoff to do the analysis on the effect of the 9/11 and subsequent developments on the U.S. economy. That will, of course, be a major subject of the World Economic Outlook, and he will be discussing that. There will also be--I think it would be fair to say some aspects of that question will also be addressed in the forthcoming Global Financial Stability Report, both of which will--you know, you will be able to discuss in the next three weeks or so.

QUESTION: And, excuse me, do you think there is a particular relation between the slump of the financial markets during the past weeks--past months and the terrorist attack?

MR. DAWSON: Again, I think that is above my pay grade or outside of my authority, so I think we will leave that to other--to other observers to comment on. But, again, the economic counselor will be addressing that issue in the World Economic Outlook press conference and, indeed, I suspect these will be items discussed during the course of the Annual Meetings as well.

QUESTION: Washington DC Police Chief Ramsey had a news conference earlier this week in which he expressed concern about the ability to get enough manpower from surrounding jurisdictions to provide security for these events. Has he relayed those concerns to the IMF? And are there any discussions going on about even further limiting or restricting or changing the Annual Meeting?

MR. DAWSON: We certainly are aware of the chief's comments, since they were publicly made. I am unaware, however, of any direct contact with us.

We are, of course, in the United States at the invitation of the United States Government. We have a reasonably formal relationship with the executive branch through the Department of the Treasury, and that is the conduit through whom we deal with our host government. So that is the answer, I guess, to the first part of the question.

The second part of the question in terms of possible further changes in the Annual Meeting, that partly requires me to know what your premise is in asking the question. But from my understanding of where I thought we were, you know, a few weeks ago to now, no, there have been no changes.

QUESTION: The Argentinean authorities were waiting for a formal answer on this letter of intention draft. Is this going to happen or the mission...

MR. DAWSON: No, I think it is a continuing process. I mean, there have been a couple of letters written already; one essentially an acknowledgment of the letter, and the other one with some preliminary views and an indication that more views would be forthcoming. So this is sort of a continuing process, and, you know, we certainly will be providing to the authorities more detail in terms of questions, issues that we think that their letter--that letter--their letter raises.

However, I think that I would rather describe this in the context of the continuing process as opposed to be there is one letter that comes in, then there is one letter that goes back, and then there is another compromise letter that comes back. That is not really what the process is. It is much more of a continuing process in which we are in close contact with the authorities, but written responses are part of that, definitely, and so, therefore, there will be more. But they are not the only response, and as I indicated, the visit of Mr. Thornton is an indication that we want to continue and, in fact, intensify the discussions.

QUESTION: But is there a big gap between what has been presented by the Argentinean Government and what the IMF is looking for?

MR. DAWSON: We are really still in the situation of trying to understand further what they are indicating in the letter and how they intend to accomplish a number of the items there, and broadly the areas are areas that we anticipated.

There are some areas in which I think there is a broad consensus. There are other areas in which there are differences, and they track essentially what I indicated earlier in the press conference in terms of where we think progress has been made and where we think that less progress has been made.

Thank you very much.

[Whereupon, the press briefing was concluded.]


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