Transcript

Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, International Monetary Fund

February 27, 2014

Webcast of the press briefing

MR. RICE: Good morning, everyone, and welcome to this regular press briefing on behalf of the International Monetary Fund. I'm Gerry Rice the Director of Communications at the IMF. I will begin this morning talking about some management travel and public events, and then we will turn to questions in the room and to our colleagues online.

Beginning with management travel, I can tell you that next Monday, March 3rd, Managing Director Christine Lagarde will be in Bilbao, Spain to participate in a high-level conference organized by the Spanish authorities, entitled “Spain from Stability to Growth.”

We expect to publish the Managing Director's speech which is scheduled for around 10:30, 10:40 a.m. local time. The event is open to the press and will be webcast live by the organizers. So that's Monday, March 3rd, Christine Lagarde, Bilbao.

Our First Deputy Managing Director, David Lipton, will take part in a series of town hall style events in parts of Latin America next week in Mexico, Peru, and Chile. At a number of these university events, Nouriel Roubini of Roubini Global Economics will be joining him in all three countries to discuss the challenges facing the region, and the global economy, with a particular emphasis on prospects for youth in the region. Hence the discussions taking place at the universities. The university events, I believe, will be live webcast, but we can get more details of that event for you if you want it.

Our Deputy Managing Director, Naoyuki Shinohara, is visiting Uruguay. He will hold a press conference tomorrow, Friday, February 28.

Also on Friday, our other Deputy Managing Director, Min Zhu, and our Financial Counsellor, Jose Vinals, will be in Hong Kong at a seminar on the future of Asia's finance.

That's about it for the housekeeping, except as usual, at this time to say that latest addition of “Finance and Development” is issued today. It's focus is on Europe, so it should be interesting.

Now, I want to depart a little bit from our usual practice at these press briefings because just a short time ago, some minutes ago, the Managing Director of the Fund, Christine Lagarde made a statement on Ukraine, and I know that Ukraine is much on your minds, much on many people's minds this morning.

So I want to begin just by reading verbatim the short statement that was just issued. Then we will return to our usual embargoed press briefing until 10:30. Obviously this is not under embargo because it's been released. I apologize to those in the room, once again, that this came so late, and I know that was inconvenient for you, but it was important that we got this statement out as soon as we can and that's what we did.

So let me read to you this statement from Christine Lagarde, the Managing Director of the IMF on Ukraine. A statement that she issued just a short time ago.

“The Ukrainian authorities informed me today of their request for support from the IMF. We are ready to respond and in the coming days will send an IMF fact finding team to Kiev to undertake a preliminary dialogue with the authorities. This will enable the IMF to make its usual, technical, independent assessment of the economic situation in Ukraine, and at the same time begin to discuss with the authorities the policy reforms that could form the basis of a Fund supported program.”

“We are also discussing with all our international partners bilateral and multilateral how best to help Ukraine at this critical moment in its history. In that regard, we are encouraged by the many statements of support that have been expressed.”

That's the statement from Christine Lagarde this morning on Ukraine in response to a request for support from the Ukrainian authorities that was received just a very short time ago.

With that I will turn to some questions in the room and to some questions online. Given that we're on -- so we're turning back to embargo mode. Given that we're on Ukraine, shall we try and stay on Ukraine, deal with Ukraine and move on?

QUESTIONER: Please describe for us the instruments that IMF has for helping Ukraine at this point, and whatever restrictions there might be on the use of funds, and the timing, which is critical in this situation. How soon can any actual assistance be dispersed?

MR. RICE: Thank you. There's a number of instruments that could be used. It will depend on the fact-finding team, the diagnostic that they're able to do on the ground working with the Ukrainian authorities, and the result of those discussions and dialogue. It's premature at this point to say what the specific instrument might be.

On the timing, the IMF can move very quickly. It's one of the features of the International Monetary Fund in crisis situations. That said we do have our processes and we need to follow those and pay attention to proper due diligence.

Again, so much depends on what the team finds once they are able to get on the ground, and, make an independent assessment. What really matters for us in these situations, of course, is that once the program is designed and in place that, it's implementable; that the capacity is there, and the commitment and the ownership is there to implement the program.

So there are a number of factors in play that would affect the timing. But I think as Christine Lagarde is indicating today, and has indicated over the last few days, we stand ready to help. The situation is urgent, and we are seized of that urgency.

QUESTIONER: Let me follow-up for a second. The reason I asked was because the regular programs, as we all know, take months to negotiate, in a best case scenario. The rapid financing mechanism is okay, but it's very limited in terms of the availability of funds. It's limited by the quota size, and the Ukrainian quota is around $2 billion dollars. So if we take half of that, which is a limit for one year, it's obviously not enough. What is the way out of this conundrum?

MR. RICE: Well, again, I don't want to get ahead. We just announced the team is going to be there in a matter of days. I don't want to get ahead of the team in any way.

QUESTIONER: I would like to ask how flexible you can be this time in comparison to the previous program that didn't work with Ukraine?

MR. RICE: Well, again, we want to get on the ground, make our independent assessment, do the technical due diligence, have the important dialogue with the authorities, and then we will make an assessment of what needs to be done.

What you're referring to is the Article IV that was done several months ago. Broadly we would expect that the main elements of that Article IV would remain valid. But again, the team needs to get on the ground and make a real-time assessment, given, as we all know, the developments that have taken place, even in that short timeframe.

QUESTIONER: (inaudible) complaining that the (inaudible) are too hard to fulfill. So I'm wondering if you have addressed now political will to be more flexible?

MR. RICE: I don't want to make comparisons between different governments. I don't think that's probably very productive. But, you know, the letter we've just received from the Ukrainian authorities does indicate that the new leadership is committed to implement wide-ranging reforms. With, of course, the goal that we all share which is helping to improve the lives for the Ukrainian people.

QUESTIONER: By accepting this request and moving forward, just to be absolutely clear, the IMF is officially recognizing the new government in Kiev and dismissing claims by Yanukovych who says he was illegally ousted. Is that correct?

MR. RICE: We are now engaging with the authorities in Kiev, and the mission will be on the ground in dialogue with them next week.

QUESTIONER: Just on a technical basis, can a country that owes the amount that Ukraine owes, I think it's something like 2,000 percent of its -- it's substantially more than its 100 percent quota. Can a country that owes that much tap the RFI? Is the IMF considering both a short-term facility and a long-term facility?

MR. RICE: Ian, I'm going to give you the same answer. I don't want to get ahead of ourselves talking about specific instruments.

On the debt, we, again, need to go there with the fact-finding team. We need to update our overall assessment. Given these recent economic and political developments, as you know, for countries under IMF surveillance -- a DSA as we call it, a Debt Sustainability Analysis -- is an integral part of the work that we do.

This was the case for Ukraine at the time of Article IV, but the team needs to go in. A lot has happened, and we need to refresh our analysis.

QUESTIONER: Just to be clear though, I understand you're not wanting to talk about what instruments are applicable, but on a technical matter, just under IMF rules, I think the IMF can inform us whether it is legally possible for a country that owes as much as Ukraine does. I don't know what the RFI rules are. Do you understand? I understand you may not have that information now. If you could follow-up.

MR. RICE: I'm sure it's on our website. If it's not we will get it for you.

QUESTIONER: Could you point us to the right way?

MR. RICE: We can do that.

QUESTIONER: Given the high political pressure on the IMF coming from the U.S., notably, do you think that the IMF will be able to act in total independence, and to impose its own rules, like assessing the economic situation in Ukraine?

MR. RICE: I mentioned earlier that one of the features of the IMF that I think everybody knows is the IMF can move pretty quickly. I think another distinguishing feature of the IMF is the independence of our analysis. Madame Lagarde has in fact referenced that in her statement this morning. Our technical, independent assessment of the situation is key. That is something that is very important for us, for the IMF. I have full confidence that in this situation we will, indeed, be able to make that independent assessment.

Of course, and as Madame Lagarde also

mentioned in her statement, we do that assessment in consultation, and discussion, and in dialogue with many others. She indicated that we're talking to all our partners including bilateral and multilateral groups.

QUESTIONER: Just to elaborate on that last point, when you talk about consultation with partners what does that involved? I mean, is it kind of saying what can other countries commit, and maybe that would influence how much money the IMF gives or do you also consider their assessments of the economic situation?

MR. RICE: We want to take into account all the relevant factors, all the important factors, of course. I think they vary in different situations. But we have already begun discussions with, as I said, many of the bilateral and international partners. That will continue.

The Foreign Secretary of the United Kingdom was at the IMF yesterday. The German Foreign Minister will be here tomorrow. So, you know, Madame Lagarde in Sydney, I know had discussions with others including Minister Siluanov in Sydney. So just to give you the sense that, this is part of the process.

QUESTIONER: The follow-up question, as far as timing, I know you don't know how much this particular program can take, but you said the IMF can act very rapidly. What's the average or range of how long it could take because, especially in this case, you know, you already have done so much analysis on Ukraine. You just had a program three years ago, so it seems like a lot of the basic groundwork is there. You just have to update it, so.

MR. RICE: I will not get ahead of the team. It just would not be fair or appropriate for me to do that. We can, I mean, if you'd like we can get you some information on how quickly the IMF has moved in other circumstances.

But let me caution that each country is different. Each circumstance is its own. Just because we moved at a certain speed in one country does not necessarily mean we'll move at the same speed in another country or in this case of the Ukraine.

You're right that we did the Article IV, but as I mentioned in response to our colleagues question, there has been a lot happening, and there have been developments. These need to be taken into account by the team that's on the ground.

Maybe one other piece of information I can give you on the team that's on the ground. We expect it to be on the ground next week. I can tell you that the staff team will be led by Nikolay Gueorguiev, who is a Deputy Division Chief in our European Department. So Nikolay will be leading that team.

I can also tell you that the head of our European Department, Reza Moghadam, will also join that mission at some point for a few days. Reza will not be there for the very beginning of the mission, but he will join the mission for a few days at some point.

QUESTIONER: Just for a clarification. Did you decide that Ms. Lagarde is going to have discussions with the Russian Finance Minister or did those discussions already take place?

MR. RICE: They had a discussion in Sydney. I can confirm that they did. Yes. That's what I said.

QUESTIONER: What time?

MR. RICE: At what time? I don't know. This was the G-20 in Sydney. It was just a few days ago. Sorry, I thought you meant the precise hour. I don't have that.

QUESTIONER: I was wondering if the $15 billion dollar figure floating around, in IMF aid, is a reasonable amount for the Fund to consider for Ukraine?

MR. RICE: Again, we should not get ahead of the fact finding team that's going out there to make the assessment, the IMF's assessment. You know, if the dialogue progresses and it, indeed, forms the basis of a potential program, it would only be then that we're at the point of talking about numbers. So I won't play the numbers game today.

So again, just the process, the fact finding team goes, makes the assessment, and, if those discussions can form the basis of the program, then there would be a negotiation process. That's when we would get into financing parameters and so on.

All right. I'm going to take a few more, and I’m going to look online because there's a long list here. It's all on Ukraine. I'm going to take a few more, I mean, is this fair? I'm going to take a few more in the room. I'm going to take a few online, and then I'm going to change the subject, okay?

QUESTIONER: So, Gerry, you said there were a number of factors in play that would affect timing. Can you elaborate on what specifically you're talking about?

You mentioned the broad-based reforms in the Article IV that the IMF has previously talked about. The IMF has also said that it would require tough preconditions. Is it correct to say that the IMF is not backing down from that stance about requiring tough preconditions, a shorter and durable -- a shorter financing program?

MR. RICE: You know, the way I would characterize it, as you know in all our programs our support is premised on policy understandings. That will be the case in Ukraine as well.

Now, what those policy understandings will be, and understandings about reforms that need to be implemented, again, we've just announced the team going on the ground. I don't want to get ahead of them.

What goes into the time factor? Well, I don't think there's any mystery to it in the broad sense, but it obviously depends on how well the discussion go, what the nature of the issues are, what the nature of the required policy understandings are, and how fast we can make progress on those things, as well as the whole potential, a bit further down the road, the whole potential financing package and how that would work.

QUESTIONER: Sure, but just to be clear, the IMF has explicitly and clearly said in the weeks leading up to this event that because of its previous bailout history with the Ukraine it would require tough preconditions. That it would require the government showing -- making tough reforms before it lent out money. I’m just clarifying whether the IMF is changing its stance on that?

MR. RICE: I'm going to use my words. Actually I'm going to use Madame Lagarde's words because she says the team is going there to begin discussions with the authorities on the policy reforms that could form the basis of a Fund supported program. So that's how I'd like to characterize that. I think it's for the team on the ground to discuss with the Ukrainian authorities what exactly the nature of those policy reforms would be.

QUESTIONER: A new Prime Minister has just been designated today, but there's still a lot of political instability in the country. How do you expect the new governments to get enough political support to implement what could be really a harsh reforms that you require?

MR. RICE: Well, obviously, that's a question for the Ukrainian authorities I think more than for me. But, as I said earlier, the ownership of the program, the commitment to the program, the capacity to implement the program are all considerations that we take into account when we would be a position to go ahead witnesses the program. So we will be taking those factors into account as part of our assessment.

QUESTIONER: What I want to know is does the IMF need the political situation to stabilize before it gets any kind of agreement on the financial assistance?

MR. RICE: Well, I think we just need to take this step by step. Today we've received the request from the Ukrainian authorities. We're responding to that request. The team is going out. It's going to make an assessment of the factors I've just described, and we'll take it from there.

QUESTIONER: On this subject I just wanted to ask if you want to use the situation to prod your biggest shareholders to fulfill their own commitments. As we all know the Americans, for example, have not yet acted on the quota reform. So maybe this is a good time for you to make them move if they want the IMF to help out in this situation?

MR. RICE: Just to repeat, we'll be making the assessment of the Ukraine's needs, and what we can do on the basis of our technical, independent economic assessment.

Okay. I'm going to see if there's anything new online. I see a lot of Ukraine but we may have covered it.

Why won't the reforms the IMF is insisting on for Ukraine, exchange rate flexibility, fiscal consolidation, reducing or eliminating domestic fuel subsidies, create political opposition to reform and destabilize any new government? What can be done to avoid this?

I do think I covered that point so I won't repeat it. I'm actually, you know, looking at the other questions. I don't see anything on Ukraine that has not been covered. My team can --

QUESTIONER: If I could modify my last question. Have you discussed this with the Board?

MR. RICE: Let me come back because there's a question, and he's asking will the IMF in a possible Ukraine program seek to reschedule or otherwise restructure the country's external bonds?

Again, I just think it's premature to get into these issues. The parameters of the program will be something for the team to look at when they're on the ground.

Okay. Let's change the subject. Good morning.

QUESTIONER: Good morning. I've got some questions from Greece. What is the progress in the discussions between the TROIKA and Greek government, and if this will be the last visit for the conclusion of the review?

Also, what are, according to IMF, the capital needs of the Greek banks? I'm asking that because the Financial Time showed twice that according to your estimations these needs will reach the amount of 20 billion.

MR. RICE: Okay. So maybe just stepping back for the benefit of others. As you may know, an IMF team along with our partners in the European Commission, and the European Central Bank started discussion with the Greek Authorities in Athens a few days ago, on Monday, on the fifth review of the program.

We expect the visit to last a couple of weeks. Will it be the last mission? We hope so. Certainly our focus is on seeking agreement on the set of policies that would facilitate the conclusion of the fifth review. So that's our goal. We're working hard, very intensively with the authorities and the European partners in that regard.

What are the issues being discussed? The team is in discussion. I don't have the details, but a number of issues on the fiscal and the structural financial site that will need to be bridged before the staff level agreement could be reached.

We are particularly concerned about delays in some structural reforms, and focused on what should be done to catch up. I think that was the first part of your question.

On the second part of your question. Again, the financial sector will be part of the assessment and the discussion that the team is making on the ground and ongoing discussions with the Greek authorities on that so it wouldn't be appropriate for me to comment.

QUESTIONER: You don't want to comment on this article of the Financial Times?

MR. RICE: We don't comment on articles usually, so no.

QUESTIONER: Just to follow-up on that, part of the issue with the bank sector needs is how much capital adequacy requirements Greece will require, and whether it will be 9 percent as they had in their first bank health check or 8 percent, similar to other European banks. My colleagues in Athens have reported that IMF has agreed to 8 percent so I was wondering if you could elaborate how that would affect how much capital the Greek banks need? Maybe it's too technical.

MR. RICE: I am aware of the issue. I can't comment because, again, that's one of the issues that's being discussed by the team on the ground. We see press reports all the time and I'm not going to comment on a press report.

I didn't mean to be cute with you, you know, we can't be in the business of commenting on press reports. The issue's being discussed on the ground, so on the substance of it I'm not going to go beyond it because the team's discussing it on the ground.

Okay. Are we still on Greece?

QUESTIONER: If I may. I would like to ask whether you would welcome a new loan agreement between Greece and the EU, which will ensure that the program will be fully funded until February 2016?

MR. RICE: I mean, two issues there. On a new program that's a matter for the European partners. Our program, the IMF's current program with Greece, as you know, the extended Fund facility is scheduled to end in 2016. So whether, you know, there's a new program that's for the European partner.

On the financing gap I think it's, again, it's premature to discuss the details of, you know, what would be required. It depends on a number of issues still under discussion. Including, for example, the assumptions around privatization.

But as you know, and this is not new, the European partners have said it a number of times that they will do what is required in terms of supporting Greece. Provided the implementation of the program is on track. Again, that's not something new that they've said. That's what they've said repeatedly and with some consistency.

I see that I actually have a few questions on other topics and I'm going to take them. Then I'll come back briefly in the room and wrap up. But just so it's not completely just Ukraine and Greece.

There's a questions which asks as the IMF staff is in Portugal for the eleventh review, is there any chance to discuss a precautionary credit line or a clean exit?

What I'd say to that is the focus of the discussions, the team is on the ground, the focus of the discussions should remain centered on ensuring strong program implementation that's of the current program which is essential to secure economic growth and debt sustainability for Portugal to regain full and durable market access.

So at the proper time there will be a discussion on these other issues that Questioner is asking about, the precautionary credit line or clean exit. Maybe just to say that, if we look at Ireland, for example, the decision in terms of graduation exit from the program was very close to the program end date. So again, I think it's an issue that will come a bit later.

There's a questions on Italy, asking what is your first evaluation of the new government program to cut taxation on labor and low incomes, and to increase them on financial incomes?

What I would say on that is many of the economic measures mentioned in the Prime Minister's speech to Parliament earlier this week take forward the economic and structural reforms proposed in the IMF's discussions with Italy in recent years. That implementation remains key to ensure that Italy returns to the path of sustainability and growth.

Just to try and respond to the question a bit more directly. High unemployment is obviously a pressing issue in Italy, and labor market reforms are key, in particular a flexible labor market contract with gradually increasing protection. So we look forward to further implementation in the period ahead.

There's a second question on Italy and it's asking do you have a comment on the new government and on the new Finance Minister, Pier Carlo Padoan?

On the new government we all listen very carefully to Mr. Renzi's speech recently, and again, look forward to more details on his proposals. We certainly welcome several of the measures that he touched on in his speech.

On the new finance minister I would just like to say that he was very well-respected when he was a member of the IMF Executive Board.

I'm going to make this the last question.

QUESTIONER: Gerry, sorry to come back to the topic of the day. In terms of the IMF recognizing Ukrainian government, in the Egyptian situation it took several months before the IMF acknowledged it. Can you help us understand that process of how it has acknowledged the government here in Ukraine?

I assume then if the IMF is supporting this that it has Russia, Moscow's backing, as a key member of the IMF? Can you say whether the Board has been briefed?

MR. RICE: You know, we can work with transition governments. We can work with interim governments. The issue for us is a government that is internationally recognized, and we have no reason to believe that recognition is an issue in this case.

I am not just -- speaking frankly with you, up to date on whether the Board has been briefed as of now. I am sure if the Board has not been briefed it will be in the process of being briefed.

QUESTIONER: Okay. Just a follow-up.

MR. RICE: Just to explain that a bit.

QUESTIONER: Sure, please.

MR. RICE: We just received, again, the request from the Ukrainian government, you know, within the last hour. So in terms of briefing the Board that's something that we'll be moving to do very shortly.

QUESTIONER: Madame Lagarde has said here that we're discussing with our international partners the best way to help Ukraine in terms of support. Why is that necessary? I thought that the IMF would be acting independently. Why is supplementary international support necessary?

MR. RICE: Well, it's not unusual at all that we would have discussions with multilateral and bilateral partners in helping a member country to address an economic crisis or an urgent economic situation. That is fairly normal.

I think that's completely separate from the issue of the IMF being able to make an independent, technical economic assessment of a member country's needs.

So I am going to leave it there. Thank you very much for your questions and for your patience at the beginning of this press conference. I look forward to seeing you in a couple of weeks. Thanks.