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

November 20, 2003

Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, November 20, 2003
Washington, D.C.

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MR. DAWSON: Good morning, ladies and gentlemen. I am Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings.

A couple of announcements. We've just posted on the external website a joint letter from IMF Managing Director Horst Köhler and World Bank President Jim Wolfensohn to the heads of government of all member countries of the institutions, Bank and Fund, calling for renewing progress on the world trade talks. In that letter, Messrs. Köhler and Wolfensohn stressed that expanding trade by collectively reducing barriers is the single most powerful tool that countries working together can deploy to reduce poverty and raise living standards. They also reaffirmed their commitment to help member countries to take full advantage of the opportunities of more open trade and to also help them manage the risks.

We will also post later today on our website a macroeconomic assessment of Iraq, prepared by Fund staff. A preliminary and very summarized version of the paper provided input for the UN-World Bank Joint Iraq Needs Assessment that was published in October and is available on the World Bank and the UN websites. A fuller version was made available to participants at the Madrid donors' conference about a month ago, as well as to our member governments, and we have now decided to publish the report to give a fuller background of the macroeconomic context for Iraq's reconstruction efforts and needs.

I would now like to open the floor to questions. Thank you.

QUESTIONER: A question on Ecuador. The Minister of Economy was here over the past few days negotiating with you guys, trying to get the program back on track. What can you tell us about that?

MR. DAWSON: Well, indeed, you are right. A team led by Minister Pozo and the central bank president were here from the 11th to the 17th for discussions, intensive discussions on the Second Review. The immediate macroeconomic prospects seem quite favorable. Growth appears to be getting a boost from oil production filling the new or recently completed pipeline, and inflation is continuing to come down steadily.

In terms of the discussions, progress was made in defining the issues to complete the review, and we've agreed on a number of steps in the fiscal and reform areas that the authorities will try to put in place by year-end. On this basis, we expect there could be a follow-up mission by Fund staff to Quito likely in January.

On the fiscal front, the authorities are making progress toward meeting the 2003 objectives for the overall balance and on interest expenditures, and in the next few weeks, they are going to prepare options for strengthening the 2004 fiscal outlook, as well as ensuring adequate financing.

With respect to the reform agenda, priorities include moving ahead with civil service reform and tax reform, and bringing private management to the electricity and telephone enterprises, as well as liquidating some closed financial institutions.

Overall, the talks were quite positive, helpful, and we look forward to further progress being made by the authorities in the weeks ahead to strengthen their program.

QUESTIONER: I would like to know if you have some news about the new agreement between the IMF and Brazil, and I would like to have your comments also about the cut in the interest rates yesterday.

MR. DAWSON: The continued strong performance, I think, has given the authorities room to pursue what I think was their desire and everyone's desire to see a reduction of interest rates consistent with the very strong performance that the Brazilians have experienced under the program.

In terms of where we are, as has been indicated, we are preparing to--management is preparing to recommend to the Board the authorities' request to extend and augment the present stand-by arrangement. This will be part of a strategy to provide some comfort and support on a precautionary basis, we expect, for the Brazilians as they pursue their program. The arrangement will be extended by about 15 months as a sort of--as we've referred to it and the authorities have referred to it--insurance policy.

So I think the performance and the signs continue to be quite positive. I don't have a date for the review, but when we do have that, we will let you know.

By the way, we are getting closer--we're not quite there yet--to the posting of our schedule and agenda. We're balancing it between a month-ahead schedule, which is helpful but not totally realistic--totally accurate, and a daily schedule, which is probably not particularly what you're interested in. And we're working on a balance, and I hope that within the next week or two we'll have that schedule available to be regularly posted and updated for you.

QUESTIONER: Tom, my question is on Turkey. You saw the news [about the bomb blasts] today. What does that do for Turkey's economy, particularly investor sentiment, privatization?

MR. DAWSON: Well, we obviously deplore and are appalled by what happened in Turkey and extend our condolences to those injured and the families of those killed. I had the opportunity to speak earlier with our mission leader, and I think we need to keep a bit of perspective about the performance. The market--the equity markets were closed. Other markets did reopen, and I think the initial reactions are sort of understandable. But I think the bond and exchange markets have been reasonably strong given the shock and the tragedy.

Clearly, you know, over the last several weeks, couple of months, there's been a marked improvement in economic and market indicators since the completion of the Fifth Review, and I think this is indicative in the medium term of the success of the program. The program is working, and I think it's important, and that's what the mission is doing to work with the authorities to keep up the momentum of policy implementation. And I think that--in discussion with the mission leader this morning--good progress is being made in that regard.

QUESTIONER: A follow-up?


QUESTIONER: The follow-up question would be then: Would these attacks seem to confirm investor predictions that the review will not be completed this month?

MR. DAWSON: I think it is way premature--not only premature but speculative to assume there would be that sort of a link. As I say, we are making good progress, and the mission-team is working on this.

QUESTIONER: I am wondering, can you help us get more precise on Dr. Krueger's forecast today? She said that the IMF is revising upward its global economic forecast, and what number would that be, then?

MR. DAWSON: No, I don't think I will be able to help you in that regard. I think clearly if one looks at private market estimates and general sentiment and our observation of the performance of our member countries, clearly some of the worries that were there at the time of our semiannual WEO in September seem to have been resolved, for which we're happy. It's our job to be cautious, of course. But in terms of the regular process, we're some way off from an updated WEO. But I think it is a reflection, and the markets reflect this and, as I say, forecasts reflect a stronger market--stronger growth prospects in a number of regions. And I think that's what is particularly important because of the concern in the past that perhaps the recovery was not balanced, the global recovery was not balanced. And I think there now are more indications that it is, and that's the point to which she was talking. But you're not going to get any more numbers from me. Sorry. Hazardous to my career.

QUESTIONER: I would like to ask you about the recovery of the American economy. Despite the growth in the third quarter, there was a sharp drop on foreign investment in September and the dollar remains very weak. I would like to know if the IMF sees any sign of danger in this recovery.

MR. DAWSON: I think our view is that the recovery has been progressing well, and I think I will pass on that question. I think you can always find particular indicators at any one particular point in time may have gone down, but I think the overall pattern of the American economic recovery is really quite strong. And even subsequent to the third quarter numbers, there have been other numbers coming out that indicated--whether it's employment numbers and others-- indicating a continued strong recovery.

QUESTIONER: Would you be able to give us a sense of how much progress you have been making in Bolivia?

MR. DAWSON: We have indeed a series of discussions with the authorities, and as I've indicated previously, we have been following, I think, quite a flexible approach in supporting Bolivia, recognizing the very difficult social and political situation.

We are working with countries and other institutions to catalyze donor support, working particularly with the World Bank, and IDB. At the moment, I think we expect a mission to return to La Paz for the Third Review of the stand-by, November 25th to, I think, December 11th.

QUESTIONER: [Inaudible].

MR. DAWSON: To December 11th, yes. And to continue the review, yes. I'm sorry, hopefully complete the review.

QUESTIONER: I have a question about the announcement on China's Article IV consultation earlier this week. I just wondered if I missed something. I mean, this was announced through e-mail that we were getting. The PIN was being released, but there was a telephone conference as well when comments were made about the U.S. possible--

MR. DAWSON: There was a conference call--

QUESTIONER: --and I was wondering how that was handled.

MR. DAWSON: It's not unusual to have a conference call with reporters on individual country Article IVs. In fact, I think two weeks ago we had one on Germany the same day that I was giving this briefing, and I believe Steve Dunaway--and I'm not sure who else, but I know Steve Dunaway was in that conference call.

If you had an interest--apparently you did--and were not included, I'm looking over toward Mr. Hawley, and we will see what we can do in the future. But we do try where we have interest as well as something to say, to try to set that up on a basis when the PIN comes out, to have the staff who worked on it available to talk with you, usually on the record, sometimes on background, but that's our purpose, and I'm sorry if you didn't get included.

QUESTIONER: My question is there's a lot of talk, Greenspan mentioned today, on increased protectionism. You have written this letter to the WTO governments. What is your sense at the moment of protectionism? Do you think trade is in crisis mode at the moment? Is it a crisis right now? Do you think that Cancún would relieve that--

MR. DAWSON: Well, no, I think that's a theoretical and hypothetical question. Clearly, the Fund and our friends across the street at the Bank are clearly on record as believing that trade is, by most measures, the most powerful engine for growth, and that is why we remain very supportive of open trading regimes, the multilateral system, in particular, and that's the context in which this letter was written, sent last week, and released today.

So I think--and I note that governments after the experience of Cancún are getting together and working in a variety of fora to try to get this process moving forward. So I think it's obviously one where we are concerned that the momentum that may have been lost in Cancún needs to be restarted, but I think that's a feeling shared by most of our member--our members as well as most of the other institutions involved in this.

QUESTIONER: The IMF has concluded the Article IV review of Spain, and it's posted its preliminary conclusions where it expresses some concern about the imbalances in the housing market in Spain. How worried is the IMF that there may be a burst in the housing bubble in Spain?

MR. DAWSON: Well, it's our job to flag these issues, as you're right, I think on the 17th we put out the preliminary conclusions of the mission. I think I would want to leave it at that because we will be having a Board discussion of the Article IV, and I think we'll have a chance to get the views of the Board on that. And I would suspect we may even have one of our little telephone press conferences.

QUESTIONER: Can you clarify what you said about that Iraq assessment? Is it just the more elaborate report or something that was already released in Madrid?

MR. DAWSON: No, no. This is not what was released. The Fund-UN paper released in Madrid had about three pages or so, I believe, of an input from the Fund. This is the document from which that input was drawn, and this has, not surprisingly for the IMF, more numbers.

QUESTIONER: Can you say now what's next with Iraq? I mean, do you have consultations with their Finance Minister, central bank? How does this go forward?

MR. DAWSON: There are continuing discussions. At the moment they are being done by e-mail, letters, and so on, with the authorities. I am aware that there are several missions under consideration to meet with the Iraqi authorities on a variety--in a variety of areas. They would be taking place outside of Iraq. And I don't have dates, and I'm not sure I would be in a position to give you the precise dates. But in the next several weeks, the last I had checked, which was just a couple of days ago, that we were expecting three--or I think actually four areas to be having discussions with the authorities in a third-country location.

QUESTIONER: Which are these areas?

MR. DAWSON: It's pretty easy to guess because, there was one on the macro assessment, I think there's a banking sector study, fiscal, and I would suspect the other was monetary. I mean, we are the IMF. It pretty much works like that. And those were expected at some point prior to the end of the year.

QUESTIONER: Also on Iraq, do you think the announcement this week of speeding up establishment of an Iraqi government changes your plan in any way? I mean, can you see this moving faster now?

MR. DAWSON: No, I mean, we are--as I've said on a number of occasions, we are working at the pace--this is not being constrained by the issue of, for example--which is related to what you're talking about--recognition of government and so on. And as I've said earlier that's not a binding constraint, and we are continuing to work with them. So it's a development, but I don't think it has immediate impact on the work that we are conducting at this point.

Last question.

QUESTIONER: Last week, the mission came back to Washington, and it was in Argentina. I want to know if there are some conclusions. And when is the Board going to discuss it?

MR. DAWSON: I don't have anything on the latter part of the question in terms of when the Board would be meeting.

Yes, indeed, the mission has come back. They had good discussions, and I don't have an announcement, as it were, of next steps at this point. Clearly, a number of the macro indicators have been positive. There is still work--and this was also a subject of the mission--on some of the structural areas identified in the program. And then, finally, also the authorities are themselves in contact with their creditors to follow up on their proposal that was made, the authorities' proposal that was made in Dubai at the end of September on debt, and that we expect that those negotiations will continue because that is an important consideration as we look at going forward with a review.

But I don't have a date at this point for a Board meeting. When we do I will let you know.

Okay. Thank you very much.


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