Transcript of a Press Briefing with William Murray, Deputy Spokesman, Communications Department

IMF News, March 17, 2016

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Transcript of a Press Briefing with William Murray, Deputy Spokesman, Communications Department

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Bibliographic details

• Published: March 17, 2016

Overview of the briefing

• Date and location: Thursday, March 17, 2016; Washington, D.C.
• Embargo timing for the launched paper and briefing: 10:30 a.m. Washington time, that's 14:30 GMT.
• Launched paper: "Strengthening the International Monetary System, a Stock Taking" (led by Siddharth Tiwari, Director, Strategy, Policy and Review Department).
• Contacts provided: Media Relations E-mail: media@imf.org; Phone: 202-623-7100.
• Purpose: Stock-taking on the international monetary system ahead of Spring Meetings; outline of near-term IMF workstreams and calendar of senior management travel and spring meetings events.

Five systemic challenges identified in the paper

• "All of the imbalances have shrunk post crisis" driven by demand compression.
• "The central role of one or two reserve currencies implies that they can have significant impact on others, constraining domestic policy choices."
• Increased interconnectedness and permanent capital flow volatility.
• Need for more focus on the non-financial side after substantial work on the financial side.
• Transitions in three currencies (dollar, euro, and the yen) will lead to volatility and strengthen the need for a robust safety net.

Immediate global priorities and context

• Priority objectives:
  • Raising post crisis growth in advanced countries.
  • Ensuring emerging markets regain prior growth momentum and resume the convergence of living standards.
• Key contextual developments:
  • Historic drop in commodity prices requiring broad adjustment.
  • China's rebalancing toward slower but safer growth.
  • Asynchronous monetary policy among major economies.
• Timeframes and historical reference points mentioned:
  • Last comprehensive discussion in 2011.
  • "12 months back" the Global Policy Agenda indicated starting this conversation.
  • Reference to "50 years" of dollar centrality.

IMF near-term workstreams highlighted

• Capital flows workstream (three phases):
  • Phase 1: Understand the landscape — how volatile flows are and their directions.
  • Phase 2: Assess how countries have coped with applying the institutional view — has it worked and where difficulties arose.
  • Phase 3: Review of the institutional view toward the end of the year.
• Strengthening the global financial safety net:
  • Stock-taking exercise already initiated; first paper on the global financial safety net and the size of the Fund issued "last week" and to be discussed by the Board "in another week".
  • Five levels of the global financial safety net identified:
  • One, reserves.
  • Two, bilateral agreements.
  • Three, regional arrangements.
  • Four, IMF at the center of the multilateral arrangement.
  • Five, private sector issues like either GDP linked bonds or private sector hedges.
• Role of the SDR:
  • The Fund has been asked to look at the role of the SDR and will return to it "in a couple of months".
• Stock-taking role:
  • The paper is positioned as an initial, membership-engagement stage ("stock taking") rather than a set of finalized proposals.

Findings and policy orientation on safety nets and market discipline

• Institutional remit:
  • IMF mandate covers both liquidity and balance of payments issues across exchange rate regimes.
• Policy stance:
  • Best safety net begins with "good policies" — securing fundamentals and enabling shock response via liquidity or other lines.
  • Market discipline is important, but when flows overwhelm domestic financial systems, measures are needed to make systems safer.
• On reserve currency centrality:
  • Centrality itself is longstanding; recent concern centers on increased volatility linked to asynchronous monetary policy rather than centrality per se.
  • Special attention to "innocent bystanders" — emerging markets affected by external policy-driven volatility.

Views on the Fund's size and scope

• Mandated review:
  • Under IMF rules the size of the Fund must be revisited every five years; this stock-taking on size is part of that mandate.
• First-stage conversation:
  • The initial conversation is about how large the institution should be relative to other buffers (reserves, regional arrangements) and risks (capital flows), not an immediate presumption of boosting resources.

Country-specific points and program status (as discussed)

• Argentina:
  • IMF welcomed the agreement between Argentina and a number of its creditors as an important step toward reengagement with financial markets.
  • Collective action clauses (CACs) endorsed by the Executive Board are important; wider adoption is a positive trend.
  • IMF noted it is too early to draw firm systemic conclusions from the Argentina holdout agreement.
• Brazil:
  • IMF guidance: strengthen the macroeconomic framework to restore confidence and boost investment (inflation targeting, exchange rate flexibility, fiscal responsibility).
  • Outlook reference: "another year of contraction expected for 2016."
  • Domestic issues mentioned: political unrest and inflation "going over 10 percent."
  • IMF view: independent, transparent, and accountable central banks are beneficial; 2015 Article IV report contained a section on Brazil's central bank independence.
  • On financing: IMF not aware of any request for IMF financing; Article IV preparatory process under way.
• Greece:
  • Mission on ground in Athens discussing microeconomic policies to pave the way for a comprehensive IMF-supported program.
  • IMF position reiterated: a strong set of policies by the authorities together with debt relief from European partners are essential ingredients of a program the IMF could support.
  • No timing provided for completion of the review; Staff asked to avoid public detail while mission is in progress.
• Ukraine:
  • IMF will need more clarity on government status and policy commitments to engage on policies and pave the way for completion of the second review of the IMF program.
  • No specific timeline or deadline provided for concluding reviews; IMF staff remain engaged.
• Zimbabwe:
  • Recent mission: on the ground from February 24 through March 11 to conduct the third and final review of a Staff Monitored Program and the 2016 Article IV consultation.
  • Financing constraint: Zimbabwe cannot have an IMF financial arrangement while in arrears to the Poverty Reduction and Growth Trust; authorities plan to clear arrears.
  • Reported loan announcement in question: authorities announced plans for a loan "in the third quarter of up to $984 million" (question referenced by press; IMF described the process required to normalize relations with creditors).
• Russia:
  • IMF offered no substantive comment on market participation or external political pressures related to sovereign bond issuance; no specific IMF view provided in the briefing.

Financial market and sectoral focus

• Nonbank financial sector:
  • Paper flags rising relevance/risks in the nonbank financial sector and identifies it as one of five areas needing more work.
• Fiscal and financial analytic chapters highlighted for Spring Meetings (launches and briefings scheduled):
  • Analytical Chapter of the Fiscal Monitor (focus: fiscal stabilization policies and incentives for innovation and productivity).
  • Global Financial Sector Report analytic chapters (including financial market spillovers from emerging markets and insurance sector trends and risks).
  • World Economic Outlook analytical chapters on capital flows to emerging markets and structural reform sequencing.

IMF management travel and Spring Meetings calendar highlights (selected items and dates)

• Managing Director Christine Lagarde:
  • Vietnam address prior to March 17; travel to Beijing on March 20-21 for Annual China Development Forum (will address international monetary system matters).
  • Participation in "Nanjing Two" conference in Paris on March 31.
  • Frankfurt speech on April 5 at Goethe University (referred to as a "curtain raiser" for Spring Meetings).
  • Berlin participation on April 5 in Annual International Financial Institutions meeting hosted by Chancellor Merkel.
  • New York participation on April 7-8 at the Women in the World Summit and to receive Columbia University's global leadership award.
• Deputy Managing Directors and senior staff:
  • Min Zhu: Boao Forum participation in Haikou (March 23-24).
  • Mitsuhiro Furusawa and Masood Ahmed: panel at Johns Hopkins SAIS on March 22 at noon Washington time to present MCD paper “long-term growth prospects in the Middle East and Central Asia” (paper embargoed until March 21).
  • Furusawa: ASEAN meeting in Vientiane, Laos (April 2-3) and IMF Japan tax conference in Tokyo (April 6).
• Spring Meetings event schedule (selected):
  • March 31: Vitor Gaspar to present Analytical Chapter of the Fiscal Monitor at Peterson Institute.
  • April 4, 9:30 a.m. Washington time: Monetary and Capital Markets Department brief on analytic chapters of the Global Financial Sector Report.
  • April 6, 9:30 a.m. Washington time: Research Department launches Analytical Chapters of the World Economic Outlook.
  • April 12, 9:00 a.m.: Chief Economist Maurice Obstfeld unveils Chapter 1 of the Spring 2016 WEO.
  • April 13: Jose Vinals presents main chapter of the Spring 2016 Global Financial Sector Report; Vitor Gaspar briefs on the Fiscal Monitor.
  • April 14: Managing Director’s pre-IMFC press conference and launch of the updated Global Policy Agenda (updated every six months).

Process and next steps emphasized

• The paper is a starting point for membership discussion; the IMF will solicit and receive suggestions from members before proposing specific reforms.
• A series of follow-up papers and consultations expected "in the coming months."
• Paris "Nanjing 2" conference at end of March and G20 focus to shape the ongoing public and policy debate.
• For media follow-up on the paper: media@imf.org (attention Raphael Anspach) or contact Raphael Anspach in media relations.

Transcript of a Press Briefing with William Murray, Deputy Spokesman, Communications Department — March 17, 2016

References

• Argentina and the IMF
• Brazil and the IMF
• France and the IMF
• Greece and the IMF
• Ukraine and the IMF
• Zimbabwe and the IMF
• People's Republic of China and the IMF
• United States and the IMF
• Special Drawing Rights (SDRs) -- A Factsheet
• Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet
• IMF Policy Advice -- A Factsheet
• Transcripts
• PRESS CENTER
• Webcast
• https://www.imf.org/en/home