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

February 26, 2004

Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, February 26, 2004
Washington, D.C.

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

I don't have any particular announcements for the top of the briefing, although I would note that the Media Relations Division has circulated the cover stories of the upcoming edition of Finance and Development, which are focused on the economic implications of HIV/AIDS. If you haven't had a chance to look at the advance copy, please do so. I believe that F&D, our quarterly publication, will be published tomorrow on the website.

Also, I would encourage you, as always, to keep in touch with Media Relations regarding public engagements. There may be some coming up that we are just not quite in a position to announce that you will be interested in.

Now I would be happy to take your questions.

QUESTIONER: Could you give us an update on the mission in Argentina? And when is it supposed to come back?

MR. DAWSON: Yes, thank you for asking that question in particular because I did see someplace—I'm not sure whether it was in La Nacion or one of your competitors—a reference to the mission possibly coming back tonight. The mission is still there, will still be there tomorrow. Precisely when it comes back—I don't have that information for you. I am sure we will let you know when it does, but the mission is there, continues to be in contact with the authorities, and I don't have a date for when they are coming back. They're there through at least tomorrow and into the weekend.

QUESTIONER: On Colombia and Ecuador, the Ministers of Finance of those two countries are in town, and I understand they are meeting some IMF officials, too. Would you have a readout for Colombia and Ecuador?

MR. DAWSON: I am aware that the authorities intend to visit the Fund soon here to review what is going on. Broadly speaking, the macroeconomic conditions have been improving somewhat. I do not have information on Colombia, and I will have to get back to you on that.

In terms of Ecuador, I guess I would just probably leave it at that. As I indicated, the situation is improving. Obviously higher oil prices have helped interest rates, and in their case, the depreciating dollar helps improve the environment. And the recent opening of the pipeline also is positive.

The present state, just for those who may not know is that we are in discussions now on the Second Review under the Stand-By. So that is what the state of play is. And I do understand they will be in shortly. I don't know precisely when. And on Colombia, we will have to get back to you.

QUESTIONER: Yesterday, Nicholas Stock, who is a co-chairperson for the Bond Holders—for the Global Committee of Argentina Bondholders—said that the IMF may demand that Argentina initiate talks with creditors as a precondition for the next disbursement. Is that true?

MR. DAWSON: I don't think it is appropriate for me to comment on his comments about us. I have gone through this in the past. As you know, one of the issues under consideration at the present time in the context of the review that is going on—the mission that's going on—is the so-called lending-into-arrears policy, which includes the issue of discussions with the external private creditors.

There was indeed, as you I think implied in your question, there was a meeting a couple of days ago. I note that of the bondholders group in New York, the one about which I think I was asked at the last press conference, a representative of the Argentine government attended that as an observer. I might note a representative of the Fund also attended that as an observer. And we are happy that that meeting took place, but I don't think I want to characterize what the Fund is going to do and when. We do, as I say, have our lending-into-arrears policy, and progress in the discussions between Argentina and its creditors is obviously an important factor and one that will be taken into account in the course of this present review.

QUESTIONER: I have two questions, the first one on Europe, the second on Italy.

On Europe, does the IMF share the concerns expressed by Monsieur Trichet and some European Ministers on the impact of the European economy of the imbalance between euro and dollar?

MR. DAWSON: I think as far as that goes, we are getting a little closer to WEO season. You know, I don't have a—that's sort of a general description. I thought you might be asking me about Chancellor Schröder's comment, which I also saw this morning in the Financial Times. I think we refrain from the tick-tock in response to those specific questions. As we get closer to the WEO time, I think you can expect that we will be putting forward our views.

Our views on the global imbalances, our views on the need for an orderly adjustment of that are well known. They are not changed, and I don't think there are any news developments or new developments that cause me to go beyond that or respond to specific questions in that the concerns have been there and they remain exactly in the fashion that were described in the last WEO—and, indeed, in recent speeches by the Managing Director. I haven't had a close look at the press coverage out of Korea and Japan, where he is now, but the Managing Director has addressed these issues in other recent speeches.

QUESTIONER: The second question is on Italy. The Italian government is scaling down the reform of the pensions. It was introduced a few weeks ago. Do you have any comment on that?

MR. DAWSON: Yes. We do think that the proposed pension reform is a step in the right direction, but its consistency with the envisaged long-term fiscal target needs to be analyzed carefully. In other words, we need to look carefully at it as to whether it is sufficient.

QUESTIONER: A couple of hard-core colleagues of ours had a chance to meet the Swedish Finance Minister earlier this week, and he said that they are fully prepared—"they" meaning the Nordic and Baltic constituency—to abstain in the next vote on Argentina in the Board. Is abstention the strongest form of disagreement in the IMF? Or has anybody ever voted against anything?

MR. DAWSON: Oh, in my previous life as a United States Executive Director, I quite often voted against things, so, yes, the answer to your question is, yes, there is a stronger form of opposition than abstention, that is, voting no.

However, we do not as a matter of practice—the institution does not as a matter of practice reveal individual Board votes. Individual Board members are perfectly free to do so in the fashion that they wish. In the context, for example, of the United States, there is a regular reporting by the U.S.—I guess by the Treasury, on votes on particular loans or, for that matter, on other issues. Other governments have that same practice of publicizing their votes.

But your procedural question I answered initially, and the precedential issue I answered as well. And there are other countries as well that have voted no, but it is not appropriate for me to indicate that or—what?

[Inaudible comment.]

MR. DAWSON: I mean, it happens. It happens. Oh, yes—it does happen on both policy issues and on country issues.

QUESTIONER: Tom, some Brazilian officials told my paper yesterday that President Lula will have the pleasure of hosting Mr. Köhler for a "churrasco" this Sunday.

MR. DAWSON: I indicated before you came in, because you were late—


MR. DAWSON: —that you should stay in touch with the Media Relations Division, because we may have some announcements later on that we are not at this point able to confirm.



QUESTIONER: Anyway, my question is on debt sustainability in low-income countries. There has been a long debate in the Fund, and particularly now that the Board has just reviewed a paper on it. How far is that debate and how close are you to an outcome on that?

MR. DAWSON: I mean, you are absolutely right. I think you were informed not only from reading our newly public publication of the work program and of the Board schedule, but, in fact, it is a topic that is getting increasing interest, both in the context of the sort of technical issues involving debt sustainability, the broader issues about the Fund and low-income countries and how we go forward, which is also an agenda item if you take a look at Board meetings.

There are also issues under way in terms of how the Fund can support countries' achievement of the Millennium Development Goals and, finally, of course, there is, as well known, the Independent Evaluation Office, which is doing a review of our PRGF/PRSP process.

So there is lots going on in that area. Debt sustainability is an issue that in some sense of the word has gotten a higher profile lately because of a number of issues, including, for example, there was a piece in the Financial Times, if I can mention individual papers, a couple of weeks ago on the case of Niger on the so-called topping-up issue in HIPC.

So there is a lot going on in that area. It is my understanding that the paper is being discussed and will continue to be discussed. We will be publishing what we have on that as time goes forward. I don't have a particular time in mind.

I would note that the Spring Meetings will be focusing heavily on this subject, but there will be stuff coming out before then. So it is a big issue. Don't expect there will be a single decision made on it. The debt sustainability paper that was discussed itself has a lot of technical elements, and that was part of what the discussion was, just to get a sense of how to take a look at these issues. But it then folds into both our existing program—our existing policies and programs for low-income countries and then how we will adapt them going forward.

QUESTIONER: My follow-up is: Is there also—like Niger, is there also a concern regarding Ethiopia? I see that is coming up—

MR. DAWSON: I am aware that that issue has come up as well. It is one of the countries where that issue has come up. I don't have anything more.

QUESTIONER: So would these be—

MR. DAWSON: Those are country-specific issues being discussed because they are in an operational context now because of the HIPC process. The debt sustainability issue is also—while it is clearly of relevance to that, is also a forward-looking issue. So that once countries successfully conclude the HIPC process, we don't get back into the situation of facing new debt sustainability issues for countries in the future. Some of these issues are forward-looking. Some of them are backward-looking. Some of them are contemporaneous, such as the Niger, you know, decision issue. But in reality, they are all linked, and I think as we get closer to the Spring Meetings, you are going to see a lot more discussion of those issue, and at the Spring Meetings it will be, as I say, I think a major topic.

QUESTIONER: I would like to know how the IMF evaluates the recent instability in the markets caused by political crisis in Brazil, and if this visit of Mr. Köhler to Brazil has something to—

MR. DAWSON: No, any visit that may be announced at a later point is in response to an invitation that existed some time ago. So that has been under consideration. It is a question—visits are always a question of timing in that regard.

With regard to recent developments in the markets in Brazil, you know, obviously there are fluctuations when you have a floating exchange rate regime. But I think we continue to believe the progress under the Brazilian program has been quite strong, and we are happy to have been able to assist and be able to continue to assist the Brazilians in their program, which by all accounts is doing quite well.

QUESTIONER: But does the IMF think that there can be some problems in the reform agenda because of the political—

MR. DAWSON: We think the authorities, the government, have a strong commitment to pursue their agenda, and we have every indication that is what is going forward.

QUESTIONER: The concern is—and that was also raised with the Swedish Economy Minister—what Argentina could do to countries like Brazil and other emerging markets. We know that Brazil has been worried about the situation in Argentina and I believe has also cautioned it quite publicly, you know—well, actually, not publicly. I believe within the IMF has cautioned that it shouldn't ruin things for Brazil as such.

MR. DAWSON: I'm not sure that was a question. Let's go on to the next—

QUESTIONER: Is there concern from emerging markets such as Brazil about the situation in—

MR. DAWSON: It certainly is inappropriate for me to comment on governments' positions as represented within the institution. I think I just will leave it at that. I still didn't—the last part you made it into a question. The first part was not.

QUESTIONER: The creditors said that the meeting with the observer that was sent by Argentina, it is not a signal of good faith in the negotiation. How does the IMF consider this meeting?

MR. DAWSON: I mean, we consider that the meeting took place. As I indicated at the last session, we take account of the state of discussions, including meetings, including other forms of discussions, including a variety of developments, and the staff, the management, and the Executive Board ultimately need to make a decision as to what the state of the review is on that particular issue, but as well as the more traditional quantitative issues, the structural issues, and so on. So that is a judgment that the institution will be making over the course of this review, and certainly the representative of the association that had the meeting in New York, they have their views. You know, we hear their views. We ultimately, however, may have to make our own decisions, staff, the management, and the Board, which represents our shareholders.

QUESTIONER: Yes, the United Nations/ILO published a report on globalization this week. Are you familiar with that? Mr. Stiglitz, your great hero, wrote about that yesterday.

MR. DAWSON: Oh, there are any number of heroes who are on the commission, including a former boss of mine was also on the commission. The commission—in fact, the Managing Director appeared before the commission last spring, I believe, in Geneva, had an excellent meeting with them for a couple of hours. Staff of the Fund have worked with the members of the commission, the staff of the commission, and reporting to them, answering their questions and so on, and they produced a report. I took it home last night. I read through most of it. I think it raises a number of issues, some of them familiar, some of them presented in a different fashion, some of them reflecting in particular the views of a commission that was established by the ILO.

So I think it's a valuable contribution to the discussion, to the discussion of these issues, and we take the report seriously.

QUESTIONER: A question—a pro forma question on Iraq. You asked me to remind you about the subject every time we meet, so this is what I am doing.

MR. DAWSON: I think I said, "Keep asking." I didn't say—this is on debt sustainability?


MR. DAWSON: No, I don't have anything new for you, but you can continue to ask me.

QUESTIONER: And on the issue of remittances, the G-8 in Boca Raton paid some attention to that issue in the context of terrorism where some remittances that go to a third country look suspicious. But the Russians also raised this same issue in a different context saying that the remittances of CIS guest workers, the former Soviets who work in Russia, are a major source of finance for their native countries, and that, in effect, the remittances represent a form of assistance from Russia to those countries rather than capital flight as previously—I mean, technically it is capital flight, I guess, going out of Russia to those countries.

My question to you is: Does the IMF follow these flows of capital separately from others?

MR. DAWSON: Well, the issue of remittances as a component of capital flows is, in fact, a subject that I would say is getting increased attention in recent times, it was a subject of a somewhat controversial paper at our recent research conference. It is a subject I recall prior to the Monterrey Summit of the Americas that took place recently. The U.S. Assistant Secretary of State for Latin America Roger Noriega cited-it is almost like you were paraphrasing if not plagiarizing him, talking about the positive role of remittances, particularly in the Latin American and Central American context.

So it is an issue that we do look at and recognize that there are different kinds of capital that flow for different kinds of reasons. And the positive role of remittances is, I think, recognized. There are also in some contexts, however, the issues of money laundering, you know, illegal flows in some contexts as well. But the potentially positive role of remittances is, I think, well recognized and a subject that has been studied both in individual country contexts and more broadly here.

QUESTIONER: What I was asking is: Can the IMF even do this? Is it technically feasible to count that sort of money flows to—

MR. DAWSON: Well, we will go back and check the statistics manual, balance of payments manual, but it is an issue that I know from reading country program papers that it does come up, and I've read papers where those estimates are made. So it is an issue that on a country-by-country case can be significant and can be analyzed.

QUESTIONER: If you could look into that and tell me, for instance, is that a requirement for the central banks, which probably is easier for them to monitor that.

MR. DAWSON: Okay. That specific question we can get back on.

QUESTIONER: Tom, from the IMF's point of view, how are talks going with Argentina?

MR. DAWSON: I mean, the talks—

QUESTIONER: You've already been there for—

MR. DAWSON: A little over a week.

QUESTIONER: —a couple days.

MR. DAWSON: The talks have not been too short and they have not been too long. This is sort of what was expected from the beginning, and we are on the track that I indicated at the last meeting for trying to proceed with the review. So in that sense, it is exactly as expected.

I did want to make a particular reference, though, to the question that came up, I guess the first question this morning. I mean, the talks are continuing. The mission is not coming back tonight.

One last question.

QUESTIONER: On Iraq, have you any decision on when to go back to Iraq?

MR. DAWSON: In terms of an actual visit to Baghdad, I have heard nothing, I have nothing for you on that. We do, of course, remain in regular contact with the authorities, both through videoconferences, meetings in neighboring countries, and meetings, for that matter, in other countries as well. But in terms of a mission to the country, I have nothing on that.

QUESTIONER: Again, a different subject. Do you follow the consultations in Beijing between the Americans and the Chinese, the technical consultations on their exchange rate? And what is your message for the participants in those?

MR. DAWSON: I think for the message on the Chinese exchange rate policy, I would direct you to the Managing Director's comments in, I think—certainly in Tokyo, I think also in Korea today.

Thank you.

[Whereupon, the press briefing was concluded.]


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