Transcript

Washington, D.C.
April 16, 2015

SPEAKERS:

Marilou Uy, Director, G-24 Secretariat
Alain Bifani, Director-General, Ministry of Finance, Lebanon
Andres Escobar, Vice Minister of Finance and Public Credit, Colombia
Randa Elnagar, Communications Officer, IMF Communications Department

Ms. Elnagar - Hello, everyone. Welcome to the IMF and World Bank 2015 Spring Meetings and the G24 Press Briefing. I am Randa Elnagar from the IMF Communications Department. Let me remind you that we have French and Spanish interpretation in the room.

On the podium with me is the Chair of the G24, Mr. Alain Bifani, Director-General of the Ministry of Finance in Lebanon; Mr. Andres Escobar, Vice Minister of Finance and Public Credit in Colombia; Ms. Marilou Uy, Director of the 24 Secretariat. We will first start with Mr. Bifani’s comments and after that we are going to take your questions.

Thank you.

Mr. Bifani - Thank you very much. I am going to be very brief. You will have the communiqué in five minutes, hopefully, so we will be able to see also whether you have any comments on that.

Let me welcome all of you to this press conference. You will have our communiqué, as I said. Our meeting focused on the central theme of financing for development in addition to the global economy and implications for emerging markets and developing countries, as well as the role and reform of the IMF and World Bank Group.

First, our Ministers agreed that while the global recovery is picking up in some large economies, it remains moderate and uneven across major economies and regions. It is, therefore, clear that collective actions to support global demand and boost confidence and investment are crucial in order to avoid a future of insufficient growth. In the short term and in the context of a strong U.S. dollar, we are concerned about the risks of sharp exchange rate and interest rate changes, as well as the potential for even greater volatility and spillovers resulting from monetary policy normalization.

More broadly, Ministers also discussed the profound development challenges that persist across all countries and regions. Now it is time to cooperate to address these challenges and meet our common goals. This is particularly important this year when the global community will convene to articulate our development aspirations and climate targets for the post-2015 Development Agenda.

We look forward to sustainable development goals that are underpinned by an ambitious—yet credible—financing framework to guide individual countries’ actions and collective endeavors. This was the central topic of our discussion today.

Achieving our growth and development goals in an inclusive, sustainable way will also require substantial augmentation and revitalization of development finance. We committed to broad actions to strengthen domestic sources of finance, but also called for the delivery of eight commitments and strengthened developing banking.

With regard to the IMF, our discussion today revolved around the absolute imperative of making progress on IMF quota and governance reforms. The Group is disappointed that the already agreed 2010 package of reforms has not been implemented, as this impacts the credibility and effectiveness of the IMF.

Ratification of the 2010 Reforms will remain our priority. Nevertheless, appropriately designed interim options can result in meaningful shifts in representation toward developing countries, as is envisaged by these reforms. We prefer options that would meaningfully increase IMF resources as well. All possibilities to sustain voice and governance reforms need to be considered, provided that they do not lower the incentives to complete the Fourteenth General Review of Quotas or begin work toward the Fifteenth General Review.

We also discussed the role and reform of the World Bank Group. We have reiterated our commitment to conclude the next shareholding review by no later than October 2015, and asked for a roadmap for undertaking this review. We discussed the ongoing policy reviews and the need to ensure that the new frameworks and their implementation serve to improve operational efficiency and enhance development results without imposing undue burden on borrowers.

With that, I will open the floor for questions.

Question - I would like to go to the issue of the reform of quotas. In previous meetings, Madame Lagarde has said, has insisted on the necessity to complete this process, saying that if this does not happen, the IMF will lose relevance.

The question that I have in mind is, what is the possibility or what possibility do you see, in light of this delay by the Congress of the U.S. to ratify the agreement, that many countries, including those in the G24 and others, will start looking to other development banks, like the new ones, the one created by China and the other by the BRICs, you know, feeling that maybe they will be, I do not know, among equals, because there is a lot of criticism about how things operate here in both institutions, the IMF as well as the World Bank?

Mr. Bifani - First, let me tell you what our views are on the non-passage of reform by the U.S. Congress. The Group has already said and keeps saying that it is disappointed about the non-passage of reform by the U.S. Congress. As you know, these reforms were agreed to in 2010 and were intended to serve as a starting point for a broader process of quota and governance reforms within the Fund, leading toward the goal of more adequate representation for developing countries. The fact that these reforms have not yet come into effect not only prevents this incremental first step from being taken, but also inhibits future reforms from being discussed, let alone implemented.

With the emergence of new players, obviously these new players will have a role whether it is directly related to what is happening now in the reform that is blocked or not, but the emergence of those new players in the MDB system, specifically the New Development Bank and the Asian Infrastructure Investment Bank, will have significant implications not only for the multilateral finance system but also for global development financing efforts, especially for infrastructure. These institutions may have a lot to offer and we will follow up closely their operationalization or establishment.

Question - Can I follow up? I mean, did you see that it is too early to start discussing the possibility that many countries start looking to these new players, as you referred to them, instead of the IMF, given the fact that this reform has not been completed?

Ms. Uy - The IMF and the multilateral development banks do have different instruments. The new multilateral development banks to some degree will do quite a bit of development financing, say, for infrastructure, for human development. Meanwhile, the concern with the non-ratification of 2010 vis-à-vis the IMF is primarily around the realignment of the quotas to reflect the changing economic weight of emerging and developing countries, and also to increase the quota resources of the IMF. Without the 2010 Reforms, at least as it currently stands, these two objectives will not be met.

Meanwhile, multilateral development banks, which are lending more directly to countries for a number of development activities, are also changing, because the development needs are enormous of countries. So, there clearly is a place for co-existence of existing multilateral development banks as well as new ones.

So, the hope, the expectation is that these multilateral development banks will be complementary, will work together in a collaborative way, so that the amount of development resources from multilateral financing will expand and will be more able to meet the development needs of countries. So, there is a lot of need out there for development financing. The entry of new banks, it is not so much that one is looking at substitutes for what exists but that these are additional to the development financing resources that will be available. So, countries are looking at these new banks, I believe, because they believe that it would have something to offer to, say, support countries in their development financing.

Question - There has been obviously a lot of focus recently on the AIIB, but I am wondering if you can expand a bit your thoughts on the New Development Bank; in particular, what types of things would your membership like to see as next steps—I believe the next BRICs Summit is in July in Russia—what further details are you looking for from them, and do you get a sense that your membership might perhaps be interested in signing up as founding members of the New Development Bank.

Mr. Escobar - Well, everyone is paying a lot of attention to this New Development Bank, as has already been mentioned, but we think it is up to member countries to decide whether they want to participate. The amount of additional financing and complementary financing that they can offer will surely be of interest to many of the members of the Group. So, everyone is looking forward to seeing where these new initiatives are leading.

Question - Obviously, the reaction to the markets when the Fed announced it was thinking of tapering its QE caused some volatility and now there has been quite a lot of warning. What would you have them do other than taper their QE? What else can be done? What is the problem?

Mr. Bifani - Well, normalization of monetary policy in the U.S. is going to happen. It is inevitable and it is necessary. However, we also know that the mere anticipation of such actions can create enormous volatility in the markets and we are concerned about the prospect of turbulence in capital flows and exchange rate as a result of interest rate increases in the U.S.

We are, therefore, calling for this process to be managed in such a way as to minimize the negative spillovers on emerging markets and developing countries. This will require careful policies and careful policy coordination, and clear, timely communication. We also do believe that improved global safety nets are an essential foundation for us to navigate these challenges in the future.

Question - I mean, there has been some quite careful guidance from the Fed as to, oh, it is not this meeting and probably not the next meeting but maybe the next meeting. Is that the sort of careful communication that you are referring to? I mean, are you critical of the way they are handling it now or are you satisfied?

Mr. Bifani - It is not a question of being satisfied. It is obvious that it is a difficult exercise for everybody, including the Fed, but it is being done in a well-managed way until now. Of course, you saw the reaction of the markets, and we are hoping that in the coming future things will be smoother in terms of communication and in terms of predictability.

Question - Smoother, meaning it is not smooth now?

Mr. Bifani - If we look at the market reaction, it could have been smoother.

Question - Referring to a couple of years ago, when there was a taper tantrum?

Mr. Bifani - Yes, exactly. I mean, that was the reference, yes, that we can take into consideration.

Question - I have a follow-up. When you refer to safety nets that would buffer your countries in the event of turbulence from the Fed raising rates, I noticed that Madame Lagarde mentioned that in her opening remarks today as well. So, what are you referring to? Are you talking about assistance from the IMF? Are you talking about liquidity swaps? Are you talking about help from development banks? What do you mean by safety nets?

Ms. Uy - Actually, in our communiqué we do suggest, we do say that the presence of adequate global safety nets are necessary, and part of that, of course, is IMF resources. That is also one reason why we really are looking forward to the 2010 Reforms that will amplify the existing IMF quota resources. So, clearly the IMF is one of the global safety nets.

Meanwhile, there are other initiatives right now at the regional level and others that are meant also to address support when countries are in a crisis or a liquidity crisis. We have also in our previous communiqué mentioned that these are potential sources as well of financial support in case of distress.

Question - I am curious that if the G24 and member countries are so concerned and impacted by this lack of action by the U.S. Congress, if you have thought of informal sort of sortes up to The Hill just to have little conversations to say, do you know how bad this makes you look? I mean, there is no reason you cannot go up and talk to somebody and have a cup of coffee. Maybe they do not know how it makes the United States look.

Mr. Bifani - This is not exactly what the G24 is about. I am sure—

Question - Not formally but—

Mr. Bifani - I am sure there are people who would express views better than we as a Group in this regard. Having said so, our position is clear in our communiqué. We, of course, do not want to the interfere in affairs that go beyond what the G24 is about. Again, in the communiqué, there is a reference to options and, of course, we are hoping that things will change in the near future. Otherwise, in one way or another, the institutions will have to move forward somehow and find the right way to do so.

Question - But, I mean, you may say that you do not want to interfere in the business of other countries, but in some way this situation is affecting a collective group of countries. So, do you not see a necessity to at least let Congress know your feelings about this situation?

Mr. Escobar - Well, as the Chairman said, the communiqué is making this concern quite clear and one of the reasons why you guys are here is letting public opinion know about this.

Question - I mean, especially for people like us who work in Washington, the way of doing business in this country or at least according to my experience is that people go directly to members of Congress. I mean, at some times of the year you can see clearly different groups of people from this country, obviously, trying to lobby Congress. We were wondering, I mean, what is wrong with that? Obviously, there is a communiqué, but there is not a single assurance that any single member of Congress is going to read this communiqué. Maybe that is the question, you know, that instead of just issuing a communiqué, it would be better to go directly to the source of the problem.

Mr. Bifani - But the communiqué in question will be read at least by people in the institutions. Since they are in Washington, I am sure they will do the job wherever they need to. As far as we are concerned, we are in Washington for three days and that is not enough for lobbying at the Congress.

Question - I just have a quick follow-up. I am just reading the communiqué here. It says the membership favors delinking, the delinking option for quota reform. Can you talk about that because—how should I put it? I think that other members of the IMF, perhaps larger economies, except for perhaps some BRIC countries, do not support that option and their explanation is simply getting the U.S. to agree to do such veto would be like asking Russia or China to give up their veto at the Security Council. So, I am just wondering why is that your preferred option for quota reform.

Ms. Uy - The 2010 Reforms have two parts to it. One is the enhancement of the IMF quota resources and the second part is the realignment of the quotas. Now, the realignment of the quotas, that is what the delinking refers to, I believe, if you [?] the two together.

Now, the communiqué states that it is a preferred option because it would find a way to meaningfully increase the quota resources of the IMF. It is a preferred option, but the view of the Group also is that all options should be explored and the global community would need to find a way to have an appropriately designed interim solution that would enhance IMF resources as well as realign quotas.

Ms. Elnagar - Any more follow-ups? Okay. Thank you for coming, and we end our press conference. Thank you.