Transcript

April 19, 2012

Speakers:
Mr. Pranab Mukherjee, Finance Minister, India
Mr. Kaushik Basu, Chief Economic Adviser, Ministry of Finance, India
Mr. Ayman Alkaffas, Alternate Executive Director of the World Bank
Mr. Carlos Perez-Verdia, IMF Executive Director for Mexico
Mr. Amar Bhattacharya, G-24 Secretariat

MR. ADRIANO: Good afternoon. I would like to introduce you to the participants of this conference. Minister Pranab Mukherjee from India, Finance Minister of India, Mr. Kaushik Basu, Chief Economic Adviser of the Ministry of Finance of India, Mr. Ayman Alkaffas, Alternate Executive Director of the World Bank, Mr. Carlos Perez-Verdia, Executive Directors for Mexico in the IMF, and Mr. Amar Bhattacharya, G-24 Secretariat. Minister Mukherjee will make some opening remarks and then we will open up for your questions.

MR. MUKHERJEE: Good evening. The G-24 Minster [Spanish interpreter on English channel]--today, and discussed the global economic reform of international financial institutions, and infrastructure financing and sustainable development.

We had frank and fruitful discussions amongst ourselves, including a brief interaction with the Managing Director of the IMF and the President, World Bank. As part of the initiative to enhance the role and effectiveness of the Group, we also had a briefing on the G-20 under the Mexican Presidency. Our communiqué shows that, despite the diversity of the Group, we can find common ground.

On the global economy, we remained concerned about the fragility of the economy. Recent policy actions have reduced states from the euro area, but downside risks remain high, including from high and uncertain prices. The subdued global growth has adverse impact on growth in many emerging markets and developing countries.

We believe that immediate and concerted actions are needed to restore confidence and boost growth with a focus on job creation and an effective and affordable social safety nets that protects the poor and vulnerable.

We call for the timely and full delivery of the ODA commitments to low-income countries. On management of the capital flows, we have strong reservations on the integrated approach proposed by the IMF staff and insist that policymakers must have the flexibility to adopt policies that they consider appropriate to deal with the capital flows.

We also call for actions to mitigate excess volatility in commodity prices, both for food and energy, which is undermining growth.

On the international financial institutions, we stress that the forward-looking commitments on IMF quota and governance reform must be made on a full and timely basis. We welcome ongoing efforts to ensure that the IMF has the necessary resources to play its role but it should remain a quota-based institution.

We are concerned that the World Bank lending is projected to decline at this critical juncture because of the constrained financial capacity. We therefore call for new solutions to bolster the financial capacity of the Bank and IFC. We also ask the Bank to improve its responsiveness through more flexible and innovative policies and instruments. We ask the Bank to remain engaged with the middle-income countries and to scale up resources and technical assistance for the development needs of MENA countries in transition.

We recognize, for the first time in the history of the Bank, that there was a contest for the selection of the President, and two outstanding candidates from developing countries represented. We congratulated Dr. Jim Kim on his selection and explained our support to him.

We believe that to realize our growth potential, a substantial increase in investment in infrastructure is required.We call for the efforts to strengthen the existing architecture of global, regional, and national institutions, and to enhance PPPs and private sector involvement.

We also look forward to the review called for by BRICS leaders to explore the feasibility and viability of a new development bank for mobilizing resources for infrastructure and sustainable development projects in emerging markets and developing countries.Thank you.

MR. ADRIANO: We are ready to take your questions. Please wait for the microphone and identify yourselves and your affiliation.

QUESTION: In regards to quota reform, was there any discussion among the participants about the IMF fundraising effort and whether any countries would or should hold back contributions until the quota reform is actually instituted as it was agreed to?

MR. MUKHERJEE: In fact, we recognize the need of augmenting the IMF resources to enhance its firepower. What could be the component, what could be the contribution of the respected countries? That will have to be worked out in details, and some of the countries may require some time to complete their internal process. Therefore, it cannot be asked. Therefore, we will engage ourselves with the G-20 countries. Many of us are also members of the G-20 countries, and equally, in G-24 or in BRICS, so there are various hats, but let us keep ourselves engaged actively to find out a solution.

QUESTION: By and large, is G-24--are they satisfied with the progress in the European bailouts, given the huge amount of money the IMF has committed and the need for the IMF to raise more funds to prevent any more contagion or do you have any criticisms of how these programs have been carried out?

MR. BASU: Well, the G-24 collectively does not take a position on this, but this is a matter that is of some concern in Europe because it is a sign of today's globalized world that, no matter which country you're sitting in, far away, that you're affected deeply by what's happening in Europe and in India, particularly, we are very sensitive to what's happening in Europe because it does impact us.

But on balance, the move that has been made in terms of the fiscal compact and ECB stepping in are moves in the right direction. It will have to be seen over the next couple of years as to whether the fiscal compact really bites and therefore pushes Europe towards fiscal consolidation.

QUESTION: So, will India participate directly in the new resource mobilization effort of IMF and does it want the additionalefforts to be reflected in the quota system?

MR. MUKHERJEE: What we want, that quota reforms should not be delayed and the two arrangements for 2010 should be explicitly implemented and negotiations on new formula which have to be completed by 2014 should be initiated. So far, the requirement of IMF to enhance its firepower to help the eurozone, I have already replied in the first question that various countries will assess the situation and take their decisions indefinitely. There are requirements for the additional resources, it is recognized, to what extent countries would be in a position to contribute and there are internal processes of various countries to make the international commitment. Therefore, some time will be required to attend this objective.

QUESTION: So, just a clarification, sir: What is India's individual stand on this issue?

MR. MUKHERJEE: It is not a question of India's individual stand. It is a question that we are part of the world. We recognize that the quality of the eurozone is essential for the global stability and the quality of the world economy, because this is an important zone, as my colleague, Chief Economic Advisor, suggested that what is happening in Europe--not only in Europe, in any part of the world, in a globalized world, that has its impact on the other part of the world and almost every country, because this is a globalized economy.

QUESTION: Mr. Mukherjee, I just want to be very clear with you on the issue of the quotas. You were in the BRICS meeting today, no decision was taken on whether any of the BRICS are going to participate in the new IMF resources. I mean, you've said now that your concern was the issue of a spillover from the eurozone crisis.

The question now is, are you specifically tying future quotas' increase in the IMF to these new IMF resources? Also, you refer to "future negotiations" on quotas. What exactly is it that the emerging economies want from those future negotiations? I mean, is it a substantial increase in these quotas? Is it anything further? Could you just give us a little more detail? Thanks.

MR. MUKHERJEE: In the new formulation of the quota allocation, ground reality is contribution of the emerging economies in the world output are to be recognized.When we talk of the voice reforms, we mean that ground realities are to be recognized and the contribution of the emerging market economies in the world output should be recognized and that should get reflected in the allocation of quotas of the International Monetary Fund with their voice and shares.

Second aspect is to be kept in mind: There are various formulations, whether it will be PPP, whether it will be--have the price parity mechanism to determine the growth, or whether there will be a combination. Those are the matters of the details to be worked out, but what is recognized, that the 2010 formulation which was initiated by the then-Managing Director of IMF and which was agreed upon by the G-20 Ministers, that should get reflected by 2012, and the new negotiations should start so that the quota reforms by 2014 is complete.

QUESTION: Has the G-24 any position about the topic of [unclear] oil that is going on in Argentina, or did you discuss about it?

MR. MUKHERJEE: We cannot take any decision with respect to individual country's decision.

QUESTION: Do you have any general concerns that the attention of the IMF is too focused on the eurozone and that maybe Europe has been treated differently to how emerging economies were treated in the past by this organization?

MR. MUKHERJEE: I am not concerned about too much focus on Europe. International Monetary Fund is there to take care of the entire world economy. But at the same time, as I mentioned that, in a globalized world, distortions in any part of the world can affect and adversely impact the activities in other parts. Therefore, International Monetary Fund should address it, but not at the cost of the others, and there should not be concentration only on one problem. There are multiple problems in different areas and segments of the economy. Those ought to be addressed holistically and comprehensively.

QUESTION: I'm looking at Paragraph 14 of your communiqué about the Middle East and North Africa, and I wonder if you discussed--I mean, the IMF had said it was committing $35 billion to the "Arab Spring" countries, and there has been some delay, at least in terms of Egypt. Maybe in contrast to Europe or just on its own, do you feel that the IMF, or did the Group discuss whether its response to these countries, Arab Spring or MENA more generally, has been sufficient?

MR. MUKHERJEE: In fact, what we have suggested that these countries also require support. Basically, what is happening today, that in fact there are two sets of problems in some country whether there is deflation in certain other countries there are inflations. Therefore, the approach which is to be taken, what we feel is essential to bring back the world economy to its steady growth path, that all the distortions ought to be addressed. Volatility of the commodity prices and fuel prices have to be adequately addressed. Sovereign debt issues of certain countries ought to be addressed and put in correct perspective.

Fiscal consolidation process at the same time maintaining the reasonable level of growth are also to be restored. There cannot be one straitjacket formula for all countries to put country-specific solutions is not expected--that respective countries will find out, but there should a set of proposals with adequate flexibility so that the countries concerned can adopt those policies to shoot their own requirements.

MR. ALKAFFAS: I would like to follow on the Minister's answer regarding Paragraph 14, in particular. As I sit at the Board of the World Bank representing Egypt, among other countries, I would like to say that, indeed, we are very appreciative of the role the IMF is playing in cooperating with Egypt during this time of transition as well as other countries going through the democratic transition in the Middle East and North Africa Region, famous for Arab Spring countries.

I would reiterate the very positive statement made by the IMF Managing Director Ms. Lagarde this morning during her press briefing, that she is very keen and very interested in helping Egypt during this time. I would like to put forward to you that negotiations have been going on for the IMF program of $3.2 billion to Egypt that is almost finalized and should be announced during the coming few weeks.

Also, I would like to go back to the question regarding the eurozone crisis and the impact on other Regions around the world. I would definitely fully support the statement made by our Chairman, the Chairman of the G-24, that in a globalized world you cannot really separate what's going on in any Region of the world from what's going on from the impact in other Regions. I would mentioned that there was a call made, and rightfully so, by one of our members during our deliberations today requiring that both financial institutions, the IMF and the World Bank, to prepare an impact assessment study on the impact of the eurozone crisis in other Regions, and in particular when it comes to the MENA Region, for instance, I would say that we have frontline countries such as Tunisia and Egypt who are already in transition and have been facing a double whammy when it comes to the eurozone crisis, bearing in mind that almost half or exactly 47 percent of the trade between--of Egyptian trade is going to the European Union.

Also, tourism has been affected, and due to the slow in trade, the revenues from an international water passage like the Suez Canal have been affected. So, we are calling for a regional impact of the eurozone financial crisis on other Regions. Thank you very much.

QUESTION: Let me go back to the question of the IMF quota and IMF governance reforms. Minister, is there something that BRICS Finance Ministers today came to a general understanding as a prerequisite for committing additional resources to the IMF. And also, was there a discussion today in the BRICs Finance Ministers meeting about whether or not the euro zone's effort has been sufficient?

MR. MUKHERJEE: General discussions were in the BRICS Finance Ministers meeting that recognizing Europe is to take initiative and to make contribution to work on the problems of the sovereign debt of the countries concerned, and they should contribute to build the firewall.

But at the same time, it was recognized there would be requirement of the supplementary efforts by International Monetary Fund which, in response to the first question I stated that it is well recognized that there will be an additional requirement to have the strength in the International Monetary Fund to intervene effectively.