Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, International Monetary Fund

April 24, 2014

Washington, D.C.
Thursday, April 24, 2014
Webcast of the press briefing Webcast

MR. RICE: Good morning and welcome to this press briefing on behalf of the IMF. I'm Gerry Rice, Director of Communications here at the Fund. As usual this morning we're on the record, and this will be embargoed until 10:30 a.m. Washington time. I'll make a few announcements and then turn to questions from colleagues in the room as well as online.

Let me begin with the Managing Director, Christine Lagarde. She will be in Morocco on the 8th until the 9th of May where she will be meeting the authorities, and also making a speech at the Conseil Economique, Social et Environmental. From there Madame Lagarde will be traveling to Amman, Jordan where the IMF in partnership with the government of Jordan will be sponsoring a conference on the Middle East with the title of: Jobs, Growth, and Fairness on May 11 and 12 in Amman, Jordan. Much of that will be open to the media.

The First Deputy Managing Director, David Lipton will be in Turkey next week where he will meet with the authorities and attend an Executive Board Constituency meeting in Istanbul, May 1st and 2nd.

Deputy Managing Director, Naoyuki Shinohara, will attend the Asian Development Bank's annual meeting in Astana, Kazakhstan. That will be on May 2nd to 5th. He will be speaking in a seminar on fiscal policy jointly organized by the ADB and the IMF.

Deputy Managing Director, Min Zhu, will speak on a panel on the global economy during the Milken Institute Global Conference in Los Angeles, on April 28. He will then head to Kuwait to attend a high-level conference co-hosted by the IMF and the Kuwaiti government on the economic development diversification and role of the state. That will be April 30th to May 1st for the Gulf Cooperation Council Countries.

As is normal at this time of the year after our Spring Meetings we have a batch of our regional economic outlooks, our reports for the various major regions of the world. You may have already seen this morning the regional economic outlook, the REO for Sub-Saharan Africa was released in Nairobi today. That was earlier today.

Shortly after this briefing, about 11:00 a.m. Washington time the REO for the Western Hemisphere region will be launched. Then the regional economic outlook for the Asia and Pacific region will be launched in Hong Kong on April 28th followed by the regional economic issues overview for Central, Eastern and Southeastern Europe.

Then finally, the REO for the Middle East and Central Asia will be launched in Dubai on May 6th. So I think that covers all the various regions.

With that let me take your questions.

QUESTIONER: Thank you for doing the briefing. On Ukraine, is the program ready? If so, when do you expect it to be submitted to the Board for consideration? Do you know what the contribution of the IMF will be to the program, more specifically than before?

MR. RICE: We're in the process of completing the steps necessary for Board consideration which is tentatively planned for April 30th. We have now received documentation from the Ukrainian authorities covering all prior actions.

Staff are checking these documents to verify the details, that they're in line with program understanding. Again, on that basis the Board meeting is planned for April 30th. So that's the status.

You had asked about the IMF contribution. We've said before that the proposed standby arrangement would be in the range of $14 to $18 billion over a two-year period. We expect that this IMF program, the IMF contribution, would unlock additional international and bilateral assistance of about $15 billion over that same two-year period. That's 2014 to 2016.

In terms of the specific IMF contribution we should wait for the Board to make that decision. As I mentioned the Board meeting is tentatively planned to go ahead on Wednesday.

QUESTIONER: I also had a different question on a related subject. In theory, is it possible to punish Russia economically without punishing Ukraine at the same time? More specifically is it possible to impose biting sanctions on Russia that would not harm Ukraine?

MR. RICE: Obviously the IMF is not in the position of imposing sanctions anywhere, anytime. But in terms of the effects of the sanction, on Ukraine, our assessment is that the U.S. and the EU sanctions announced so far are unlikely to have a significant effect on the Ukrainian economy.

The more substantial risk to Ukraine's economic outlook comes from a possible further escalation of overall tensions.

QUESTIONER: You just said that the IMF program could unlock $15 billion additional funding, could you elaborate on that?

Also on Ukraine, how concerned are you by the recent developments in the country? Do you think that it could threaten any kind of IMF program and the implementation of the program?

MR. RICE: One of the key roles that the IMF plays in most programs is its catalytic role whereby the IMF commitment, the financial commitment, and our contribution can catalyze resources from others. That's very much a major objective of the IMF’s role in this program.

We have said before that we anticipate that the IMF financial commitment in this case would catalyze, as I've just said about $15 billion that would be additional to the IMF commitment.

Where does that come from? This comes from financial assurances that have been made by others. We expect that financial assurances that have already been made by others, and we would expect that funding would come online once the IMF program and financial commitment has been approved by our Board.

QUESTIONER: Will you comment about the $27 billion package or is it part of this package because --

MR. RICE: It's part of the $27.

QUESTIONER: But if the low range of the IMF is $14 billion, if you add $14 billion plus $15 billion -- you have $29 billion, then it's more than the $27 billion that was previously announced. So does it mean that you are revising the financing needs of the country?

MR. RICE: No. I think what we're talking about ranges. I said about $15 billion, so we're talking about different ranges. The IMF loan is still in a range to be decided by the Board on Wednesday. So not to give you the wrong message here. Our numbers are not changing.

QUESTIONER: On the political situation in the country?

MR. RICE: Yes, let me come to that. One of the roles that the IMF can play, and is valued by the international community is working in sometimes very difficult situations where member countries face fragile circumstances, and during periods in which they experience domestic turmoil or political tensions.

In terms of our financial assistance, the Fund only approves the use of its resources if it is satisfied that the member has the capacity to implement the program and is committed to do so. In this case we believe that is the case. So we remain committed and engaged.

So again, one of the Fund's fundamental roles is to work in these difficult situations, and that's why we are committed and engaged in Ukraine.

QUESTIONER: I was wondering if you could give us examples of situations similar to Ukraine where there were tensions at the border from another country?

MR. RICE: We don't want to make direct comparisons with other countries because each country's circumstance is different. But there are many examples, you know, broadly, where the Fund has been engaged during difficult internal times in our member countries.

I'm not making a direct comparison with Ukraine, but in terms of working in a very difficult, fragile, politically tense situation, examples might include Bosnia, Sri Lanka, and Peru. But again, let me reiterate, every country's circumstance is different, but it is not uncommon for the IMF to be working in politically tense or fragile situations.

QUESTIONER: Can you clarify this number again? So there was -- at the tentative agreement or interim agreement reached earlier this month or last month, I can't remember which. It was announced that a total package of $27 billion would be forthcoming if the IMF moved forward.

IMF would do $14 to $18 and, you know, the remainder would come from international support. Are you now saying that $27 billion there's an upward range above that that the international community and the IMF are committing to?

MR. RICE: No. I'm not changing our basic parameters in terms of the numbers.

QUESTIONER: Just to follow-up on the events in Eastern Ukraine, will IMF cash be flowed to the eastern regions of Ukraine even if, for example, Crimea becomes a federation or sorry, an annexed part of a federal Ukraine which is something that is being considered?

MR. RICE: I won't comment on the issue of possible annexation or political developments. What I can tell you is that at the moment in terms of how Crimea maybe treated under the program, it's included in the data that we are using for Ukraine. It accounts for a relatively modest 3.7 percent of GDP.

So the authorities’ lack of control of Crimea would not impair their ability to meet program targets and objectives given the small economic size of Crimea.

QUESTIONER: Finally, to clarify, Russia has said that Crimea is now officially annexed. Does the IMF recognize that annexation?

MR. RICE: I'm not going to comment specifically on that issue, but just to again repeat that we are including Crimea in the data for Ukraine at present.

QUESTIONER: On the same subject, the Russians keep complaining that the Ukrainians are not paying for gas, for energy resources. just for one month, I think, for March, it was like a $500 million debt. I understand that the program can still go ahead as it is with the expectation, and the Russian's will, I think, vote for it with both hands with the expectation that the program is used to pay the debts, and for Ukraine to keep current on its payments for energy resources.

Is this how this program is viewed? Is this how the resources are viewed by the Fund? That this is one area where the resources should be put from the program?

MR. RICE: The program, again, subject to approval by our Executive Board provides room for settling gas payment arrears, and making all current payments on time.

QUESTIONER: Eurostat confirmed yesterday Greece's primary surplus, I would like you to comment on that. Also, when are you expecting the discussions for the new debt relief to begin?

MR. RICE: The achievement of the primary surplus by Greece recently announced, we think is another welcome and important milestone in Greece's progress in the economic recovery. As was Greece's recent return to the markets a few weeks ago. I think it's an important sign of progress, though obviously significant challenges remain.

On debt relief discussion, European partners have recently indicated that those discussions would begin the second half of 2014.

QUESTIONER: If I can follow-up, the European Commission said yesterday that Greece's debt is sustainable under the assumption that the implementation of the program will continue as planned. What is your comment to that?

MR. RICE: Our debt assessment remains the same. Public debt is still projected to remain high. And as we've discussed here a number of times before, and as we've just said, Greece's European partners have agreed to provide debt relief if necessary and contingent with Greece being fully on track with meeting the program commitments.

The numbers we've talked about are a debt to GDP ratio declining to 124 percent of GDP by 2020, and to significantly below 110 percent of GDP by 2022. As long as Greece is delivering on its program commitments, again, the Europeans have said they stand ready, as needed, to help Greece hit these targets.

They indicated recently that these discussions would begin the second half of 2014.

QUESTIONER: If you have any idea when the IMF Board will convene to discuss the Greek program?

MR. RICE: Yes, the Board is expected to meet in mid-May to discuss what would be the fifth review of Greece's program. We would expect disbursement to be made contingent on approval by our Executive Board.

QUESTIONER: The Fund said last year that the negotiations for debt relief would begin once Greece met its primary surplus. Yet now, they're being pushed back into the second half of the year. This is kind of reminiscent of the delay in debt restructuring that the Fund criticized itself for earlier in the Greek programs.

Why is this not an instance of the IMF yielding to the Europeans rather than being the advocate for Greece and its debt relief situation?

MR. RICE: I think we're proceeding in an orderly way here. The IMF program, which runs to 2016, is fully financed for the next 12 months, but we've said further financing will be needed from then onwards. That is until program completion in early 2016.

So discussions on the financing of the program -- on that additional financing of the program-- will be part of the following review that will be the sixth review, not the current one being discussed by the Board. I think this is all timely and being done in an orderly way.

QUESTIONER: So just to clarify on a matter of timing. The IMF is fine with that second half May discussion? Because even at European level it's not clear that everybody agrees on that day.

Second, I'm sorry to come back on Ukraine external contributions... So would it be incorrect given that we're talking about ranges to say that the total package could be as high as $33 billion which is the maximum from the IMF, and the maximum from the external. Would it be correct to write that?

MR. RICE: I'm not going to change the basic, as I said earlier, the basic parameters of the numbers that have already been announced.

On Greece and the debt relief discussions, as I said, I think the timeline that we are on for those discussions is orderly and will enable the international community to support Greece's continuing recovery.

QUESTIONER: Can you just give us an update on the two instances of IMF computer hacking/surveillance. The one a couple of years ago and the allegations of the U.S. reviewing -- hacking IMF telephones, surveillance, et cetera?

Secondly, can you just tell us a little bit more about Lipton's constituency meeting in Turkey, please?

MR. RICE: On your first question, I do not have a detailed update on that issue beyond what we said in both cases at the time. The IMF continues to take all necessary steps to ensure the integrity of our systems.

But in terms of the detail we may be able to get something for you after this meeting. I don't have anything for you on that right now.

On the David Lipton meeting, it's an Executive Board Constituency Meeting in Istanbul, and the constituency includes Austria, Belarus, Czech Republic, Hungary, Kosovo, Slovak Republic, Slovenia, and, of course, Turkey.

QUESTIONER: I mean, what's the agenda for the discussions? Is it how to organize? Is it, a policy discussion? What policies they want to put forward? Why is Lipton part of that?

MR. RICE: These are regular constituency meetings, and it's not uncommon for our senior management to attend one of these constituency meetings. I don't have the specific agenda, but we can imagine that they will be discussing issues germane to that constituency. But it's not an uncommon thing.

Let me just go online because there's a couple of things here, then I'll take one more round in the room. There's a question asking will Madame Lagarde meet with Chancellor Merkel when Chancellor Merkel is in Washington in the beginning of May. If so, what will they discuss?

I can confirm that a meeting is planned between the Chancellor and the Managing Director on May 2nd here at the Fund. In terms of what they will discuss, I don't have the agenda, but I would imagine global economic developments, European developments would be what they would be looking to talk about.

There's a question about the ECB's forward guidance policy, and whether you think it's appropriate at the moment? Are you still worried about deflation in the Euro Zone periphery?

On this issue of low inflation and deflation, it was discussed extensively during the Spring Meetings, so I won't revisit all of that. I think the IMF's position on low inflation was clear.

On the ECB's forward guidance policy, we think that the ECB policy is appropriate. Let me leave it at that.

I've got a number of questions from online here. Let me take one of them, and for those that we don't get to we will come back to you off-line.

The status of reaching an agreement with Serbia? What I can say on that is the precautionary standby arrangement with Serbia expired in March 2013. Following the authorities request for a new program an IMF mission visited Belgrade in the first quarter of 2014 to initiate discussions on a possible new IMF supported program. These discussions were constructive and will continue after a new government is formed following Parliamentary elections.

There's another question about Zimbabwe. In Zimbabwe, given the IMF's staff monitor program and reports the government failed to meet the Fund's target to cap personnel related budgetary funding, is it the case that the government risks failing to pay its employees in the next few months following a recent 23 percent wage increase amid falling revenues?

On that one I can say that the staff monitor program does not have a ceiling on personnel related outlays among its targets. But it does have a target on the budgetary primary balance. The Zimbabwean authorities have indicated to staff that they are considering both revenue and expenditure measures that would allow this balance to stay within the target for the year.

QUESTIONER: Just to clarify, because I have not been doing this before, in the beginning you talked about receiving documentation from Ukraine. Could you just clarify what that documentation is? Is it an explanation of how much Ukraine has satisfied the conditions to receive the aid? Can you just explain what the documentation is?

MR. RICE: We use the term prior actions to describe commitments that we expect from a government in order to make the way for the program to be considered by our Executive Board.

So what I was saying earlier in the case of Ukraine, this is true for all our programs, was that we have received the documentation from the Ukrainian authorities covering all areas of require prior actions. Staff is now checking the details of those documents with a view to the planned Board Meeting next Wednesday, April 30th.

QUESTIONER: So you're reviewing to see whether they have complied, right?

MR. RICE: We're checking the details. With that, thank you for coming. Thanks to those of you online, and we'll see you in a couple of weeks.


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