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

May 26, 2005

Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, May 26, 2005
Washington, D.C.

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MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the Fund, and this is another of our regular briefings. As usual, this briefing is embargoed until about 15 minutes after conclusion, and we'll set the precise time at that point.

I'd like to run through a few press events and public schedule items before I take questions.

I'd first start by noting that Monday, May 30th, is an official holiday at the Fund headquarters, and there will be our normal duty officer system in place in Media Relations in the event that you may all have questions. The contact number is listed on the For Journalists' page on the website.

The U.S. Article IV consultation staff discussion was completed this week, and I think you can expect that shortly, in the next couple of days, we will have a concluding mission statement that would be published, I think both at the U.S. Treasury as well as on the Fund website. And if we have an idea precisely when the timing is, we'll let you know.

This weekend, over the long weekend, as I mentioned previously, the Managing Director will be traveling to Santiago, Chile, to participate in an ECLA, or Economic Commission on Latin America conference. There will be press events and availability.

Next week, on June 1st, the Managing Director will be presenting the updated IMF work program, which is our semi-annual review of our non-country-oriented program, to the Executive Board, and I expect that as is standard practice, we will be publishing a press release, either later that day or shortly thereafter, outlining the work program, which as I indicated is a six-monthly document.

Media Relations will also be in contact with you to update you on management travel and public events, but I'd like to note that the Managing Director will attend a joint IMF-Deutsche Bundesbank symposium in Frankfurt scheduled on June the 8th. The symposium is entitled "The IMF in a Changing World," and the MD, the Managing Director, will have press availability after his address at the symposium. Press in Frankfurt are already registering for the event, and if you haven't registered, or you listening or reading out there on the Ethernet wish to attend, please contact the Bundesbank press office. We will have additional information on Managing Director travel in that same time period after June 8th, but we're not quite ready to provide the details yet.

First Deputy Managing Director Anne Krueger will be visiting Southern Africa between June 5th and 10th. This includes a trip to Madagascar between June 5th and 7th and South Africa between June 8th and 10th. There will be concluding press conferences at each stop. In Madagascar, Ms. Krueger will meet with the authorities and civil society representatives and, as I say, conclude with a June 7th press conference. In South Africa, she'll meet with the authorities and she will also speak before the Economic Society of South Africa. While that is not a public event, the actual text, however, of her address will be released shortly thereafter. And we expect that her press conference in South Africa will be on June 10th.

My understanding is that our resident representative offices in each country will organize these concluding press events, and you or your colleagues can be in contact with them for additional details.

I'd be happy to take any questions that my hardy perennial friends here may have.

QUESTIONER: What about the trip to Tbilisi?

MR. DAWSON: As I say, I'm not at a point yet to announce additional travel. We will have information on the travel within the next few days.

QUESTIONER: Okay. And I wanted to ask you about the budget message that President Bush has sent to the Russian parliament. He gave the government a view of our new taxes, and I think he generally laid out his financial management principles in the message. So I wanted to know what the IMF thinks about that message.

MR. DAWSON: We think that President Putin's call for prudent budgetary policies is appropriate and that increases, for example, in the share of the oil windfall spent by government should be avoided. The 2005 budget did already envisage a significant increase in the non-oil deficit, and there may be indeed further relaxation in 2006 as a result of the decision to raise the reference price off of which the stabilization fund operates.

To go a little bit into the macro side, emerging capital—I'm sorry, capacity constraints are evidenced by the slowdown in growth and a pick-up in inflation. And in our view, therefore, further expenditure increases or tax cuts would be likely to exacerbate inflation or the pace of real appreciation. And, unfortunately—or moreover, rather, as reforms have been lagging, the administrative capacity to target spending effectively is more limited.

Therefore, our summary view is that fiscal policy should not be loosened for now. In the medium term, though, there is significant scope for fiscal relaxation as the permanent part of the terms of trade gain associated with increased oil prices could be used to support structural reforms and improvements in infrastructure that would contribute to an expansion of productive capacity.

QUESTIONER: And sort of a follow-up, I don't know if you are aware of it, but this morning the Russian economics ministry cut their own forecast for growth in Russia. Does the IMF want to look again at its own numbers, its own—

MR. DAWSON: We, as you know, our most macro approach is that twice a year we do the WEO, and then we do internal updates thereafter. I don't think at this point we are going to be having any updates of individual country forecasts of the sort that come out individually in the WEO later. We do that, of course, in the context of Article IVs, but I don't think at this point there's any reason to do that.

Our general view on the global economy, the Managing Director in his speeches gives a general update on [the global economy], and did, in fact, on his Africa trip. But I don't have any expectation that we're going to be putting out individual country changes prior to the fall meeting, except for those countries where we do have Article IV discussions.

QUESTIONER: If I may, on—

MR. DAWSON: A simple follow-up.

QUESTIONER: Yes, on a neighboring country. From press reports I have the impression that the economy is Georgia is stumbling, and I was wondering how the Fund program with Georgia is going on and, again, whether it needs revision of any sort.

MR. DAWSON: I don't have an update—let me just make sure. I mean, we have a mission scheduled starting next week, and so I think I should hold off on commentary until that point. I mean, clearly macro performance has been strong, but we have been concerned about an upturn in inflation in recent months, and the mission will be discussing both the issues you raised and issues that I just raised at that point. They go, I think, the middle of next week.

QUESTIONER: What would the IMF suggest to Italy now that the government has cut its forecast for 2005? And the OECD forecast a negative growth of 0.6.

MR. DAWSON: Well, we certainly have noted—and this issue came up, I think, at the last press briefing as well. You know, we see these regular updates of country forecasts. As I indicated in my response [on Russia] earlier, we tend to hold and try to do ours globally twice a year and then in the context of Article IVs. And I would note that a number of the revisions that have come out in recent weeks [from other official sources]—which were reported appropriately in the press, in fact, are bringing out numbers on growth estimates toward what we had indicated at the end of April when our WEO came out.

So, this is sort of an iterative process, and I think we by and large have been standing by our forecasts. When we have new ones, we will get them forward.

Our summary view from the Article IV discussion, which was three months ago, was urging further structural reforms as well as a more ambitious fiscal consolidation effort to jump-start growth. But I don't have any updates to that, and I think there may be the opportunity in the context of the forthcoming—I believe we have the euro area consultation coming up in a couple of weeks, and there's likely to be a mission concluding statement at that point. I think you'll get a flavor of our views on the euro area at that point. That would be coming out of Brussels as a concluding statement.

QUESTIONER: First of all, have the Article IV discussions with Argentina formally ended?

MR. DAWSON: That's a somewhat theological question. Mr. Murray and I were discussing that before coming down here as to when—there is—the staff conclusion—the staff meetings with the authorities have concluded. A report is being prepared. It will be reviewed by management, may be actually pretty close to being reviewed by management already, and then there will be a Board meeting. The formal conclusion of the review of the Article IV is when the Board does that because that's the Board's responsibility, and we are expecting that in—I would say in the time period of the end of June, most likely the actual Board discussion.

QUESTIONER: I was told something like the 20th of June?

MR. DAWSON: Yes, and that's why—that's sort of toward the end of June. I try not to hold to specific dates. Schedules change. But it is on the timeline that we are expecting to go forward, and I think I will try to get the right theological line down as to when—I used to be on the Board, as some of you know, and the conclusions of the Article IV the Board takes very seriously as being their responsibility. The staff work has been prepared, the report is being prepared, but it is the Board that does the review and, as you know, the summing-up reflects the Board's views on the Article IV.

QUESTIONER: Has Argentina formally requested an agreement?

MR. DAWSON: No. No. I mean, what we—we are in a time—a sort of anticipated time frame of getting the Article IV discussions out of the way, and then the authorities have indicated that at some point they will wish to discuss that. But I had—it's not a point which there would have been a formal request.

To back up a little bit, the most recent step was the—while it was technical, was still something that the Board was involved with, was the approval of the conversion of expectations and obligations versus some of the payments coming—for all of the expectation payments coming due in the next year. Now it is the Article IV Board discussion, as I said, expected in the latter half of June, and then subsequently we'd turn to the issue of a program, which is ultimately the authorities' interest and desire. And if that is the case, we will enter into discussions with them. And in a sense, the question is best addressed to the authorities. But the discussions that have taken place to date are—have been the Article IV discussions.

QUESTIONER: In view of the French referendum, do you anticipate weaker euros in the next month? And if that—how do you see the impact of the new balance of the currencies of—of the major currencies?

MR. DAWSON: I mean, we as a matter of policy and prudence don't discuss exchange rate movements and it's not our job to talk about referenda and so on. I would, again, direct you, as I did to the earlier question, that we will be having our semi-annual consultation with the euro zone coming up in the next couple of weeks, I think it is, and then subsequently there will be a—let me get it. I think I have the exact date here. And then that would be the opportunity which the Fund would put forward its views. Let me get that.

I don't have...I think in early June you would expect possibly to see the next steps in terms of a statement from the Fund on this.

Any other questions?

QUESTIONER: In the last communiqué involving Argentina, there was an interesting phrase, the last one, saying something like the Directors were eager to discuss the Argentinean policies.

MR. DAWSON: Right [inaudible], yes, I remember.

QUESTIONER: Could you clarify which sort of policies, which sort of—which Directors, which-

MR. DAWSON: Well, I certainly could not do the latter because Directors' discussions are confidential. The thrust of the discussion was—remember I indicated that the Board consideration of the conversion of expectations obligations was largely a technical issue. The context in which I would take that statement is that the Article IV is now what is coming forward toward the end of June. The Article IV has—is, in fact, delayed from the normal annual cycle, so it is not surprising the Directors are looking forward to a broad-ranging and full discussion of developments in the Argentine economy, which is not what was the subject of the meeting—when was it, last week? Last week.

If that is it, then we can wrap up and lift the embargo at 10:20—I'm sorry, at 10:35 Eastern time, which would be 1535 GMT.

Thank you very much.


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