Transcript

Director of External Relations Department
International Monetary Fund
Thursday, June 23, 2005
Washington, D.C.

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MR. DAWSON: Good morning, everyone. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings. As usual, the briefing will be embargoed until about 15 minutes after conclusion, and we'll set a precise time at that point. I don't have much in the way of formal announcements, but let me touch on a few items before taking your questions.

First Deputy Managing Director Anne Krueger will address the Institute for Global Economics in Seoul, Korea, on June 30th, at 8:00 a.m. local time, on the subject of mutual interdependence, Asia and the international economy. Media Relations will advise if there is an advance text available to the press closer to the time of the event.

You will note that the Fund Executive Board yesterday published its latest six-month work program. If you haven't reviewed the press release, which is the Managing Director's statement on the work program, I suggest you look at the website. I would note, however, that the work program that was published was discussed by the Board on June 1st. It takes a while to finalize it for publication, which is, of course, what happened yesterday, and since that review, you know, as you are aware, the Group of Eight nations convened their pre-summit Finance Ministers ministerial meeting in London and had a proposal for deeper debt relief for the very poorest HIPC countries, the HIPC countries.

The Fund Board yesterday met formally for the first time to discuss the G-8 proposal, not yet in a position to go into details of either the discussion or the proposal, which is being looked at, of course, but I do anticipate we will have a press statement reporting on yesterday's discussions in the next day or two.

Clearly, we think the HIPC program has been of great benefit to the countries, and we are looking forward with our shareholders on how to--working with our shareholders on how to deepen debt relief, again, in the context of the broad approach toward helping the very poorest countries, which the Fund is and continues to be actively involved with, while at the same time we are working on helping our Executive Board look at the G-8 proposal.

I would also direct you toward the G-8 communique which did indicate their desire to have an accord by the Annual Meetings this fall, in late September, early October, and we are indeed in the process of working toward that goal.

The Managing Director will be attending the G-8 Summit in Gleneagles, Scotland, next month, and Media Relations will update you when we have more information on that.

Finally, as you're all aware and many of you have reported, the Executive Board met on Monday, June 20, to conclude the latest Article IV review of Argentina. I anticipate that a Public Information Notice concerning the Board's findings on the state of the Argentine economy will be released shortly--"shortly" meaning in the next day or two, hopefully, but possibly early next week. I don't have a precise time.

Just to remind those of you who may not remember, this was, of course, an Article IV discussion. It doesn't normally lead itself to a press release on the same day. Typically Article IV discussions are released in terms of the record of Board discussion sometimes two or three days later, quite often a week or two later. So this is not an unusual delay, but that, of course, hasn't stopped the discussion being fully reported in certain, shall I call it, regional press.

Now I'd be happy to take any questions you may have. And, please, make your mothers proud of you and identify yourself and your organization.

QUESTIONER: I have a question about [inaudible]. He says, "We have reached agreement in principle with the economic team [inaudible] Letter of Intent and the policy actions needed to complete the first program review [inaudible] passage of the agreed social security reform law and banking law by the end of this month."

MR. DAWSON: So far you've got my talking points here perfectly. Let's continue.

QUESTIONER: "Provided these [inaudible] steps are taken, I will be able to the IMF management that Turkey's request to complete the first review be subject to the Executive Board." I understand that both prior actions must [inaudible] completed before the review could be completed. Is that correct?.

MR. DAWSON: That is correct, yes. You must have had a copy of my notes.

Mr. Sitov of Tass.

QUESTIONER: Thank you, and thanks for identifying me for the record. I wish I could read from a press release that I know you released earlier this morning in Moscow, but I haven't seen it yet. On the other hand, I do know that our Ministers are now publicly quarreling with the head of the government about the slowing rate of growth. My question is, probably also to reiterate what I have said many times before, but what does the Fund believe the government needs to do to deal with--to spur the growth to reach their goal?

MR. DAWSON: Well, I think what I will do-because I do have the press release, which is fairly extensive, so I will not read the entire release. In my version here it is eight pages. Perhaps what might be useful for the record is to go over the summary, a sort of longish paragraph, and if you have any questions, ask, and then we can provide it to you afterwards. And it does follow along the lines--you've asked some of these questions previously.

Russia certainly has had a sustained period of quite high GDP growth, benefiting from higher oil prices but also good macroeconomic policies, including a policy of-a fiscal policy that included saving oil revenues. The policy, however, is now being relaxed as a much greater share of oil revenues is being spent despite buoyancy in other areas still in the economy and a slowdown in the potential growth.

This, we believe, risks exacerbating the slowdown by increasing the already high inflationary pressures and causing further real ruble appreciation.

While there is scope for relaxing fiscal policy once inflation pressures ease, the fact that increased spending is being used largely or overwhelmingly for public sector wages and pensions suggests that perhaps the oil wealth is not being harnessed in support of the reforms that could raise potential GDP growth.

At best, I think it risks missing an opportunity to accelerate growth over the longer run, and at worst, it may have to undertake--Russia may have to undertake a more painful and prolonged fiscal tightening if oil prices were to drop substantially.

If it is becoming politically difficult to continue to resist pressures to spend oil wealth on wages and transfers, it becomes a matter of urgency to raise potential growth by reinvigorating reforms, structural reforms, which seem to have lost some of the momentum that they had a few years ago.

So I think that--

QUESTIONER: So the clarification I have, you agree with--I mean, I don't see how you cannot agree, but you do agree with the government when it says they will have a slower rate of growth now?

MR. DAWSON: Well, I think I'll leave it with the mission statement. I'm not particularly aware of the government's statements, and I certainly do not want to deal with the premise to your question, which had to do with different positions possibly existing within the government. I don't like dealing with that issue within the Fund, and I don't like dealing with it with member governments.

QUESTIONER: Another follow-up to that of a slightly different nature. One of the elements obviously for the Russians of the policy is attracting investment. And the way they deal with it very often is just by exhortation, calling on the major internationals to come into Russia and to invest.

I know that this coming weekend they will have something [inaudible] very major--CEOs of major American companies, such as IBM, Intel, Alcoa, that sort of thing, coming over to St Petersburg to talk to the government again about all those issues. Do you feel that this is sort of the correct way of attracting international capital, international--

MR. DAWSON: I can't possibly touch that question. The idea of investors conferences and so on I think is a well-established way of many countries doing that. The Managing Director was recently in Istanbul, for example, at an investor council meeting, which I thought was quite successful.

On the substance of what you raise, though, we certainly agree-and this is in the statement, the concluding statement of the mission-that priority should be given to reforms that strengthen the investment climate. Rather than reading another paragraph, I will just direct anyone interested to take a look at the statement, which is available.

QUESTIONER: I have a question on Ecuador and Bolivia. As you know, those Latin Americas countries have been in some kind of trouble with the IMF to get new programs. Now both countries have new governments. Did those governments make any kind of approach recently to the IMF? And what is the IMF policy for those countries?

MR. DAWSON: I'll take Bolivia first. We obviously have been closely monitoring the situation there and expect a short visit by Fund staff to Bolivia in the next few days to learn more about the developing economic and political situation.

With regard to Ecuador, Fund staff and the authorities have agreed to maintain a close and cooperative relationship, including having the staff assess the government's economic program on a quarterly basis. We do have some concerns about the new fiscal responsibility law which has been passed by the congress in terms of whether it does maintain the overall framework for fiscal discipline, and that's one of the issues that we will be discussing with the authorities.

QUESTIONER: I'd like to know which is the next step after the Article IV program with Argentina. Are you going to negotiate a new program with Argentina, by the way? Mr. Lavagna said this morning that he was ready to negotiate with the Fund today if it was necessary.

MR. DAWSON: The next-the Article IV is, of course, part of our regular process of engaging with all of our 184 member countries. We have indicated-the Managing Director in Canada earlier this week indicated, you know-that if the Argentine authorities wish to approach us to discuss a program that is their prerogative, and we are--that's where it is. I mean, it's not an initiative that we take. It's something for the authorities to determine what the course-what their course of action is going forward. So I think the question is best directed further south.

QUESTIONER: Can I have a follow-up on Argentina?

MR. DAWSON: Sure.

QUESTIONER: Mr. Kirchner wrote a letter to the Fund this week. Did you receive this letter and--

MR. DAWSON: Well, I haven't received the letter. I haven't seen it either, so I don't know. I'll have to check. I wasn't aware of a letter. But we'll get back to you on that.

QUESTIONER: I have a follow-up on your remarks. Did the Argentine Government formally request the initiation--

MR. DAWSON: No. No.

QUESTIONER: And, second of all, since your last press conference, your special press conference, you remember the fire at the World Bank. Did Argentina finish the debt swap?

MR. DAWSON: I mean, in terms of the debt swap that they launched, it has been concluded, yes.

QUESTIONER: Yes, and the Argentine Government says that the default was lifted in a sense. Does the-

MR. DAWSON: That's not-I mean, that's not a judgment that the Fund makes. I mean, we have--that's something to talk to other creditors and so on. They were certainly not in default with us, so that's not a question that we're involved with. They maintained their payments to us.

QUESTIONER: I have two questions. On Argentina, I wonder if you could tell us what are the options for the country. Is it possible still, for example, to renegotiate that agreement that was suspended in August? Can they sign a one-year agreement or it will have to be like--

MR. DAWSON: The entire issue is--it's for the Argentines to determine the path that they wish to go on, and then they will approach us, and we will be happy to discuss it with them. So I just really don't have any--I'm not going to answer hypothetical questions, and the ball is very much in their court in terms of how they wish to go forward.

QUESTIONER: On Ecuador, you said that, you know, the authorities have agreed to this cooperation with the Fund. But I read a statement by the government saying that they didn't want a surveillance program with the Fund. [inaudible] this issue of the new use of the oil revenues. I wonder if you could comment on both.

MR. DAWSON: Well, I don't know, I mean, surveillance is an obligation of membership. Every country has an Article IV. So if you--I thought you said surveillance program. Those are two different things. A program is, of course, a judgment as to whether the country wishes to enter into a program, and in a sense, that's the same answer that I was giving in the context of Argentina. That's up to a country.

In terms of surveillance, that is what we do with all 184 member countries. And, indeed, I noted that the authorities have agreed that the staff would assess the government's economic program on a quarterly basis. That is what surveillance is.

QUESTIONER: On the issue of the oil revenues, I mean, the government has said that before, they were using a higher percentage to pay down-to pay the debt.

MR. DAWSON: That issue is going to come up in the context of our quarterly review, so I think I would just wait for the next of those quarterly reviews, and we'll be happy to deal with it at that point.

QUESTIONER: I have two questions, the first one on G-8, the second on Europe.

On the G-8, you already touched on the Africa subject. Could you elaborate a little other priorities or other issues that Mr. Rato will discuss at the G-8 Summit?

MR. DAWSON: I think it's a little premature to do that. Clearly, there's a tradition of the Managing Director attending the summit meetings to provide an overview on the global economy, and he certainly will be doing that. And certainly because of the Finance Ministers' discussion on-proposals, rather, on further debt relief for the HIPC countries, that will be discussed, too. But I don't have anything more than that, and, you know, when we get closer we will. But this is--I mean, we are going as guests to give the presentation, and I don't think it's appropriate for us to ahead of time signal too much.

I would note, by the way, that Mr. Murray will be in Gleneagles, and so all of you who wish to be in touch with him, because he might be a little lonely, trapped up in the press center someplace, you can get in touch with him.

QUESTIONER: And the question on Europe, after your last briefing the crisis of Europe deepened with--

MR. DAWSON: I presume this is not cause and effect.

QUESTIONER: No. Not necessarily.

MR. DAWSON: I don't recall actually being asked about it last time.

QUESTIONER: Perhaps you could help in easing the crisis with some suggestions from the IMF to Europe to avoid a slowdown in the economic growth.

MR. DAWSON: I mean, I think I would direct you first-you know, the Managing Director two weeks ago was in-I would point to Frankfurt in particular for the IMF-Bundesbank conference in which he was asked on progress in Europe and the current situation. The night before, I believe, Michael Deppler has given a teleconference after the conclusion of the consultations with the euro area. I would direct you back to both of those.

I think one of the points that we have made and I think you'll hear the Fund continuing to make is that Europe has, in fact, made substantial progress in terms of the reform program that they have developed for themselves over the last few years and that we think that this is progress that should, first of all, be recognized but, second of all, should be built on.

I also believe you can expect to be hearing from us on that more in the near future, but we think that the record of progress and reform in Europe is perhaps a bit greater--is greater than many people seem to be giving it credit for at this point.

QUESTIONER: A follow-up to Jean-Pierre's question about the G-8. The Chinese leader has first said that he will be going, and then he also indicated that he would be prepared to discuss the foreign exchange issue.

Do you know if that discussion is planned? What format will it take?

MR. DAWSON: That question is best addressed to the U.K. hosts.

QUESTIONER: Would you at least say that you welcome the Chinese participation or something like that?

MR. DAWSON: No, I mean, we welcome our participation. That's as far as I'll go.

[Laughter.]

MR. DAWSON: Is that it? I have actually one more announcement that I wanted to make. Yesterday the Managing Director informed the Fund staff and the Executive Board that I intend to leave the Fund in the next six or eight months. My target date is the end of 2005. I have been here a little more than six years--or almost six years. It will be six years next month--next week, rather. It's been actually the longest I've ever held a job in my life, and after a lot of thought, I've come to the conclusion it's time to move on.

As I say, you'll have me to kick around for another six months. I look forward to that. I think one of the most satisfying parts of my six years here, or five and a half, six years, has been having this regular encounter with the press. I think our relationship has built over these five and a half years, and I've enjoyed it thoroughly. I look forward, as I said, to the next six months, and I look forward to being in touch with you in whatever my next life is. I have no plans. I hope by the end of the year to have some plans. And I just wanted to let you know that since, as I said, the Fund staff were informed of that yesterday.

Thank you very much.

[Applause.]