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

May 8, 2014

Washington, D.C.
Thursday, May 8, 2014
Webcast of the press briefing Webcast

MR. RICE: Good morning everyone and welcome to this IMF Press Briefing. I'm Gerry Rice, Director of Communications at the Fund. As usual, we will be under embargo this morning until 10:30 a.m. That's Washington time. I'll make a few brief announcements and then turn to the questions in the room, and online as well.

I will be brief with the announcements this morning. Touching on management travel at the IMF, the Managing Director, Christine Lagarde is in Morocco today and tomorrow meeting with the authorities. She will then travel to Amman, Jordan on May 11th and 12th where she will take part in a high level conference co-hosted by the IMF, the government of Jordan, and the Arab Fund for Economic and Social Development. I can refer you to a speech that Christine Lagarde gave just a very short time ago actually, available to you on the website.

Secondly, Deputy Managing Director, Naoyuki Shinohara, will travel to Manila, the Philippines on May 17th to 23rd to attend a Financial Times Investment Summit and speak on ASEAN integration. He will also participate in the World Economic Forum on East Asia held in the same location.

That's it for the announcements this morning, so let's get to the questions in the room.

QUESTIONER: First of all, do you have any date for the report for the discussion of the report on Greece?

MR. RICE: Okay. On the Board meeting we expect that imminently in the coming weeks. Just to remind, that's to discuss the fifth review of Greece's program.

QUESTIONER: Given the recent comments from Europeans, what is the IMF's assessment on Greek debt, and if you still believe that the debt is sustainable?

MR. RICE: Again, as I've just said, our focus for the time being is on completing this fifth review which the Executive Board has yet to approve.

On debt, as you know, as we've said here many times, Greece's European partners have agreed to provide debt relief as necessary, and contingent on Greece being fully on track with meeting its program commitments. We've gone over before what those commitments are and what those debt targets are. I won't repeat them right now.

So we expect this issue to be discussed in the context of the sixth review, that's the review that will follow this one. The Europeans have indicated recently that this is something that would be discussed in the second half of this year.

Our, the IMF's debt assessment remains the same. Public debt is still projected to remain very high.

QUESTIONER: I have two questions on Ukraine. How concerned are you by their referendum in Donetsk scheduled for Sunday? Can you give us more details on how the US$3 billion that were lent to Ukraine are being used? Are you concerned that it could be used to finance any kind of military expenses given the situation in the country?

MR. RICE: Maybe just step back for one second and remind everyone that just a week ago the IMF Executive Board approved a loan of about US$17 billion to Ukraine. The first disbursement has been released, about US$3.2 billion. The government's well stated commitment to the reforms continues, endures, and the program is moving ahead.

The Staff Report on the program was released to you, again, a week ago. It's very detailed. It is very clear, candid, I would say, on the risks. Including the risks mentioned. The Staff Report mentions that a loss of effective control in the East is one of the risks to the program. In case it materializes the program would need to be, in some ways, recalibrated. The degree of that calibration I wouldn't speculate on or any other specifics related to that. The degree of uncertainty is large.

On your second question, the focus of the IMF program and the IMF resources, as you know, is in the area of public finances, helping to stabilize Ukraine's public financing, and on the level of budget deficit.

QUESTIONER: I'm sorry, but you didn't answer, actually, my first question. So are you concerned about the referendum? Also on the second question, do you have any guarantees on how the first disbursement is being used? Are you concerned that it could be used to finance any kind of military expenses?

MR. RICE: I was trying to answer your question, both your questions, actually. The Staff Report referred to the risks of this program. One of them is where if the government were to lose control in the east I wouldn't want to speculate on that point at this stage or speculate on the referendum, so, you know, I was trying to respond to that.

On the second question, again, the focus of our resources is on the public financing and stabilizing the public financing, and the level of budget deficit. Maybe just to add, if it's helpful, that, you know, as we've said here before the Government of Ukraine is going to be receiving financing from a number of international partners. It's a package of financial assistance.

You know, those funds are not assigned to specific budget line items, but the package ensures, or tries to ensure that the government can stabilize the public finances, and remain current on all its payment obligations. Again, in that Staff Report that I mentioned I think there's a table in there that shows the amounts and the schedule.

QUESTIONER: Good morning. The same question basically, but in Russia some people say that by taking this position the Fund actually encourages the Kiev Regime to use more violence, more military force against the population in the East to subdue the population in order to get the money. That is basically they have presented the Staff Report, some of my colleagues in Moscow are saying, either you subdue your East or you do not get the money. What is your response to that?

MR. RICE: I think that kind of linkage would be misleading. Again, I would just want to repeat that the focus of the program, the focus of the IMF support is on the public finances, the level of budget deficit and its financing. And again, as I've said, the situation in the East is recognized by the IMF and in the Staff Report as a potential risk.

Again, the Staff Report talks about some of the measures that are in the program to try and help mitigate those risks.

QUESTIONER: Back on Greece, you just mentioned a few minutes ago that you're expecting the debt discussions to begin in the conduct of the next review which means after the summer which, obviously, means after the result of the Euro Zone stress tests. It seems to me that this discussion gets pushed back all the time.

MR. RICE: I think we talked about this at the last briefing. You know, speaking for the IMF, I think the discussions of the program and the financing of the program are proceeding in an orderly way, and contingent on our discussions and engagement with the Greek government, contingent on implementation of the program. So, you know, I think it's proceeding in an orderly way.

QUESTIONER: Madame Lagarde met with Mrs. Merkel on Friday. Can you give us a read out on this meeting because there are a lot of reports around that the two ladies discussed the Greek program, and actually that they started to talk about the Greek debt?

MR. RICE: We issued, I think you know, a statement last Friday indicating, indeed, that Madame Lagarde and the Chancellor met and discussed various issues, developments in the global economy and Europe, Ukraine and other program countries. I can confirm that Greece was among the program countries discussed.

QUESTIONER: Please remind me when the first review of the program for Ukraine is scheduled for and what is the amount that will be discussed in that review?

MR. RICE: We expect that review to conclude sometime in September. I will need to get back to you on the amount that's being discussed. I mentioned the initial disbursement of US$3.2 billion, and we can get back to you on the payment schedule.

QUESTIONER: Good morning. The review starts at the end of May, right? So after the elections, but it won't conclude until September?

MR. RICE: We're expecting it to conclude around September.

QUESTIONER: Then can I ask a question about Serbia? The Serbian government said they're requesting a precautionary loan from the IMF, about US$1.5 billion, so I am wondering if you have any comments? What's the timeline on that?

MR. RICE: On Serbia, yes, what I can tell you is that following the Serbian authorities’ request for a new program earlier this year, an IMF mission visited Belgrade during February to initiate discussions. We feel these meetings were constructive. It was agreed to continue the talks once a new government is in place, and the policies of the government are formulated. So the new government is now in the process of formulating those policies, and we expect the discussions now to continue.

QUESTIONER: So there's no set date for a mission, another visit or any kind of set timelines?

MR. RICE: I don't have a specific date for you right now.

QUESTIONER: I just wanted to check, I know it's not that easy to calculate, but can you tell us the interest rate in the Ukrainian loan? Because the authorities yesterday mentioned a 3 percent average. It's always good to have those, and I know those are pretty hard because it's variable rates, but if you could confirm that figure?

My second question is on Argentina. I remember the Managing Director was supposed to report to the Board on compliance with the new GDP, CPI figures. Has she already?

MR. RICE: Unfortunately I don't have that interest rate for you, but that's a factual thing that we can give you as soon as possible after the briefing.

On the Argentina issue, again, we've said this before here at this briefing, the schedule for reporting back to the Executive Board on the issue of Argentina's data and CPI is that we were looking for further actions to be implemented by the end of September 2014. The MD is indeed expected to report back to the Board, again, according to the timeline that's been communicated in our statement.

QUESTIONER: But can you clarify because I think according to the timeline of the statement, it more or less brings us to May, so I'm just wondering if she has or not?

MR. RICE: If she already reported?


MR. RICE: No, she has not.

QUESTIONER: I would like to get back to Ukraine once again. Can you tell us if you know how the first disbursement has been spent, if it has been spent already? Was it used to reimburse Russia, for instance, I mean, do you have any details?

I'm really sorry to get back to it, but I really don't understand why the IMF cannot say that it's concerned about the referendum in Donetsk because it could be a huge blow to the program. So why can't you say it is that you are concerned?

MR. RICE: Well, I didn't say we were not concerned, I said I wouldn’t speculate on it.

QUESTIONER: I don't ask you to speculate. I mean, I just want to know what's the IMF's mindset regarding this --

MR. RICE: You know, I had tried, but again, the situation in the East is identified as a risk in the Staff Report. So beyond that I'm not going to speculate.

On the question of the disbursement, as you probably know, our disbursements are made for budget support, and then we review the budget support on a fairly rigorous basis and assessment in the context of the reviews of the program. In this case, as you know, it's bimonthly reviews, so at that time we will be looking at how expenditures are being used, and how the budgetary support indicators are being tracked, the budget deficit indicators and so on.

QUESTIONER: So, for instance, you don't know yet if it was used to reimburse Russia?

MR. RICE: As I stated, we'll be looking at how the expenditures are used in the context of budget support and deficit support in the context of the reviews.

I'll take a question and then I've got quite a few online. I'm going to go there.

QUESTIONER: Sorry to belabor this point, just to clarify. I believe the Ukrainian program is having reviews every two months for the first program, so why would it only conclude in September if it starts in May? Because in the Staff Report it says that there's going to be a disbursement of US$1.4 billion in July, September, and December.

MR. RICE: Well, you know, I said about September, so I think it's September, so I think it's going to be, you know, around that time.

QUESTIONER: So the July one isn't happening anymore?

They said the next disbursement will be in July?

MR. RICE: Yeah, I'm correcting myself.

You're quite right. The next review would be in July. Did everyone get that? Good. So it's the same.

Now I'm going to go online because there's quite a queue. On Portugal, when will the IMF Board approve Portugal's last review? May the Portugal Letter Of Intent be published before that meeting and before the European elections? Why not? What is the purpose of such a letter if the program finished in June? Then they also ask what is the major risk to Portugal from a clean exit?

On the Letter of Intent, this is standard procedure for IMF programs, nothing out of the ordinary here. It's part of the documentation that the Board reviews. It's part of every review. As is the usual practice, this will be released after the Board meeting. Again, this is standard procedure. This was the case for all previous 11 reviews of Portugal. We're now in the 12th review, so nothing out of the ordinary here.

On the exit of Portugal and the risks, on that I would just refer to the statement that we issued a few days ago from Christine Lagarde where she commented on that issue. I wouldn't say much more beyond that.

I have a couple of questions. And I'll take some of them and get back on other ones off-line. On Ghana, the Secretary General of the Trade Union Congress spoke out on May Day against the government seeking an IMF program. What does the IMF make of it and would the IMF consult with such opponents if a program were requested?

Just to remind, the Ghanaian authorities have not requested a new program from the IMF. The Board, our Board discussed the Article IV review on Ghana on May the 5th, and we will have a press release on that in due course.

Let me just add, as usual, the IMF consults with a wide range of stakeholders, and in particular the Ghana team has had meetings with the Trade Union during its visits to Accra to exchange views on the country's outlook and challenges.

I will take one more which is on Bosnia. What steps would the IMF require to unfreeze the next tranche of its standby program? Does the IMF have any comment on the Federation's May 6th auction of six month Treasury Bills?

So to that I would say the fifth review under Bosnia's and Herzegovina's standby arrangement was completed in January 2014. For the next review, the sixth review, while the authorities implemented measures that had been agreed to improve revenue collection and budget processes, the decision by the Parliament to delay consideration of legislation, to harmonize excises on different tobacco products precluded the completion of the review, and the disbursement of the next tranche.

Since this has delayed the completion of the sixth review, a staff team will go back to Bosnia and Herzegovina later this month for discussions on what will now be the combined sixth and seventh reviews. Then, just to answer the question, in order for us to be able to take the combined reviews forward, full implementation of the prior actions for the sixth review would be needed, notably again, the harmonization of those excises on different tobacco products, and a comprehensive sharing of tax payer information between the four tax agencies to help improve compliance.

So let me go back to the room.

QUESTIONER: My question is about the timing of the next review for Greece. Given that the recent Eurogroup, they made the concession, from what I understand, that the fund for the Greek banks will be used, maybe used, depending on the results of the stress test for either future financing gap of the Greek program or for bringing down the Greek debt.

I'm wondering, does this mean that the next review of the Greek program will only be completed after the stress tests of the ECB in fall? Is it something automatic, almost?

MR. RICE: On the timing of the review, two things, we expect a technical team to go back to Athens in June or July, but the full negotiating mission is not expected until after the summer. So I don't have a precise date on that.

I also don't have a comment on the use of the funds to potentially strengthen the banking system. I think that's something that would be discussed in the context of that next review.

I see two more questions, so I'll take them.

QUESTIONER: I have two questions. In Greece we have local elections. First we have elections for the Euro Parliament. I wanted to know what is your take on the elections, and do you think that the cost of political instability is a threat to the program?

MR. RICE: You won't be surprised that I won't comment on elections. We don't. The focus of our effort is on the review, implementing the review, and, you know, keeping that on track.

Obviously, as we've said before, in the Greek program and in all our programs a measure of political stability is important. But beyond that I don't have much.

QUESTIONER: I also have a question on Cyprus. If you have any update since Miss Velculescu was in Nicosia?

MR. RICE: Yes, well maybe just a factual update. As you say, the team, along with our partners in the European Commission, and the ECB is in Nicosia this week to discuss what is now the fourth review of the program. As usual, the visit's expected to last about two weeks. As you mentioned, Miss Velculescu is the mission chief and she's there.

I can give you a word more if it's helpful. The focus of the discussions is on the macroeconomic outlook, on fiscal performance, progress on policy implementation, especially dealing with non-performing loans in the banking sector, and reforming the welfare system to help better protect vulnerable groups.

QUESTIONER: I was just writing about South Sudan and I saw that the IMF had a tentative deal on a rapid credit facility in the fall, but I imagine that went off track after the violence again started in December. But I was wondering if that's accurate or if you've had any more talks with them about this? Thank you.

MR. RICE: So let me come back to you on South Sudan, okay? Good. With that I'm going to wrap up. Thanks to you for coming today and we'll see you in a couple of weeks.

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