Transcript

Director of External Relations Department
International Monetary Fund
Washington DC,
March 9, 2006

MR. DAWSON: Good morning, everyone. First of all, I'd like to apologize if I break into coughing. I have a cold. I promise I'll keep my distance from you.

Good morning, ladies and gentlemen. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings. As usual, the briefing is embargoed until 15 minutes after conclusion, and I will set the precise time at that point.

I do have a few announcements to make before we have questions. I'd like to mention some work the Fund is carrying out in connection with avian flu, including a forthcoming publication. In the face of large uncertainties surrounding the possible avian flu pandemic, business continuity plans have become a critical component of operational risk management in the financial sector, including the public financial sector. Fund staff have gathered common elements from advanced pandemic response plans in a paper that we will publish on our web site on Monday, March the 13th. In addition, we are organizing regional seminars in the weeks ahead that will bring together the business continuity managers and supervisors of central banks to share their knowledge and experience in this area. Preparation in members' financial sectors and appropriate economic policy response is also going to be discussed in the course of normal IMF consultations with our member countries. So I do draw your attention to the release next week, and, of course, you are welcome to follow up with Media Relations.

On-line press registration opened last week for the Spring Meetings of the Fund and World Bank. The deadline for registering is April the 12th. If you haven't registered yet, you can find the link on the For Journalists page of the IMF website, along with current information related to the meetings in late April.

Managing Director Rodrigo de Rato will visit Zambia and Equatorial Guinea between March 13th and March 17th. This will be the Managing Director's first visit to Africa since the IMF provided debt relief to 19 countries under the Multilateral Debt Relief Initiative. Zambia is one of the—is among the initial 19 recipients of 100-percent debt relief from the Fund. He is visiting Equatorial Guinea first, starting on March 13th, so that he can attend a regional summit of the CEMAC, the Central Africa Economic and Monetary Community.

In Lusaka, Zambia, between March 15th and 17th, he will take part in a regional Finance Ministerial meeting devoted to the MDRI and the role of the Fund in low-income countries. We will have press events in each country. I believe Mr. Hawley will be accompanying the Managing Director. I think Frances Hardin is already [traveling] there, and there will be some other staff, I think, already in Equatorial Guinea. I think there will be staff in Zambia as well. And I think we will also make available video footage of events, if the technology works, to broadcasters. Media Relations has details if you are interested. We will have a press release regarding the visit published after we conclude the briefing today.

I would also note there will be other Managing Director travel coming up that we are not quite in a position to announce yet, so we will let you know. My next briefing will not be able to be two weeks from today. Whether it is a couple days earlier or a couple days later in the next week, we'll just have to decide at a later point.

I'd now like to turn to questions. I would like again to welcome press watching via the Media Briefing Center. Please feel free to submit questions, and we will do our best to answer your questions during the briefing, although if we cannot, someone from Media Relations will follow up. Andreas, how many people did you tell me have signed up? [Forty-two] today, so I think this is really working quite well, although I encourage those of you on-line to submit questions, and we will, as usual, announce the embargo time lifting at the end of the briefing.

QUESTION: In these days, there is a major discussion in Turkey about claims that the Turkish lira has appreciated a lot, and a number of experts [inaudible] foreign economy—[poor recording, static]—claim that the appreciation of Turkish lira—that the lira is highly overvalued and it is becoming dangerous. And they have proposed a number of measures.

Now, do you agree that the Turkish lira is overvalued? If so, are you concerned about that? And do you still think that the...floating rate is the right thing for Turkey to do to continue with the program?

MR. DAWSON: Well, I don't think it's appropriate, you know, for me to comment on what is, to a degree, a debate within the country. We certainly are well aware of the strength of the currency and of the intervention that has been taking place, and we think, you know, the central bank is following its stated policy and it has been and remains the appropriate policy. So, I mean, I think we certainly observe that.

Frankly, it is to a degree a vote of confidence in what has been going on. It's also a reflection in reality of the nature of the markets at this point. We have a lot of currencies where this happens. So I don't think it calls into question the foreign exchange policy at this point.

QUESTION: I have a question on the Japanese monetary policy. The Bank of Japan [inaudible] easing monetary policy. Would you give me your comment in this regard? And some people are worried the future of the Japanese economy by this monetary policy change, so what do you think?

MR. DAWSON: Well, I mean, I think this was a well-anticipated event in deciding to end the quantitative easing policy on the strength of a positive flow of economic data over recent months, including pick-up in bank lending and the prospect of rising prices.

At the same time, the bank indicated that an expansionary policy remains appropriate for now to help inflation expectations become better established and to support the expansion.

Consequently, we would see interest rates staying close to zero for some time to come, and, you know, in the transition to a post-deflation environment, if we can call it that, clear communication is going to be critical to guide expectations, and in this connection we welcome the Bank of Japan's indications that a longer-term inflation objective will help steer the conduct of monetary policy going forward.

You know, somewhat more broadly, I mean, clearly we do see the near-term outlook for sustained growth, notwithstanding risks such as volatile oil prices, avian flu, and the like. So we see these trends supporting domestic demand, and frankly we see at the moment that growth may well exceed our presently published WEO projections. That's just an enticement for you to take a look at the WEO projections when they come out next month.

QUESTION: [inaudible question on Japan monetary policy]

MR. DAWSON: The change in policy by the Bank of Japan I think has indicated confidence in the success of the policy, of the quantitative easing policy, and an indication that the conditions that required it have ended. So I think this is definitely not only, as I said, a positive sign but one that was well anticipated.

QUESTION: Following speeches in the past month by Tim Adams and recently by Mervyn King, where is the IMF moving forward as far as reforms that are being called on by the G-7 countries, in particular in the area of surveillance of exchange rates?

MR. DAWSON: Well, as I'm sure you know, the Managing Director last fall launched a Medium-Term Strategic Review. That is ongoing. That has, I believe, led to a number of observers, members, academic observers, think tank observers, in commenting on thoughts and prospects for the future orientations strategy of the Fund.

Tim Adams' speech, Governor King's speech, there are a number of others. The G-20 have been discussing the issue, other Gs will continue discussing the issue.

This is welcome. I mean, we hoped when the Managing Director made his initial presentation that this would prompt an international discussion and a dialogue, and I think this is exactly what is going on. In terms of the state of play of our own medium-term strategy, as I've indicated previously, in the fall we published the Managing Director's initial thoughts. Working groups, six or seven working groups within the Fund, have prepared assessments of the various issues, whether surveillance, low-income country strategy, technical assistance, and so on. Those are now being finalized. They will be presented in a context with a message paper, an update from the Managing Director, for discussion at the Spring Meetings next month. And as I have indicated I think previously that I expect we will have publication of this, and I think you can expect it certainly will be a major theme in the Managing Director's speeches going forward, particularly in particular audiences that he is going to that are interested in the subjects, for example, low-income strategy in the forthcoming trip to Africa.

QUESTION: Can you tell us something about relations with Zimbabwe after yesterday's decision?

MR. DAWSON: Sure. I believe you have seen the press release that went out last night. If you haven't, I'm sure we have copies. I think it really does speak for itself.

We had a process—the meeting yesterday was in a sense a six-month review that had been identified that would take place. I think the operative note is that the Board decided not to restore Zimbabwe's voting and related rights and not to terminate its ineligibility to use resources of the Fund.

Just briefly, to those who may not have followed the various amendments in the Articles of Agreement, it took a 70-percent weighted vote of the Executive Board to suspend the voting rights. It similarly takes a 70-percent weighted vote of the Executive Board to restore the voting rights. There was no such 70-percent majority. That is the fact of what happened, and I am sure we will continue to be in contact with the authorities in Zimbabwe as they deal with a very difficult situation, and we think, you know, it needs careful attention and some serious policy [inaudible].

QUESTION: I had a question about the release that was just handed out regarding the Republic of Congo. Have they—how quickly have these reforms been made? It seems that in the past two weeks there have been deep concerns about the corruption in Congo, and KPMG was declining to certify the books of the oil company and now this release is saying that the oil company seems like they're all cleaned up and that everything seems fine for debt forgiveness. How quickly did this transformation...

MR. DAWSON: Well, I think it's important to know what we have—what the Fund Board did yesterday, and that is when we met, was to take our step in what is a joint set of actions of the Fund and the Bank when we go ahead with the decision points under the HIPC debt relief. It is very much a joint process.

I think you are recalling that there was a lot of—some to'ing and fro'ing on the issue of how—of whether Congo had met the necessary conditions for a decision point. There were several discussions in the Board, both at the Fund and at the Bank. Last week, I believe the Bank took its action. Today—or, I'm sorry, yesterday, in today's release, is when we are taking our action.

Clearly the issue of governance and financial transparency is a concern, and that was something that was a subject of discussion. You can see, I believe, the summing up by Mr. Carstens that reflects the discussion, but I think the judgment of the Executive Board at the Fund, as it was at the Bank last week, was that the conditions are sufficient to go forward with this action that continues working with Congo to continue to make further progress, which is, in fact, something that is needed. But it was sufficient for the decision point.

It's a funny release in a sense because what we were doing is following Bank action. This is the way the HIPC works. Sometimes these actions take place two days apart from each other. In this particular case, it was about a week.

QUESTION: Could you [comment on] the relations between the Fund and Iran?

MR. DAWSON: Iran?

QUESTION: Iran.

MR. DAWSON: I mean, Iran is, of course, a member in good standing with the Fund. Let me check in terms of missions and so on.

The last mission for the Article IV was in December. Our assessment on the economy is that the overall situation has been favorable, but that monetary and fiscal tightening is necessary to prepare for a possible eventuality of declining oil prices. But that is the nature of the relationship. It is not a program country. It is not a country in which we have technical assistance, at least that I'm aware of. There may be some technical assistance.

I have a question [via the Media Briefing Center]. "If I'm not mistaken, the current program of the Fund with Bolivia expires at the end of this month."

Yes, he is not mistaken.

I can't—the next part of the question seems to be a bit garbled. Is the IMF—perhaps "in Bolivia?" I'm not sure.

Yes, we have a resident representative, but we do not—but at this point it certainly is our understanding, you know, that the program does lapse at the end of the month, and, frankly, the favorable situation is such that there doesn't seem to be a need for Fund resources, and this is, I believe, what the authorities have indicated that, and so we remain at the disposal of the authorities to discuss any issues that they wish to.

[Pause.]

MR. DAWSON: That's it? All the questions I thought you were going to ask and you didn't ask. But I won't ask them for you.

Thank you very much. We'll lift the embargo at 25 minutes of 11:00.