Transcript of a Press Briefing by Masood Ahmed

May 10, 2007

Director, External Relations Department
International Monetary Fund
Washington, D.C.
Thursday, May 10, 2007
View a Webcast of the press briefing

MR. AHMED: Good morning. I am Masood Ahmed, and this is our regular press briefing embargoed until 11:00, which is 1500 GMT.

Just a bit of travel and housekeeping out of the way first and then I'll take your questions.

First, on travel, just to let you know that next week on Monday, the Managing Director will be in London where, amongst other things, he will meet with the members of the Treasury and Development Committee of the U.K. Parliament House of Commons. This event has been announced by the committee and is open to the press.

On Tuesday, on the 15th, he will be in Dubai where he will be speaking at the Fourth Islamic Financial Services Board Conference, and again that will be open to the press.

At the end of that week, on the 18th and 19th, he is going to be at the G-8 Finance Ministers' meeting in Potsdam. Again, there will be press availability, and we will be in touch to let you know exactly the arrangements for press availability then.

Also, next week, the First Deputy Managing Director will be in Paris on the 15th and 16th at the OECD Ministerial Council meeting, and the following week on the 22nd and 23rd, he is going to be in Tokyo for meetings with the authorities, but there will be press availability at the conclusion of his visit in our Tokyo office. If you are interested, we can give you more details on that. My colleagues in Media Relations can give you more details on that.

Still on travel, Mr. Portugal, the Deputy Managing Director, will be in Albania on the 21st for meetings with the authorities, and during that visit, he will also be interviewed by local TV broadcasters. If there is interest in meeting with him or interviewing him, do let us know.

Similarly, or just to follow up on that, on the 23rd and 24th, he is going to be in Estonia where he will be attending a conference hosted by the Bank of Estonia to mark the 15th anniversary of the introduction of the Estonian kroon.

A couple of other items, tomorrow, May 11th, we are going to post the revised IMF Fiscal Transparency Code and supporting documents under embargo until May 14th. There will be a conference call that we are organizing for the 15th for senior officials from our Fiscal Affairs Department to brief press and the CSOs who are interested. Again, details on that, if you would like to pursue those, will be with our colleagues in Media Relations.

Finally, I should let you know that in Dubai on the 13th, we are going to be launching the Regional Economic Outlook for the Middle East. Mohsin Khan, the Director of that department, will be there, launching that. There will be a series of press events around that, which again if you or your colleagues are interested in pursuing, please get in touch with us.

The Regional Economic Outlook itself will be posted on the Media Briefing Center under embargo on May 12th.

That is my list of announcements. We will open it up to questions now. As usual, please identify yourself.

QUESTIONER: I don't have questions on Russia. I have questions on Venezuela and North Korea. I don't even know if I need to ask the questions, but basically what can you tell us about Venezuela's intention, declared intention to leave the IMF?

MR. AHMED: Did you have two questions or one?

QUESTIONER: Venezuela first.

MR. AHMED: There is nothing that I can add on what you said already on Venezuela.

And your second question was?

QUESTIONER: When you say there is nothing, you mean there has been no formal communication with the government in Venezuela about any follow-up to the famous announcement or infamous announcement by the President?

MR. AHMED: I mean I have nothing to add to what has already been said.

QUESTIONER: Okay. Then on North Korea, similarly, there was a report a few days ago that the South Koreans were willing to help the North Koreans to join the IMF. Have you had any communication with either government and what are their plans that you can share with us?

MR. AHMED: On North Korea, we saw the same reports. We have not had any official communication about North Korea's intention or interest in joining the IMF. The IMF, of course, is a universal institution, and any country that wishes to join it can do so. There is a well established process whereby the Executive Board considers the application for membership and then forwards a recommendation to the Board of Governors. But, as of now, we haven't heard anything specific official on that.

QUESTIONER: Are there any benchmarks to be met before entering? Like when the Board considers such a request, do they look at the financial situation of the country and say you need to do this first or whatever?

MR. AHMED: I am not able to give you today the exact specific benchmarks if there are any. I don't believe there are particular benchmarks of the kind that you are thinking of, but we will be able to find that out, and I will come back to you on more specifics on that.

QUESTIONER: I am going to ask a question about Italy to start, and it is about pension reform. At this time in Italy there is a bit of turmoil on this piece of legislation with the union and it also looks like inside the government. Anyway, the government and the Minister of Economy have repeated they want to move forward with the reform. I believe the IMF has stressed in the past the importance of this reform. I would like to know if you still believe it is an important reform to stimulate growth and if you could articulate in case why. Thanks.

MR. AHMED: Well, as you said, the Board met and considered the Italian Article IV consultations in February. Following that, if you go back and look at that document, there are indeed a number of areas where the Executive Directors felt that further reform was going to be important to sustain the momentum of reform with the twin objectives of ensuring that the public finances continue to remain sustainable and also with supporting, dealing with the issue of weak productivity and raising the potential growth rate.

Amongst the list of areas that were addressed at that time was indeed the question of pension reform, and our view then, and our view remains the same, is that pension reform is indeed critical for Italy. This is a view which is shared by the authorities, but it is also a view that has been shared by other agencies. The European Union, the OECD have also identified this as an important area.

The main reason why this is one of the areas of reform that were identified is the role it would play in ensuring the sustainability of Italy's public finances. As you know, Italy has the highest pension expenditure as a share of GDP in the European Union. Combined with further projected aging of the population and the already high public debt, this spending is obviously one of the areas of concern for long term debt sustainability.

I should say, though, that there have been three important reforms that have been passed over the last 15 years which, if implemented fully, will have an important, decisive effect in limiting this expenditure. So if you would like more details on that, then I would refer you to the Article IV consultation that was done earlier in the year from which I am drawing for this.

QUESTIONER: I would like to come back on Venezuela. One week ago, Mr. de Rato said he didn't receive any formal request. Today, did you receive, yes or no, a formal request from Venezuela?

MR. AHMED: As I have said, what Mr. de Rato said then is the current state of play, and I really have nothing more to add on Venezuela.

QUESTIONER: Has Mr. de Rato spoken to the Venezuelans at all about the issue?

MR. AHMED: Not that I am aware of, Lesley, on that. I will just say there really isn't a lot more I can say on Venezuela.

QUESTIONER: A follow-up, has a country ever before pulled out of the Fund?

What would the implications be of such a move? Would that have to mean a certain massive adjustment or a small adjustment in any way for resources or quotas or anything like that? I don't think anybody has got any reference yet on such an impact.

MR. AHMED: As I say, I think I ought not to go down that road in the context of the conversation we have just been having. As to the general point of whether countries have in the past left the Fund, yes, there have been instances of countries that have in the past, early on, going back many, many years now, have left the Fund. The consequences of that vary depending on the relationship the country had at that time with the Fund in a bilateral sense.

So I think there is no general rule in terms of the consequences. Obviously, it depends on where the country is. But as I say, I don't want to relate that at all to the conversation we have been having.

QUESTIONER: Following up on that, who has left the Fund and do you know when the last time that happened was?

MR. AHMED: These are all examples going back to the fifties. But if we can come back, I can give you a sort of list of those at some point, but I don't have that list with me of the countries.

QUESTIONER: Also, just coming to North Korea, does North Korea have to be a member to get technical assistance at an early stage from the Fund?

I am talking about a Fund team just going in and assessing just generally the state of an economy.

MR. AHMED: We do provide technical assistance to countries that aren't members. For example, we do provide technical assistance in the case of the West Bank-Gaza. But I think the precise arrangements as to when and how we would be able to provide that technical assistance need to be worked on. I need to go back and get specifics of those in terms of what legal rules are that would define that. If you are interested in pursuing that, again, that is an area where I can come back on.

[Additional written response following the press briefing: Fund technical assistance is a service for members, and is normally provided only to Fund members. However, there are exceptions to this rule. First, TA may be provided to a non-member where, for instance, it is needed to help a country with reforms that would eventually lead to it joining the Fund. Second, TA is sometimes provided to regional groupings or institutions which have non-Fund members; the benefit that flows to the non-member in these cases would be considered ancillary.]

QUESTIONER: I gather it hasn't happened in the case of North Korea then.

MR. AHMED: Not that I am aware of.

In the meantime, I have got one question here on a completely different topic. "How does the IMF view the idea that the IMF Managing Director and World Bank President shouldn't be appointed by Europe and the U.S. anymore?"

Let me, first of all, just speak for the IMF, and in that let me make the following points. First, this is obviously an issue for the membership of the IMF as to the process that they follow, and I think it is important to stress.

Second, I think it is important to, in that context, refer you to the report that was sent by the Executive Board to the Board of Governors in September 2006 on the program of governance, quota, voice and governance reforms in the IMF. In that report, there is in fact a section where the Executive Directors say that they will consider, as part of this two-year program of governance reforms, whether further steps beyond those that were discussed by the Board of the Fund, and also the Bank in 2001, and the steps that were followed for the selection of the Managing Director in 2004, whether further steps are needed to ensure a fully transparent process for the selection of the Managing Director.

So that is the sort of last statement by the Executive Board on this issue, and that is really all I can give you in terms of the state on that.

QUESTIONER: A technical point if I may, please make sure that the taken questions, there have been a number of questions you have taken in this briefing, that they are posted. I wouldn't want to miss out on anything that my colleagues are smart enough to ask you and I am not. I want to know your answers.

MR. AHMED: I assure you of that, and you can be assured that whatever questions we come back on, we post, so that everybody who is either present here or who is actually watching on the Media Briefing Center can have the benefit of the same answers.

QUESTIONER: Do you have any comment on the Fed's decision yesterday not to raise rates and how that falls in the context of what is going on in the global economy?

MR. AHMED: I have no comment on the Fed's decision of yesterday.

QUESTIONER: Can I follow up? Yesterday, there was the Fed. Today, there was the Bank of England. Do you think under these conditions it would still be appropriate for the ECB in case to raise the rates in June?

MR. AHMED: You know I don't get into short term interest rate advice to central banks, and it is not an area in which I am going to get into today, to offer any advice to ECB on what they should do.

QUESTIONER: Okay, I have another question.

MR. AHMED: Please.

QUESTIONER: Do you have any comment about the next resolution -- it looks very close at this point -- of the issue of the World Bank with the President of the World Bank, the investigation and what is going on in your twin institution?

MR. AHMED: I am not going to comment on what is going on in other institutions. Certainly, I don't have a view on what is going on in the World Bank in the sense that as the Managing Director has said before, the President of the World Bank, the Board of the World Bank, made a number of statements. There is a process underway in the World Bank, and we have every confidence that the World Bank will find a satisfactory resolution to that issue.

That is what we have said before. That is what I am going to say again, and I am not going to go anywhere else.

QUESTIONER: Even though you said you are not going to go anywhere else, I will give it a try anyway. How often do the Managing Director and Mr. Wolfowitz talk? Do they speak all the time, once a month, once a week, once a day?

Is it kind of a constant dialogue, and has the Managing Director offered support at all for Mr. Wolfowitz?

MR. AHMED: The Managing Director and the President of the World Bank speak regularly and as often as they need to in the context of their work. I don't monitor exactly the conversation or the phone logs, but they have a regular and ongoing conversation which continues, and that is still the case and very much so.

If there are no further questions, two weeks from now, same place. Thank you very much.


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