Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, International Monetary Fund, Washington, D.C.

July 10, 2014

Thursday, July 10, 2014
Webcast of the press briefing Webcast

MR. RICE: Well, hello and good morning everyone. Welcome to this briefing on behalf of the International Monetary Fund. I'm Jerry Rice, Director of the Communication Department. As usual our briefing this morning will be embargoed until 10:30 a.m., that's Washington time.

Let me begin with a few pieces of information about upcoming IMF events and visits to our membership and then I'll turn to colleagues in the room to take their questions and colleagues on line as well. So just a few things for your information, on July the 18th our Managing Director Christine Lagarde will attend an annual public event that's organized by the Robert Schuman Foundation. That will be in Paris where she will discuss with the German Finance Minister Wolfgang Schauble the issues facing the Euro Area and there will be a Q & A, you know, questions from the audience at that event. It is open to the press, July the 18th in Paris. Our Deputy Managing Director Min Zhu will be in Peru to meet with the authorities and attend a high-level conference organized jointly by the Central Bank of Peru and the Bretton Woods Committee. And that's on the 70th -- the discussion is focused on location of the 70th anniversary of the establishment of the Bretton Woods system. He will also have a town hall meeting with students at Universidad Catolica del Peru and visit our annual meetings site and facilities. As you know Peru will host the annual meetings of the Fund and the Bank in October 2015. Min Zhu will be in Peru July 20 to 24. Just a few other things. This morning as you may have seen there was the launch of an energy subsidies study in the Middle East at the Atlantic Council. That already happened this morning. That's a paper from our Middle Eastern and Central Asia Department. Next Monday at the Peterson Institute, Peterson will host the presentation and launch of an IMF book entitled, Post-crisis Fiscal Policy. And there will be a panel discussion including our relatively new Director of the Fiscal Affairs Department Vitor Gaspar. That's at Peterson at 12:15; that's next Monday. And then let me remind you, I know it's something in which you all have a keen interest, on July 24 our Economic Counselor Olivier Blanchard and his team will launch the World Economic Outlook Update, the WEO Update in Mexico City. More information is forthcoming on that, will be sent to you soon. July 24 I'm sad to say will also be our last press briefing before our Executive Board recess in August. We will be back; we shall return.

Questioner: In September?

MR. RICE: We'll get the day -- either later part of August, September, we'll be back. Okay. Thank you very much. Good morning.

QUESTIONER: I was wondering if we could chat about Ukraine today.

MR. RICE: For a change.

QUESTIONER: The government -- yes. Well, it's, you know, Greece is not the first question. But the government has asked for more money from donors. They say the $17 billion is not enough and the conflict in the East still continues; they still have gas disputes with Russia. So I was wondering if you could help us understand a bit more about the economic situation in the East, what's going on, how the country's program has been affected by the continued fighting, and whether the IMF thinks more money would help the situation or maybe loosening some conditions for the program. Thank you.

MR. RICE: Thanks.Look, I won't have a lot of new information on Ukraine for you this morning because as you know the mission is in the field. They are about to conclude in the coming days. In fact there was a statement this morning about that if, you know, you may have seen it. And they will be updating more fully on the issues that you mentioned, so I won't say too much on that this morning but you will be receiving more information soon.

On the question you asked however about the financing I mean a couple of things, just to be clear the IMF program is fully funded. And the authorities have not requested to increase the funding under the program. You know as in the past and from the very beginning we have said and we encourage all international partners to deliver on their commitments in terms of financing. I mean one other thing that you may have noted, the other day, I think it was Tuesday there was this high-level coordination meeting in Brussels on Ukraine attended by many countries and many international organizations, the IMF was represented as well. And amongst other things they issued a statement, I'm sure you saw it, but amongst other things they discussed the possibilities of a donors and investors conference to further support the efforts of the international community to help Ukraine. I think they mentioned that that could be in the fall.

QUESTIONER:Could you maybe explain why the IMF mission extended its stay? I think it's at least the second time that they extended their mission in Ukraine.

MR. RICE: Well, you know what, just a couple of things. Our mission dates as the regulars here know we refer to them as tentative. They're always a bit tentative because missions by their nature are flexible. They're usually about two weeks but they're flexible and it is not uncommon at all for a mission to be extended by a day or two or even longer than that. In this case the statement we issued this morning said that we expect to conclude on Saturday. So, you know, we're not talking about some major extension here. Anyway just to say it's not an unusual thing, and, you know, I don't have what the specific issues might be but as I said earlier there will be further clarification coming on Saturday when the mission concludes.

QUESTIONER: And to follow up on that also, do you expect the Board to have a say in what will be happening next because we were discussing before the briefing here that it's sort of unusual. The IMF is not supposed to lend even into arrears to say nothing of a war. There is a war going on so will this be taken up by the Board, maybe by the leadership of the Fund? Again, revisited.

MR. RICE: Well, the issue of the approval of this review, of course as always will be taken up by the Board. That's the way -- I think you know -- that's the way the process always works. Let the staff go into the field, they have the discussion with the authorities. They come back, they make a report, that report then is subject to discussion and decision by the Executive Board. And then the last part of that process is we publish and openly communicate the full findings.

QUESTIONER: I guess to make it a more specific question, have there ever been instances where such reviews let to like a suspension of a program because of events on the ground, because of geopolitical events as you describe them?

MR. RICE: You know, I'd have to look at history but, maybe we can do a bit of that for you to get back to you on that. But it's not unusual, again, for the IMF to be working in extremely difficult situations including situations where, you know, there's sometimes internal conflict.

QUESTIONER: I'm sorry, just a quick follow up on that, in the ex post evaluation of the 2010 Ukraine program the IMF mentioned one of the problems was that they couldn't cancel the program when they wanted to and Ukraine kind of strung them along for a few months and said oh, everything is going fine even though -- and there was no kind of mechanism for the IMF to cancel the program even though -- because the government still wanted to continue. Has that mechanism been in place since then? Do you know what I'm talking --

MR. RICE: You know, I'm a little bit not sure what this mechanism is you may be referring to. And I may best to just to be precise about that and to follow up. I'm not aware of any discussion around that right now.

QUESTIONER: I have my question on Ukraine.

MR. RICE: On Ukraine?

QUESTIONER: On Ukraine, I follow up. The issue here is that Ukraine is asking for money from the IMF, the IMF is giving the money to them and they spent the money to start a war. This is the question.

MR. RICE: Yeah, well, I mean I don't agree with the statement, you know. We've discussed this here before. The IMF resources are used for budgetary support or support of the public finances and, you know, these things are monitored on a regular basis. So just to be clear on the purposes of IMF financing.

QUESTIONER: I have another question on Greece also, some questions if it's possible.

MR. RICE: Yes, sir.

QUESTIONER: The first one is what established of the mission? Is Mr. Thomsen going there, and if you can tell us if the Greek program is still on tack?

MR. RICE: Some information. The IMF staff team along with our partners from the EC and the ECB arrives in Athens this week for a technical visit. Again this is expected to last about two weeks. This is not the negotiating mission. We talked about that before here. The negotiating mission for the six reviews is expected sometime in the fall. So that's the status of the mission. Yes, Paul Thomsen is expected to join this mission shortly. And in terms of the status of the program there was I think a useful statement yesterday from one of our staff advisers in the European Department who gave a statement speech at a conference in Athens yesterday, and we've published that so it might be useful to take a look as I am right now. This was Rishi Goyal who's part of our team working the Greek program and amongst other things he said that the work that's been done by the Greek authorities, the Greek people, he said these developments suggest grounds for cautious optimism. We expect annual growth to turn positive in 2014. That would be the first time since 2007 and he said also for the first time since the crisis there were even signs of upside risk in the near term to the growth forecast. So cautious optimism I think was the phrase he used in terms of kind of where we are with the program.

QUESTIONER: And he also said, and I quote that, "Greece should accelerate reforms in the labor market and the institution framework for strikes." This issue is a very delicate issue for the coalition government and one of the coalition members, PASOK, they don't accept this. I wanted to know if the IMF will assist on these changes since there is, you know, it's a (inaudible) there that the government is going to collapse.

MR. RICE: You know, I'm looking at the statement, which you refer to and indeed he talked about a major policy priority continuing to be structural reforms in product and labor markets where more progress needs to be made. This isn't new. It's been a part of the program from the very beginning and I think it continues to be as we said yesterday very important. And again I'm quoting from what he said that timely implementation continues to be key.

QUESTIONER:I have a question about the Asian Infrastructure Investment Bank that China initiated. The World Bank has already welcomed it and saying that there is a huge demand in the developing country. I wonder, what is the IMF -- the IMF's position is?

MR. RICE: You know, first of all, the IMF has a strong and excellent relationship with China, which is a key member of this Institution. China already had an important voice and role in the IMF, and that’s set to be enhanced even further upon completion of the pending quota and government's reform of the Fund, which we continue to work hard for, and hope to be completed in the near future. So that’s kind of the context.

On your question, our view is that all initiatives that seek to strengthen the network of multilateral lending institutions, and increase the available financing for development and infrastructure are welcome. And what is important is that, of course, any new institutions complement the existing ones so that we can be confident that the overall impact on beneficiary countries will be positive.

QUESTIONER: We heard there are some thoughts as well saying that there is -- already have the Asian Development Bank in the region, and don't know how the AIIB can complement the existing institutions. So do you think how the AIIB can complement and add value to the existing institutions, say, the IMF?

MR. RICE: Well I think we have to wait, you know, for the details to make a proper assessment. But, again, as I said, I think you are touching on the key issue. The key is that these institutions complement each other and add value to the beneficiaries. So, you know, we'll be looking at this in the future, and as I said, at the moment our view is to welcome any initiatives that would work toward that direction.

QUESTIONER: My question is also about China. During the strategic and economic dialogue in Beijing this week, the U.S. raised the issue of lack of transparency in Chinese foreign exchange interventions. The U.S. would want China to be clear about when and why China intervenes in foreign exchange markets. Is this something that the IMF is looking at and working with China on?

MR. RICE: Well, you know, we just recently issued, a couple of weeks ago, a very comprehensive analysis the -- Article IV review of the Chinese economy which, you know, touched upon issues in a comprehensive way, so I'm going to refer you to that to look at that issue.

Let me go online, and then I'll come back for a few questions in the room. There are a few questions from InnerCity Press, so let me just -- let me just take some of them, I won't take them all, but they may be of interest to -- more broadly.

One is on Romania. "What is the IMF's comment on President Băsescu's now rejecting the planned Social Security tax cut, pending measures that would cover a likely revenue shortfall?"

Maybe just stepping back and setting that question in context. The joint IMF/EC Mission had constructive discussions with the Romanian authorities, so far on how to ensure further progress on the third review of the current program. Some key issues remain outstanding so those discussions continue.

On the specific question, I would say that while the Fund shares the objective of lowering the high tax burden on labor in an effort to stimulate employment, we need to understand how the government intends to compensate the revenue shortfall. Without offsetting measures, a reduction of the Social Security contribution rate by 5 percentage points, would increase the fiscal gap.

A question on Mali. "Can you provide an update on the IMF's review of the two contracts that were awarded without competitive bidding, including the purchase of a new plane for the President?"

Again, just setting the context; the first review under the current extended credit facility, which had been initially scheduled for June, is being postponed following the recent discovery of a series of problematic transactions which reveal weaknesses in public financial management.

Now, a delegation led by the Minister of Economy and Finance, visited Washington for a few days of talks in June, and reached an agreement with the IMF on remedial measures which include an audit of the transactions by the Independent Government Auditor, and a tightening of the Procurement Code. And at the end of that visit the Minister and the Mission Chief issued a joint declaration which we published.

So what's the status? The status is that as per that joint statement, the reviews, again, under the ECF arrangement, have been postponed until September, and related disbursements would only happen toward the end of the year, at the earliest.

So, again, the conclusion of the reviews will depend on the implementation of the remedial measures and, again, in line with this, any related support in the form of a disbursement would only happen following approval by the reviews by our Executive Board.

One other question that I will take, which is on Pakistan. "The Bureau of Statistics has abandoned the policy of releasing national accounts on a quarterly basis, described as a 'violation of the IMF's guidelines on good statistical practice' is that the case? What is your comment?"

My comment is that the IMF has been providing technical assistance to Pakistan on improving national account statistics with significant progress observed over the course of the last year. The upcoming mission, which is scheduled for early August, will follow up on latest developments with data dissemination.

QUESTIONER: Gerry, going back to Greece. The Prime Minister and the new Finance Minister, Mr. Hardouvelis, talk often lately about the need to reduce taxation in these austerity measures. I wanted to know the position of the IMF, and if you think that this thing is visible?

MR. RICE: You know, I think, again referring to the statement we made just yesterday, it was noted that Greece has made enormous progress in restoring fiscal sustainability. We expect the 2014 fiscal target to be met, and we do not see the need for additional measures for 2014. Then for 2015 to '16 we need to assess progress in implementing the program in the context of the next review.

So that’s the fiscal question. Your second question was on --

QUESTIONER: That’s the -- this is the other question. I wanted to know if you think it's feasible to reduce the taxes.

MR. RICE: Well, tax reform, again, has been a big part of this program from the beginning. The IMF has consistently urged that the pace of tax reform be accelerated. It's key to the success of the program, and key to ensuring fairness and sustainability. You know, that everyone should pay their fair share.

QUESTIONER: Can I ask about Portugal? The country's largest bank, Espírito Santo, is asking creditors for extension of maturities. So I was wondering if you have any comments on this, the restructuring, what impact it could have on Portugal's financial sector, and on the country's progress now that it's pretty much done with its IMF Program. Thank you.

MR. RICE: You know, I've seen those reports this morning, and so obviously it's something we are watching, but I don't have anything for you on that right now.

QUESTIONER: Another issue is that Greece issued today a three-year bond, and borrowed EUR1.5 billion at the rate of 3.5, as I have it here. Any comment on this and are you satisfied with the borrowing costs?

MR. RICE: You know, what I would say on that is that, again, one of the fundamental objectives of this program in Greece, since the beginning, has been to restore market access, so we've welcomed previous bond issuances and, you know, we welcome the fact that Greece continues to be able to access the market.

Again, as we said before, there's a long way to go before Greece would be able to rely entirely on the market. I don't have a specific comment on the number, on the cost, but I think these are important steps, and in the right direction.

Maybe I'll go online again. AFP is asking, "France has voiced its concern over the reach of the U.S. standards, and has called for a push to give a greater place to the euro. Where does the IMF stand on that? Do you think that such a rebalancing would be appropriate to mitigate the dollar's supremacy?"

You know, on that, what I would say is, you know, the structure and the composition of the global economy is constantly evolving and, relatedly, the international monetary system and the international use of currencies may evolve as well. While policies can facilitate this process, the speed and shape of such a possible transition will be largely market-driven.

And just to add, that as you know, every year we publish what we call a Spillover Report, the effects of one country's policies on another. We also have, over the last year or so, the External Sector Report, the Pilot External Sector Report, and we will have both of those reports this year as well, probably coming toward the end of this month, and questions in this area, I think, will be usefully contextualized with those two reports and further information.

There is one other question I'll take online, and then I will come back in the room, briefly. And it's from Market News."What actions, guidance, advice is the IMF providing to Argentina regarding the situation of the holdout creditors? What kind of harm could this situation cause to other debtor nations?"

You know, we issued a statement a short time ago on this issue; that we are considering very carefully the decision that was made by the U.S. Supreme Court. And as we have said before, we are concerned about possible broader systemic implications. I probably don't have much more to add in terms of the specifics on that. Questions in the room?

QUESTIONER: I have another one. This one is from Cyprus. If you could tell us when the mission is going back to Nicosia and what are they going to discuss there with Cypriot authorities.

MR. RICE: Yes. The IMF team along with, again are partners in the EC, and the ECB will visit Nicosia on July 15 to discuss with the Cypriot authorities the fifth review of the Economic Program.

What will they talk about? I'm sure you can imagine discussions will focus on the macro outlook, the financial sector, and fiscal structural reforms. The team will be led by Gilia Bell Velasco, and the visit is expected to take about two weeks.

Okay. With that, let me thank you all for coming today. Thanks to those online. And we look forward to seeing you two weeks. Thanks, all.


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