Transcript

Washington, D.C.
Thursday, July 23, 2015

MR. RICE: Hello; and good morning everyone. Welcome to this briefing on behalf of the International Monetary Fund, I'm Gerry Rice, the Director of the Communications Department here at the Fund. As usual, this morning I will be on the record, and we are under embargo until 10:30 a.m., that is Washington, D.C. Time. Let me make a few announcements, and then I'll turn to your questions in the room and online as well.

Beginning with next Wednesday the 29^th of July, the Managing Director of the IMF, Christine Lagarde, will hold a press conference that’s going to be a virtual press conference, via the press centers, our Online Media Briefing Center to which I think you all have access, and are registered with. This will be an opportunity for all of you to follow us via the OMBC to exchange directly with the Managing Director and pose some questions. We will send you media advisory about this, shortly, with all the details and how to submit questions and all the rest of it. That’s Wednesday, did I say 9:15 a.m. D.C. Time?

So that will be the Managing Director's last major press interaction before we have our Board Recess here in August at the Fund. Okay.

There are a number of Article IV reports coming out, there was one this morning on Japan, which you are probably aware, others include China, it's coming early next week, and there will be the Article IV Staff Report on the Euro Area as well. Again, Media Relations will send around a note to you giving you the precise dates and timing of those Article IVs.

On Tuesday on the 28^th of July, so that’s the day before the Managing Director's Online Press Briefing, we will be releasing our External Sector Report which has become an annual event for us. And David Lipton, our First Deputy Managing Director, will do a conference call with you, with the Press on that. That’s going to be on Tuesday. Again, we'll come back with the times, so that you have everything you need.

On Management travel, I don’t have much. Our Deputy Managing Director, Mitsuhiro Furusawa, is currently in El Salvador for a conference on Central America, Panama and the Dominican Republic, organized with the Salvadorian authorities, and he'll also be meeting with the authorities. We'll get you some more information on that as it concludes. Thank you, for that. And let me turn to the room.

QUESTIONER: Can you tell us when the Mission is going back? Why you bring on board Mrs. Delia Velculescu, that we know very well from Cyprus? And if it is correct that the Greek Government asked for the replacement of Mr. Goyal?

MR. RICE: Just on the last question; no, that’s not true, so just to take that. And as you said, Delia Velculescu is well-known, certainly to you, and Greek colleagues, I think she's pretty well known to everyone. This was very much a -- you know, a standard rotation, professional rotation that we do all the time, here at the Fund in terms of Rishi, Mr. Goyal, moving on to something else.

And of course Delia is very well placed to succeed Rishi, because she has worked closely not just on Greece, but on Cyprus and other countries. So, it's a regular rotation. So I just want to give you a very direct answer on that.

On the timing of the Mission and so on, let me say a few things because I know would be probably a lot of interest in that. The timing of the Mission is still to be decided, the modalities and the process for the discussions, still to be decided. We have, as I think you know, we have not been on the ground in Greece for some time, to do our customary due diligence.

We will undertake updates once we've been able to complete that essential technical work. So, again, I know a lot of you have questions. I don’t have a specific date yet for the mission, nor for the timing for the timing of the IMF decisions on when and how we would, you know, move ahead beyond that due diligence and technical work that needs to be done.

That said, I mean, I think you all know that the Fund's position on Greece has been pretty clear. I think we've been reporting on it, that to move forward we need sufficient progress to assess policy reforms, that’s commitment and implementation, and financing with a high probability that debt will be sustainable over the medium term. So, again, this is not new to you.

This is the balanced approach that we've been supporting or the Managing Director refers to it as the two legs of the approach that the IMF, I think, has been consistently reporting for reforms on the one side, from the Greek authorities on the financing and the debt relief on the other side.

So, clearly it's a difficult path ahead. We are just at the beginning of the process, the goal is clear. The goal remains; I think it's a shared goal by all parties of stabilization for Greece recovery, growth, jobs and a sustainable economy for Greece and the people of Greece. It's been a fast-moving situation; you’ve all been on top of that. It remains fluid, and I know you have to do your job; you are trying to do your job, will try and help me with that. So, we'll try and get you the information as we have it, and update you as much as we can.

QUESTIONER: Is it true that you will not participate in the first review, and what does it depend on? Do you -- because the Greek authorities, the Greek Government has already passed through Parliament some of the prior actions needed, and I understand it, also demanded by the IMF too. And so, will it depend on the financing being in place on the debt sustainability?

MR. RICE: As I said, that modalities and the process for, number one, the discussions that have yet to take place, has yet to be decided and that applies -- would apply, obviously to, as I mentioned, the IMF future involvement, future participation. I think it really all depends on those discussions. You are clearly referring to the European program when you talk about the first review, when you are talking about the ESM, right? So, again, I think the process and the modalities for the IMF involvement is something that we'll come back to.

QUESTIONER: Just on a similar theme, is it fair to expect that the IMF will, in the months to come, be negotiating a new program of its own with Greece given that the European communiqué that was published last week, calls for a three-year rescue program from the ESM? And also for IMF involvement, and given the fact that the IMF's current program runs out in March next year?

MR. RICE: Yes. Well, what I'd say, is as we've said before, we stand ready to support Greece and our partners. We retain that goal we've had for quite some time. I don’t have, again, the modalities and the details of the process by which we would be involved. But did you have something more specific?

QUESTIONER: Well, just very specifically, that the Europeans are saying they want a three-year program; they want the IMF to be involved. Is the IMF -- does the IMF expect to have to negotiate a new program with Greece?

MR. RICE: Yeah, so, don’t have the modalities and process there would -- for a new program there would need to be a request from the Greek authorities as is standard and we have not received a request for a new program as yet.

QUESTIONER: I have two questions. The first one is to set the record straight. Actually, I was wondering has the IMF been supportive in any way of the temporary (inaudible) that was discussed during the (inaudible). And my second question actually is can you tell us when the board will meet on the Greek request to extend the repayments. Last time Mr. Blanchard said that actually the main hurdle was the arrears that Greece had with the IMF. Since the arrears have been cleared does it mean that maybe you could do something and grant the request of the Greeks’ to extend repayments?

MR. RICE: Just on the second one, Jeremy, my understanding is that given that Greece has repaid the IMF and is current, is no longer in arrears, that the discussion of extension of repayment is probably moot.

QUESTIONER: It’s probably what? Sorry?

MR. RICE: It’s probably not necessary because Greece is current with the IMF. The request for extension of repayments, there were two, and they were on both of the repayments that had not been made over the course of the past month. Both of those repayments have now been made. So Greece is current, is not in arrears, and so I think it’s a moot point. I don’t think it would be necessary.

On your other point, as we’ve said before repeatedly, our baseline assumption has always been that Greece would remain a member of the euro area. That’s been the expressed wish of the Greek authorities and that came through clearly in the communique of not the past weekend, but the weekend before from the European partners so that’s been our consistent position on that topic.

QUESTIONER: So you didn’t support the temporary exit proposal?

MR. RICE: No, we did not.

QUESTIONER: I’m puzzled really. The Greek government expects the mission (inaudible) on Friday or Saturday. So what you are telling us is that she’s not going.

MR. RICE: I’m not telling you that.

QUESTIONER: But –

MR. RICE: No, I’m not. What I’m saying is I don’t know.

QUESTIONER: You don’t know, okay. The other question, do you have a technical team in Athens?

MR. RICE: What we have in Athens, Michael, as I think you know, is resrep (resident representative office) with a small staff there. So we have a presence in Athens, we’ve always had a presence in Athens in that respect. But in terms of the work that’s to be done now, the technical work would be done by the team that would go out. When they go out for which I don’t have a date for you right now, Andrew.

QUESTIONER: Still on Greece. So the ESM program, I believe is about 86 billion euros over three years. There has been talk that a portion of that is IMF money. Can you clarify, and if so how much of it is assumed to be IMF money?

MR. RICE: You’re going to what I don’t have for you Andrew which is the whole -- we’re just at the very beginning now of this process. We’re going to send out a team at some point to do the technical work, and that has to be done and then there is going to be a whole discussion of modalities, process, potential IMF involvement, what that would be, how that would be, and when that would be. I do not have that today.

QUESTIONER: That being said, the European Summit document makes it clear that an ESM request is conditional on IMF participation. How do you reconcile that with the fact that in pretty stark terms you’ve laid out that the proposals as currently constituted are just not sustainable from a debt perspective?

MR. RICE: Again, what we’ve said is that our participation would be contingent on this balanced approach and that would require on the one hand, reforms, commitment, implementation, and on the other hand, financing and we have said pretty clearly, as you say, we feel the debt relief is required. So, again, the modalities and the process of potential IMF involvement would depend on those things.

QUESTIONER: If we can just stick on the question of debt relief, are you -- is the Fund happy with the way the direction of the conversation is going on debt relief given Frau Merkel’s comments on Sunday that she was open to a re-profiling, an extension of maturities, the discussion seems to have firmed up about having a serious conversation on debt relief after the first review. Just tell us how the Fund reads that conversation. Is it going in your direction? Are you winning the argument?

MR. RICE: I wouldn’t characterize it that way. What I would say is that we’ve been very clear now for the past -- certainly well over a month in the current context on what we think is required for an effective support program for Greece, so I won’t repeat that again. But debt relief has been a big part of that. The debt relief component -- if you look at the Euro Summit communique there are a few paragraphs there that deal with that issue, so clearly it was on the table for consideration coming at the Summit and coming out of the Summit. So, again, I wouldn’t characterize where we think it’s heading, but just to say, again, our position is very clear that we think that it is something that’s going to be necessary for an effective program.

QUESTIONER: Sorry, can you just clarify something? Do you expect a formal commitment from the Europeans on debt to move ahead in discussions? Do you expect something concrete coming from them?

MR. RICE: Again, I think we’ve been clear that on the debt relief there would need to be a specific concrete commitment. And we’ve pretty clearly in the DSA and so on laid out what we think the options on such a commitment might be. We haven’t recommended anything specific but laid out several options and that would of course be for the European partners to decide.

QUESTIONER: Could you specify on what level would that discussion be taken? Would you need a board meeting again in order to discuss it or is it a decision for the management to take, whether to proceed with the evaluation and then take it to the board?

MR. RICE: Ultimately, if there is going to be a new or additional financing commitment from the IMF as in any program, that would be something to be decided by the board.

QUESTIONER: The Fund a year ago said that the German exchange rate on an adjusted basis was probably 5-15 percent undervalued with the euro. What is the latest Fund view on imbalances within the euro zone and particularly on the German surplus?

MR. RICE: I’m going to ask you to be patient on that one because it’s precisely those kinds of issues that we’re going to be dealing with next Tuesday in the context of this external sector report, and those issues will be updated there and I’m going to point to that in terms of where you might get a more accurate up to date assessment just in a few days’ time.

QUESTIONER: What can you tell us about the SDR analysis and the release of the report and particularly how that relates to the Chinese Yuan?

MR. RICE: The SDR process, that’s shorthand for the Chinese request from the government of China, that the Chinese currency the renminbi would be included in our SDR basket of currencies. So what I can tell you, Barry, the SDR review is going along well. It’s focused on, as we’ve discussed here before, a well defined set of criteria. What else can I say? The financial market reforms in China are advancing and the renminbi internationalization is continuing. Further progress including continued development of the capital markets to increase the share of equity in bond financing will help improve the efficiency of financial intermediation.

I can tell you there will be an informal board discussion of this toward the end of this month, July, and I’ve laid out the broad timeline here before, I think you probably know what it is, that we’re expecting the formal board discussion of this issue toward the end of this year probably in November, but toward the end of the year. So, as I said, it’s progressing well. We are interacting with the Chinese authorities on this issue on an ongoing basis. There is a lot of work still to be done in terms of gathering data and before we would be in a position to make that assessment. But the timeline is pretty clear and I think the direction of travel is pretty clear.

QUESTIONER: Colleagues in Beijing heard this (inaudible) story yesterday that the IMF was concerned about investors’ ability to get in and out of the Chinese market’s liquidity. Is that being a factor in the discussion of the SDR basket and can you confirm that? And then is the recent market volatility a factor in the discussions, deliberations?

MR. RICE: On the last point, I think the recent market volatility is a separate issue from the longer term discussion of the SDR. You know it’s not something that would be decided on the basis of the short term market movement and so on, is what I mean by that.

On your other question, I don’t have the details of the discussions on the SDR. As I said, clearly a big part, and important part, of those discussions are financial market reforms in China. We would be looking to progress being made in that area as we head down this path toward the end of the year. I think the Chinese authorities have said the same thing actually, so.

QUESTIONER: I just wanted to ask you about Ukraine. Do you have an update on that program?

MR. RICE: On Ukraine I can tell you that a board meeting is tentatively scheduled for July 31^st. That’s subject to verification of the last prior action. In addition, of course, it would also be important to avoid policy reversals. I know that the debt issue is something that is of importance to you and those watching this issue. We have said, as you know, that it’s vital that Ukraine and its creditors would make significant progress toward an agreement in line with the objectives of the operation that were stated in the memorandum of understanding and to do so before our review. We want and expect that outcome, we’ve said that before. Maybe, finally, the Managing Director in her statement a few weeks ago encouraged all parties to reach a cooperative agreement and to that end, I would note that the authorities and ad hoc creditor committee have been making good progress in their discussions as reflected in their joint statement in July 1 and July 15, and further progress is expected by July 31.

QUESTIONER: Is it possible that following that board meeting on the 31^st, if indeed it occurs on the 31^st, that the next (inaudible) could be shortly thereafter dispersed?

MR. RICE: That’s possible provided all our usual conditions are met.

QUESTIONER: On Ukraine, Kiev has a big bond payment to make, coupon payment tomorrow. What would be the IMF’s view on - if Kiev missed that payment would that be considered a blow to that significant progress benchmark that you need to hit?

MR. RICE: I won’t get into specific events and what might come between now and July 31^st. Ukraine is currently current on all its payments so we just need to wait and see what happens between now and July 31.

QUESTIONER: On Ukraine, how do you respond to claims that there is this kind of double standard, you know, from the IMF on Greece and Ukraine? It seems that you’re willing to make a new load to Ukraine whereas the debt sustainability is still uncertain. How do you respond to that?

MR. RICE: Well, just a couple of things. Two very different countries, very different sets of circumstances, so I think it’s always a bit risky to just make direct comparisons one country to another. On the debt sustainability, we’ve made clear what we think needs to be done in the case of Greece. And I think, to be frank, I think we’ve also been very clear in the case of Ukraine on what we think needs to be done, including a restructuring that we just talked about.

In all our programs we need the reforms to be committed to by the government in implementation. So there’s a story there on Ukraine that we can talk about a bit more if you like, but that’s a big part of the story for all other countries as well.

I’m not sure if you were -- maybe you were referring to our lending into arrears policy whereby the Fund can under certain conditions lend to countries where they have arrears to private creditors. That’s a Fund policy that has been used in the past. That could be used in the case of Ukraine, again depending on the circumstances. That was very different from Greece. Greece did not have substantial arrears to private creditors. As you know, Greece’s private debt was essentially restructured several years ago.

QUESTIONER: When the staff gave these agreements, at the same time said that there were still doubts on the Ukraine debt. They give their agreements, saying that they still have concessions to be made. So actually I was more referring to that.

MR. RICE: All I can tell you is that on July 31, assuming the Board will meet on that day, that this is something that will be presented by the staff and discussed by the Board in great detail. The Board would need to be satisfied that those conditions are met, including on debt sustainability. And then, of course, we will publish that staff report and let you and the world see what the Fund’s assessment of that issue is. I’m going to go online because there’s lots on line and I’m going to take a few and then come back briefly in the room.

ONLINE QUESTIONER: I’d like you to confirm if indeed Pakistan and the IMF are considering to limit periodic reviews to just two per year.

MR RICE: What I have on Pakistan is -- and I think this is news -- the mission for the 8th review will start work on July 29 till August 7. I won’t predict the details of those discussions, but, of course, we will share the outcome of the review with the media and others at the end of the mission.

ONLINE QUESTIONER: Brazil’s economic team announced yesterday that it cut its 2015 fiscal target from 1.2 percent to just 0.15 percent. How does the IMF evaluate that decision?

MR RICE: What I can tell you is that the reduction in the fiscal target has to be seen against the context of the ongoing recession and the actions being implemented to strengthen fiscal policies. The original fiscal target for 2015 was formulated on the expectation of a mild slowdown in economic activity. In the event there’s a deeper recession in Brazil, which is affecting tax revenue performance and making the attainment of the original fiscal target very difficult, so there’s an element of keeping the target realistic. Against this background, the government has been demonstrating its commitment to its macroeconomic adjustment strategy by taking specific measures to strengthen the primary fiscal balance from its negative result in 2014 and to reduce subsidies and other imbalances, which may have impact the fiscal results, in fact, as well as the fiscal targets revised and announced yesterday. There were also announced additional cuts in discretionary spending and these efforts need to continue without interruption even under the revised primary fiscal target as the objective continues to be the restoration of fiscal sustainability by arresting and reversing the growth in public debt.

ONLINE QUESTIONER: How do you see Jamaica’s debt sale?

MR RICE: We welcome the Jamaican government’s proactive move to manage its debt and its continued commitment to economic reform. The IMF fully supports the transaction today. The buyback is firmly anchored in the goals of the government’s reform program. It’s an important step in reducing the value of the country’s public debt and will help to put debt firmly on a downward trajectory.

Going forward, full implementation of the ongoing economic reform program by the Jamaican authorities, supported by the IMF, should help maintain access to international financial markets at favorable terms. We see the program as being on track and Jamaica just recently completed the 8th review.

QUESTIONER: We have a story advancing that the representatives of the troika are expected on Friday, this Friday. Are you sure you cannot confirm that?

MR. RICE: I can only tell you what I had coming into the room some half hour ago, Jeremy.

QUESTIONER: But it’s tomorrow.

MR. RICE: So we’ll come back to you -- if there’s an update, we’ll come right back to you. I understand you need the information.

QUESTIONER: So the decision for the mission to go back is on hold. This is the news today, correct?

MR. RICE: No, that’s not correct. It’s not on hold. It’s not on hold. I just don’t have the date for you.

QUESTIONER: Can you tell us maybe what is the obstacle now because you asked them to go and they did. And I’m wondering what else they have to do for the mission to go back? And the other question is about Cyprus, your success story. Your mission is there, so if you can tell us something about Cyprus, too?

MR. RICE: You’re right, an IMF team is in Nicosia discussing with the authorities and with our European partners the policies that can lead to completion of the 8th review of Cyprus’ reform program supported by the IMF. The team is expected to end their visit tomorrow, Friday, July 24, and we will communicate to you and others then. I’ve said here before the recent return to growth is obviously very good news for the country and the Cypriot people. It shows that efforts they’re undertaking to implement the difficult reforms are beginning to pay off.

I would not -- going back to Greece, on your other question -- I would not assume obstacles because I don’t know that and I haven’t said that. We are at the very beginning of the process. Things are moving pretty quickly, all of which I said at the beginning, and I just don’t have a date for you right now for the return of the team. As soon as we have that date -- we will check it again after this press briefing -- and as soon as we have it, we will inform you so that you can report on it.

QUESTIONER: May I go back to the Greek debate? If you didn’t support the proposal as you said, why is that? Has your Board debated such an option from the report prepared by your staff on what that would mean for the Greek economy and for the IMF repayments?

MR. RICE: To my knowledge there has not been a full discussion of that issue. I think that possibly a reason for that is that as I said the IMF’s baseline assumption has always been consistent that Greece would remain a part of the Eurozone as is the stated objective of the Greek authorities and as of the summit two weeks ago the stated objective of the European partners.

Let me leave it there for today. I want to thank you for coming. I want to wish you a couple of weeks off for those of you who are going to be able to manage that. We look forward to seeing you after the Board recess. And as I mentioned, we’ll come right back to you with any updates.