Transcript of a Press Briefing by G24 Ministers

October 11, 2013

October 10, 2013
Washington D.C.

Mr. Fernando Aportela, Chair of the G-24 Ministers and Vice Minister of Finance and Public Credit of Finance Mexico;
Mr. Karim Wissa, First Vice Chair, Alternate Executive Director of the World Bank, Egypt;
Mr. Alain Bifani, Second Vice Chair, Director General at the Ministry of Finance of Lebanon;
Mr. Amar Bhattacharya, G-24 Director;
Mr. Bosco Marti, Ministry of Finance and Public Credit of Mexico;
Ms. Silvia Zucchini, Senior Communications Officer; Communications Department, IMF.

MS. ZUCCHINI: Good evening, and welcome to the G-24 Press Conference. I am Silvia Zucchini from the IMF Communications Department. Before we start, let me just remind you that if you need translation, we have English on Channel 1, Channel 2 for Spanish, Channel 3 for French, and Channel 4 for Arabic.

The G-24 Ministers just met this afternoon. Here on the podium for the press conference we have, representing the G-24 Chair and Vice Minister of Finance and Public Credit, Fernando Aportela of Mexico; representing the First Vice Chair, Mr. Karim Wissa, Alternate Executive Director at the World Bank for Egypt; representing the Second Vice Chair, Mr. Alain Bifani, Director General of the Ministry of Finance of Lebanon. In addition, we have Mr. Amar Bhattacharya, Director of the G-24 Secretariat and, from the Mexican Delegation, Mr. Bosco Marti, Head of International Affairs at the Ministry of Finance and Public Credit of Mexico.

First of all, and before we go to your questions, let me ask Vice Minister Aportela to give some introductory remarks.

MR. APORTELA: Thank you very much for being here this afternoon. I want to try to be brief. You have already our communiqué. We discussed three main topics at the G-24 Ministerial Meeting: first of all, growth and productivity post crisis; second, IMF quota and governance reform; and third, development financing and development agenda.

On the first topic, our Ministers agreed that emerging markets have demonstrated fundamental resilience in the aftermath of the financial crisis, which continued to be the main source of growth in the global economy. Nevertheless, our [economies] have not escaped the global slowdown in recent years. Our immediate concerns revolved around managing uncertainties as a result of [monetary stimulus] tapering in advanced economies. We also recognized that growth is a collective challenge and that we are committed to continue to support domestic as well as global growth. To this end, we agreed that job creation and increased productivity is critical for long-term sustained growth and the development of our members. This will require a reallocation of resources from low- to high- productivity jobs and firms, increased efficiency across industries, promote formality in the labor markets, and competition-friendly domestic business environments together with macroeconomic stability.

As a second issue, we also discussed the need of coming to closure on the IMF quota and governance reforms. We attached the highest importance to implementing the already agreed 2010 package of reforms, as well as to meeting the forward-looking commitments. This includes agreement on a reformed quota formula in time for it to serve as a basis for the Fifteenth General Review of Quotas in January next year. We believe the ultimate goal of the quota formula must be to recognize the growing role of emerging markets and developing countries in the global economy while enhancing the voice of the poor and small low- and middle-income countries.

The third main important issue that we discussed was development financing. G-24 Ministers agreed on the fundamental importance of adequate sustainable financing in order to achieve development aspirations. This includes, in particular, a need to mobilize infrastructure financing at a sufficient magnitude and with the appropriate characteristics to meet the profound need in emerging markets and developing countries. The use of the new Institutional Financial Mechanism shows potential in this regard.

We also welcomed the work of the United Nations High-Level Panel on the Post-2015 Development Agenda. We believed the World Bank, under its new proposed strategy and twin goals of helping to end poverty and achieving shared prosperity, will be well-positioned to support this agenda through a focus on sustainable, inclusive, and equitable growth, poverty reduction and job creation.

As you know, Mexico has had the honor to be the Chair of the G-24 Group during 2013. It has been a privilege to be working together with Amar, with the Vice Chair and the Second Vice Chair. We are happy to say that Egypt will chair the G-24 Group in 2014. We trust that under the country’s upcoming presidency, the G-24 Group will reach important goals and results. We wish the best for Egypt in the coming year, and we also congratulate Colombia that will be the Second Vice Chair for the G-24 Group.

Ms. ZUCCHINI: Thank you, Vice Minister Aportela. There are copies of the communiqué in the room. If you have questions, I would please ask you to introduce yourselves and indicate your affiliation.

QUESTIONER: I have two questions. You say the Fund should do more to support countries in helping them deal with the effects of the Fed tapering. I was wondering if you could elaborate on that. What should the Fund do?

You talked about dealing with the influx of Syrian refugees. Do you see scope for more programs from the IMF or the World Bank? Because there is already one for Jordan, do you see more from Lebanon or could you speak more about that?

MR. APORTELA: Monetary stimulus tapering is, without a doubt, an important matter for all countries in the world, even for the advanced economies. So, all the G24 countries are looking very deeply into that. There have been increases in volatility due to the announcement about tapering. It was mentioned during our meeting that the Fund is working are working, also closely with the U.S. authorities, in analyzing the impact of specific measures on developing economies and on emerging countries.

MR. BIFANI: On the issue of the refugees, we are dealing with a humanitarian issue, and a very serious one. But we are also dealing, because of the magnitude of the influx, with an economic situation. In Lebanon, for instance, the number of refugees represents more or less 35 percent of the Lebanese population.

We see an influx of refugees not only because of security issue, but also because of the difficult situation of those who have lost their jobs and the opportunities they used to have in Syria. The question is also a difficult one because the conflict is not yet over. So, we are not yet dealing with a stock; we are dealing with a flow that is permanent. The situation could deteriorate every day.

The World Bank has initiated an impact study that shows clearly the size and the magnitude of the problem. We are now in the process of working with the institutions to find solutions for the humanitarian aspect of this crisis, but also for the economic issues that are becoming extremely significant for Lebanon. We are talking about very massive changes, losses in revenues in billions of dollars, an additional amount of expenditure for basic needs. We are also talking about the growth loss that is extremely important for Lebanon. The rough figure for three years is about US$7.5 billion.

All of this is to be considered while looking at the infrastructure and its depletion, and the cost that is will be required reinstate the situation to what was before the Syrian refugee influx. All of this i requires the intervention of the institutions not only in Lebanon, in all neighboring countries, as we are in the most difficult situation.

QUESTIONER: China is one of the developing countries so my question is about China. Recently, China’s Premier, Li Keqiang, said that China’s GDP will hold about 7.5 percent in the first nine months of this year. He also said that China’s economy has shown stronger momentum. So, how would you evaluate China’s economic growth? Are you confident about the future of China’s economy?

According to the IMF, growth in emerging markets will slow down in the future. What should emerging markets do to ensure their economic development continues and to that the current slowdown is smooth?

MR. APORTELA: On the forecast for growth in China, we share the number that you just gave us: the 7.5 percent. We believe that the policies that the Chinese government is taking are adequate in order to achieve that level of GDP growth.

In terms of the slowdown that we have seen in emerging market economies, this is something that is generalized across the world. Most of the countries have experienced that, with few exceptions. We are not experiencing the tail winds that we used to have in the past. What some countries are doing, and this is the case of Mexico, we are trying to push a structural reform agenda that differentiates our economy from other economies in the world. It is also a matter of what you can do inside your country to try to secure investment and create jobs. The way we have done it in Mexico is to try to push labor, education, and financial market reform. The energy and fiscal reforms are also now being discussed in Congress.

So, those elements of the structural reform, plus having sound public finances—with low deficits and sustainable public finance accounts— is something that can distinguish a country and place it in a good position to achieve higher growth when international conditions get better.

MR. BHATTACHARYA: If I could just add that, as the Vice Minister pointed out, the slowdown that you have seen in emerging markets was from exceptionally high levels, so part of the growth slowdown was to be expected.

Second, you have to remember the conditions in the advanced economies have never been worse. That, of course, has had an effect on our countries, especially on China, because China has been such a major exporter in the world. In spite of this weakness, emerging markets and developing countries account for 80 percent of global growth right now and 80 percent of global import demand. So in a way, emerging markets and developing countries still remain basically the engines of growth of the global economy. It is in that context that we have to focus much more on generating productivity-led growth and focusing on jobs. That is what we discussed in our meeting.

As I mentioned, we have been contributing 80 percent of import demand. One third of that comes from China.

QUESTIONER: The deal that has been tabled by the Republicans and whether or not that is accepted by the White House is a sign, nonetheless, that the two sides are talking to each other. Is this a positive sign for the emerging world that worry about volatility? I am just trying to gauge an opinion across the eminent panel.

MR. WISSA: Any dialogue is always positive. We have been following the discussions that have been initiated with great interest, because the outcome does affect all of our countries tremendously. So, any positive outcome that will come out of such negotiations will be a good thing.

MR. BATTACHARYA: I would like to add that World Bank President Jim Yong Kim, in our meeting, pointed out that the last time there was a stalemate, emerging market bond spreads increased by 75 basis points and stock markets collapsed in emerging markets by 15 percent, and the effects lasted for months. So, we do believe that it is very important to get a timely agreement, because if there is instability, it has a disproportionate impact on our countries.

QUESTIONER: I noticed that in the G-24 Communiqué you expressed concern about the higher volatility in global financial markets. As we know, so far it is still not clear whether the U.S. Congress will raise the debt limit, and there is still the risk of a U.S. default on debt. So, what would you do to mitigate this kind of risks if that really happens?

MR. APORTELA: There are different policies that can be taken across our group of countries. In the case of Mexico, what we have done against volatility is having a flexible exchange rate, a high level of international reserves; and a Flexible Credit Line from the IMF. In the past months, we experienced a high period of volatility and we saw a depreciation of the exchange rate that actually was reverted after the volatility was diminished again, and we saw sufficient liquidity in the financial markets. So, basically, those are the policy tools that we have in Mexico to face this type of volatility. However, as was mentioned by Messrs. WISSA and BATTACHARYA, we are expecting that there will be a prompt solution about the debt ceiling and that that will diminish the volatility in the international financial markets.

QUESTIONER: How frustrated are you that the governance reform is not in yet place and what do you consider the chances are that the U.S. will ratify soon?

MR. BHATTACHARYA: The entry into force of the quota and governance reform is delayed by more than a year, given the commitment on the 2010 Reform. So, our Ministers did express a very strong view that we would like to, first and foremost, see an early conclusion of those reforms. But, as you know, the reforms also entail some forward-looking commitments. In particular, we are committed to a timely conclusion of the Fifteenth Quota Review. That Quota Review is very important to put the IMF on a stable, long-term footing in order to play its role. It is also critical that that view be linked to the kind of governance reform that is needed in the Fund, further governance reform. So, as you will see in our communiqué, we continue to stress that it is very important to get now both things done, completion of the 2010 Reform and then speedy work on—and conclusion of—the Fifteenth Quota Review.

QUESTIONER: How could we push this reform agenda without the United States? That is the most important country that has not yet ratified the quota and governance agreement.

MR. BATTACHARYA: The United States’ political process, not just on this but on many other issues, as you know, is complicated. The Administration has stated very clearly, including in these meetings, that it is completely committed to getting an early completion of the 2010 Reforms. We are very hopeful that the political process will proceed in a way that allows that.

The Managing Director of the IMF has been in very close touch with the Hill. Some of us had been to the Hill to plead the case of emerging markets and developing countries, and the importance we attach to governance reform. So, there has been a lot of discussion. The practical thing is when the bill—that has already been tabled— will be actually taken up. Particularly with the discussions that have been going on, that actually has not yet happened.

QUESTIONER: How do you manage the economy of a country like Lebanon with its constant security threats?

MR.BIFANI: What we do in Lebanon is permanent crisis management. We are moving from a situation where we have wars, to blockades, to a massive influx of refugees, and so on. The good news is we are still growing. Within this region, Lebanon is one of the few countries that is achieving growth that is higher than 2 percent. We have built a lot of reserves, again for the survival mode, but the situation is not easy at all.

Lebanon has suffered for a long time and built a deficit and huge public debt. We were able to manage this until now. Lebanon is a country that has never defaulted on its debt. We are very keen on keeping the credibility of the country alive. But, for the time being, we have very serious challen6ges. Those challenges are due to the situation within Lebanon, but also to the situation in neighboring Syria, as mentioned. In this regard, we are trying once again to find solutions that are appropriate.

In the short term, we need to find ways to guarantee security. We need to support the Lebanese Armed Forces massively, because there is a new situation that is not easy to manage in terms of security. We also need to maintain credibility and to have the state cope with the new challenges. This requires different way, among which is the support from the international community. And we are seeking their support, not because Lebanon is in bad shape for the time being but because the situation is not sustainable in the long run.

We were talking about emerging markets a few minutes ago. Considering the flight of capital that took place in emerging markets in the past weeks and months, Lebanon has reacted rather well. The deposits’ base in Lebanese banks has grown 8 percent year to year. So, credibility and confidence are there, but we need institutions to strengthen that, and to provide Lebanon with the required infrastructure. This is extremely expensive for a country that has been indebted and that has always relied on its own financing.

The main difference between Lebanon and many countries in the region that have witnessed difficult times is that we have always relied on ourselves. We are also in a different situation when it comes to Syrian refugees. In other neighbors countries the refugees are in camps. In Lebanon, they have been integrated in the community. We are in the process now to finalize the approach that Lebanon will have with potential donor countries, as we believe that the situation we are facing today is different than the previous ones. We are now facing a global challenge and this should be seen as a challenge for the whole world. The situation in Syria cannot be borne by Lebanon only. It is something that requires and that creates a responsibility for the whole world. We are hoping that the whole world will be there to support our country in its efforts.

QUESTIONER: I appreciate your efforts working so hard to find a financial structure to stabilize the world. Given all these uncertainties, is there time to consider how jobs in the environmental sector can create income and make a better living, or is it so much putting out fires that it is not possible for you to focus on creating green growth, in Mexico especially?

MR. APORTELA: Climate change and taking care of the environment is a very important issue for the G-24 Group. For example, we cannot escape the reality that productivity is related to climate change in many activities. So, it is something that was discussed at the Ministerial Meeting. Some of the funds and some of the initiatives for financing have to deal with climate change.

For example, the serious floods that we had in Mexico some weeks ago had a high human cost and resources implications. So, it is important for productivity and we discussed that. Productivity is always on the G-24 agenda as a general topic that has to shape the policies that we are trying to implement.

MS. ZUCCHINI: If there are no final comments, we should close the G-24 Press Conference for these IMF-World Bank Annual Meetings. Thank you very much for joining us, and have a good evening.


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