Transcript of the International Financial and Monetary Committee (IMFC) Press Conference

IMF News, October 13, 2012

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IMFC members agreed they are in a better position today than six months ago with regard to the policy footing, getting growth restarted, and achieving fiscal consolidation in the advanced economies.
The economic environment remains tough, but policy footing improvements underpin a more optimistic outlook compared with six months (and three months) earlier.
Downside risks were highlighted, including the U.S. fiscal cliff and uncertainties in Europe; nonactions can generate spillovers as much as actions.

Consensus that the medium‑ and longer‑term narrative is fundamental:
- Achieve fiscal sustainability.
- Pursue structural reforms to regain competitiveness and growth.
Agreement that fiscal adjustment must be credible and medium‑term, but calibrated country‑by‑country:
- Pace and type of measures depend on each country’s growth prospects, market pressures, and debt burden.
Fiscal policy must be complemented by other policies:
- Monetary policy should accompany significant fiscal adjustment with accommodative stances where appropriate.
- Structural reforms are necessary alongside fiscal and monetary measures.

Short‑term measures should support growth while fiscal consolidation proceeds by prioritizing growth‑friendly forms of fiscal consolidation (the right type of tax measures and spending adjustments).
Emphasis on being conscious of spillover effects from one country’s policies to others, particularly from large economies.

The Fund’s surveillance toolkit is now broader and more integrated compared to two years ago:
- Better ability to look jointly at sovereign risks and financial risks and their interlinkages.
- Increased focus on macroprudential risks involving asset markets as well as traditional growth and inflation metrics.
- Greater attention to spillover effects across economies.

Global safety net has increased:
- At the Spring Meetings members rallied 32 countries to increase Fund resources by 456 billion dollars.
- Additional contributions have brought the total to 461 billion dollars:
- Algeria contributed 5 billion dollars.
- The Sultan of Brunei committed 300 million dollars.
- Approximately half of that has already been signed by way of bilateral loan agreements.
Concessional resources for low‑income countries:
- Replenishment of the Poverty Reduction and Growth Trust (PRGT) approved, enabling use of windfall gold sale profits and supporting concessional lending to low‑income countries.

Reaching the conclusion of the 2010 quota and governance reforms and embarking on the next round of quota review.
Progress reported on governance reform thresholds:
- Two thresholds reached or exceeded (quota increase and number of countries approving governance reform).
- Still short on the third item: the quota threshold for governance reform.
- Expectation that one or two additional countries pressing “yes” would make the reform implementable.
- If implemented, the reform will bring the four large emerging market economies into the top 10 of the Fund membership.
- Deadline to continue work on formula reform: January, 2013.
On the future size of the Fund:
- The Fund envisaged, at minimum, to be no less than the sum of existing quotas and existing bilateral contributions (the 460 plus billion dollars of bilateral contributions).
- Further assessment of vulnerabilities and regional developments next year will guide decisions on additional resource needs.

Managing Director announced a forthcoming global policy agenda that:
- Sets out what the membership should do and what the Fund can do to support recovery and job creation.
- Will be used to check commitments at the next IMFC meeting in the spring to ensure implementation and mutual accountability.
IMFC endorsed the recommendation for members to A‑C‑T (act).

Europe:
- The communiqué welcomed ECB monetary transactions and the launch/operationalization of the ESM; further steps are necessary as the process continues.
- Use of ESM and OMT tools is a matter for eurozone authorities and the ECB to decide when appropriate.
- Programs, significant reforms, and fiscal adjustments are underway in some countries and are regarded by the IMF as appropriate.
Japan:
- The consumption tax law increasing consumption tax from 5 to gradually 10 percent is viewed as a very significant step toward fiscal consolidation.
- Monetary policy can be expected to play a continuing role and the Bank of Japan would be prepared to do more if appropriate.
Arab Countries in Transition (ACT):
- IMF combines on‑the‑ground capacity building and technical assistance (Jordan, Yemen, Morocco, Tunisia, Libya; discussions with Egypt) with international community support.
- International support can take the form of financial contributions or facilitating market access and foreign direct investment.
- Japan noted as a principal partner and supporter of the Fund’s technical assistance; referenced a reported 12 million dollars new funds for the region.

Bilateral loan agreements:
- China had signed its bilateral agreement prior to the meeting and contributed to increasing Fund resources.
- No indication in the communiqué that any bilateral contributions are conditional on quota formula changes.
Ongoing uncertainties and confidence:
- Complete elimination of uncertainty is impossible, but narrowing uncertainty and renewed commitment to policy implementation were cited as means to reduce it.
Use of Fund tools and timing:
- No specific pressure reported by the IMF regarding Spain’s application to OMT; readiness and appropriateness of tools left to eurozone authorities and the ECB.