Transcript

Washington, D.C.
Thursday, October 22, 2009

MS. ATKINSON: Good morning,. I’m Caroline Atkinson, the Director of the External Relations Department in the IMF, and I welcome to you here, and those journalists participating online through our Media Briefing Center, to our biweekly press briefing, although we haven’t had one for a couple of weeks because of Istanbul. As usual, the briefing is embargoed until 10:30 a.m. Washington time or 1430 GMT.

First, I wanted to mention a little bit about the Annual Meetings and draw your attention to what we have called the Istanbul decisions on four key areas, and these will be defining our work in the period ahead, in the months and perhaps years ahead. These call for the IMF to look at our mandate with a view to having one that is sufficiently broad to cope with, to adjust to today’s globalized world and focus on any area of potential instability in the global system.

Secondly, to look at our financing role and to build on the innovative flexible credit line that was introduced earlier this year, to think how we can help with the issue of excessive reserve buildup or reserve buildup for insurance purposes.

Thirdly, the IMFC (International Monetary and Financial Committee), as you know, supported the G-20 call for us to help in their mutual assessment. This is a new challenge on multilateral surveillance and cross-country spillovers.

And, finally, but very importantly, the IMFC supported an important step forward in governance reform. They also backed the G-20 call for a shift in quotas of at least 5 percent to dynamic and emerging market economies from overrepresented to underrepresented.

So these four important and broad-ranging decisions will be discussed as normal part of the work program in the Board, in early November, and we’ll let you know more about that at that time.

Next, I wanted to talk about management travel. Today, the Managing Director, Dominique Strauss-Kahn, is in Stockholm where he’s taking part in an event organized by the European Commission and the European Presidency, the E.U. Presidency.

Tomorrow, he will deliver a speech in Oslo as a guest of the Norwegian authorities. We will be posting that under embargo for journalists registered in the Online Media Briefing Center.

At the end of next week, the Managing Director will be in Rome, participating in a dialogue at the International Labour Festival.

Then later, in early November, both Mr. Strauss-Kahn and the First Deputy Managing Director, John Lipsky, will be attending the G-20 Finance Ministers’ Meeting in St. Andrews. The Finance Ministers’ Meeting will be on November 5th and 6th.

Deputy Managing Director Takatoshi Kato will be in China next week, from 24th to 27th of October, and will be delivering a keynote speech in Beijing next Monday, October 26th.

And Deputy Managing Director Murilo Portugal will participate in a conference of chief executives in New York on October 30th, which brings together the heads of the organizations of the U.N. system. He will also then be visiting Lima, Peru.

Aside from those travel and activities of our management, in two weeks we will be having an interesting conference here at the IMF. It’s our regular Annual Research Conference. This year, the topic is going to be Financial Frictions and Macroeconomic Adjustment, and we will have an outstanding list of presenters and participants.

Media are welcome, and there is more information on that on our web site, imf.org.

Finally, we have our Regional Economic Outlooks (REOs). The African one has already been released, and there is some information during this week. Two important REOs are being issued shortly -- the Western Hemisphere REO, which will be initially presented in Brazil [tomorrow, Friday] and then in La Paz, Guatemala City, Lima, Peru, Chile and St. Kitts in the days following that, by various members of the Western Hemisphere Department. We will also, of course, be making that available online under embargo beforehand.

We’ll also be featuring some of the articles, that analysis, in a new IMF “Research at the IMF” web page that we’ve established that showcases particular bits of research done by the Fund.

The Asia and Pacific Department REO is also going to be launched on October 29th in Seoul, and there will be follow-up sessions and presentations in Tokyo with Anoop Singh, the Director of the Asia and Pacific Department. And, again, we will be sending out a media advisory on those issues.

So let me turn to your questions, to remind journalists on the Online Media Briefing Center to submit questions and remind you of the embargo. Please identify yourselves and your news organizations.

QUESTIONER: You talked about the G-20 on November 5th and 6th. Is your understanding that this framework for a more balanced global growth and so on is going to be unveiled there, or is it going to be just the discussion of it and kind of planning for it and what would the IMF’s role be?

MS. ATKINSON: That will be an important part of the discussions, I’m sure. The framework for the strong, sustainable and balanced growth and how the IMF will carry out the responsibility and the request to assist in that will certainly be an important part of the discussions for us. Exactly what will be in the communiqué, I don’t know.

QUESTIONER: But I mean is your understanding that the framework is actually going to be agreed on at the G-20 or don’t you know that?

MS. ATKINSON: I’m not sure as yet. It’s a good question. I can get back to you. My understanding is that how you implement it is something that will be implemented over time.

QUESTIONER: It is said in Argentina that perhaps [IMF Western Hemisphere Department Director Nicolas] Eyzaguirre is going to stop by, profiting from his trip to Latin America for the Outlook. I wanted to know if this is true, if this can happen, if he could stop by Argentina.

And the second is: As you know the Argentina government wants an Article IV but with some conditions, like a low profile mission and non-recommendation, non-political recommendation. I wanted to know if this is technically possible because finally, generally, after a mission of an Article IV you have a report that goes to the Board, and this traditionally has always recommendations, that they are always in a way economic, dealing with economic policy.

MS. ATKINSON: On the first, I have no information for you on that, as to whether Mr. Eyzaguirre would make a stop. I know that he was recently, as I’m sure you’re obviously aware, he and [IMF Reseach Director] Mr. [Olivier] Blanchard were both fairly recently in Argentina.

On the second, I think that our Article IV consultation processes are fairly clear. As you say, there is normally a report to our Executive Board that reports both the views of the authorities and the views of the staff and the discussions between them, and typically includes a staff appraisal. So that would be a normal Article IV consultation.

You made a point about politics. We don’t discuss political issues. So we’re focused on economic and technical issues.

QUESTIONER: It’s difficult to put a limit between politics and economic policies, and generally, the Article VI has some recommendation of economic policies. For example, if there is too much inflation, you can say that we need to cut the inflation. So these kinds of policies are what I’m referring to, not political issues.

MS. ATKINSON: Well, as you say, Article IV consultations, the whole point of an Article IV consultation is to discuss economic policies, to analyze the economy.

I have a question actually, I think there are two questions.

One is on Ukraine. The opposition is critical of the IMF for funding the campaign of [Ukrainian Prime Minister Yulia] Tymoshenko and what is our response?

On that, as you know, the IMF funding is delivered to the Central Bank, and there are safeguards and controls in Ukraine, as elsewhere. We have a mission on the ground in Kiev now that is looking at the situation for the third review of the program.

His second question regards Zimbabwe. He notes that NGOs (non-governmental organizations) are critical of the IMF for pushing Zimbabwe to privatize its social services system. How do we respond to the criticism?

I believe that we are involved, and I can certainly come back to him on that. We generally don’t take a position in favor or against a particular privatization. What, I’m sure we’re very strongly in favor of in Zimbabwe is the building up of a strong social services network which is important for the poor and vulnerable in that country.

QUESTIONER: This week, the lower chamber of the Mexican Congress passed a law, or a proposal basically, for the income budget for Mexico for next year. Among other things, this law proposed an increase in [income] tax, also a tax on cigarettes, alcoholic beverages and other [products].

The thing is that for one part, the proposal has not been supported by all parties, but also the private sector has been very critical of it, saying that it’s targeting the companies or the sectors that are going to help promote economic growth and jobs. Also, they feel that this proposal doesn’t go to the core of the issue, which is basically to ensure Mexico a secure way to increase revenues.

So, I wonder, first of all, if the IMF has a position on this issue, do you feel that this is the right way to go for Mexico to strengthen their revenues?

MS. ATKINSON: We generally avoid getting into too many specifics, especially when something is being debated in parliament. I can try to get back to you on that. I’m not aware of any particular position that we have on individual taxes and so on.

What we generally would be interested in is strong and sustainable and consistent measures that can deliver the revenues that are needed.

QUESTIONER: But, again, this is something concrete. Usually the IMF has not tried to say when things in certain countries are not in the right way or maybe in the way you think things should go. So the question is basically is this a way to go for the Mexican government?

MS. ATKINSON: I’d like to repeat that Mexico has been following successful economic policies. Of course, they were severely hit, have been severely hit, by the global crisis, and, as you know, they have access to our flexible credit line.

I’m not going to comment on specific measures that are under discussion in parliament. Actually, we don’t typically do that.

QUESTIONER: Just coming back to Ukraine, I know a mission is on the ground and there will be probably a news conference afterward. But do you have any update on progress so far in the discussion and exactly what are the topics? What is the focus of these topics, including I mean there’s an upcoming election as well, if that at all is going to be an issue?

MS. ATKINSON: As you know, when a mission is in the field, having a program, negotiations over a program, we don’t comment then. Things can change very frequently, and we don’t think it’s appropriate to be giving frequent updates.

We will, as you say, certainly update you when the mission is concluded, and that I can say we will do. But as to giving a tick-tock of the progress in negotiations, we’re not going to do that.

QUESTIONER: I have a question on the Istanbul announcement by France and the United Kingdom that they would dedicate part of their SDR allocations to lending to low-income countries via the IMF.

The first question is to know whether you are discussing with other member countries about their doing such, and the second question is more technical: I would like to understand how the IMF can translate these SDRs that have been created out of thin air into hard currency. I understand the mechanism for a member country, but I don’t understand the mechanism for the IMF, and the U.K. and France have said that it would have no cost for their taxpayers. So what is the mechanism exactly?

MS. ATKINSON: Well, I think that mechanisms from the point of view of the government and the relationship with their taxpayers is something that each government has a different way of accounting and something that you should raise with them.

But what the British and the French have agreed is that they will make their SDRs available for us to convert into hard currency to lend on to the low income countries, and it’s part of making sure that we have enough resources to make those loans. It’s not part of a subsidy. So this is sort of reserves money that will get repaid, not part of a subsidy.

But I’m very happy also, and perhaps it would make sense -- these are complicated issues -- to follow up with you and maybe arrange for you to talk to some of our technical experts on quite how the programs will work.

QUESTIONER: I’m sorry, I’m coming back to Argentina, but I want to clarify. You know there were so many things said after Istanbul in my country, that I would like at least to put a little bit of order.

So I wanted to know, has the Argentinean government sent a letter asking for a mission, or this is not done yet?

Second is in the frame of the G-20. Our President has signed the final declaration of the G-20, and this includes the monitoring of the economies of all the country members. So what kind of obligation will have Argentina in that frame?

MS. ATKINSON: Just to answer the second question first, the framework for this assessment has not yet been agreed amongst the G-20 members. So it’s certainly premature for -- I mean they haven’t settled yet quite how that will be done. They have asked the Fund to be involved in that assessment, and we have obviously, and the IMFC has also, supported that. So, obviously, we will be working on that in coming months and beyond, to support the G-20.

On your first question, we have no specific plans at the present for an Article IV consultation.

QUESTIONER: I’m going to ask you a question about labor market reform, and, in general, what’s the view of the IMF on reforms toward more labor market flexibility versus a more rigid and guaranteed employment situation. Specifically, in Italy, there is a very strong debate in this moment among who proposes more flexibility, and, as you know, in Italy, the labor market is very strongly guaranteed and according to more rigid rules at the moment.

MS. ATKINSON: We don’t have just a cookie-cutter response about labor markets. I think research shows in general that a certain amount of flexibility is important to have efficient labor markets. The goal of, I’m sure, any government, and certainly what we would be supporting, is to have employment as full as possible -- so, good jobs for as many people as is possible without straining the resources of the economy. Especially at this time in the global crisis, as we have said, we do see unemployment likely to continue to rise because it’s a lagging indicator. And so, the issue of how best to support strong job growth is a very important one.

Thank you.

I have a question online from Nigeria asking why is the IMF supporting what is happening in Nigeria even when they know it is all politics. It’s a little bit vague as a question, but I think that what we support in general is strong governance and sound and sustainable policies. It may be to do with the commercial banks, and it’s important that in Nigeria, as in the U.S. and other countries, that a strong approach is taken to strengthen the financial system with dealing with making sure that you have adequate capital and deal with toxic assets, so that credit growth can resume and support the economy.

QUESTIONER: Hello. I have a question on Iceland. I saw the statement yesterday that it will be brought to the Board on October 28th. Now, the agreement struck with the U.K. and the Netherlands is also dependent on parliamentary approval, as I understand it. What if they’re rejected in parliament?

That was one of the conditions mentioned by the IMF for doing it, having a review and disbursing. So, what happens if it’s rejected?

MS. ATKINSON: As we said yesterday, we expect the Executive Board to discuss the review on October 28th, and that’s -- there had been an issue about the financing assurances, not particular issues in parliament, and we believe that’s been resolved. And, there had been another issue about program implementation, which has also been resolved. So we expect that the Board meeting will go ahead on October 28th.

QUESTIONER: You mentioned the flexible credit line. So far, the Mexican government has resisted requesting that credit line. I wonder if you feel that given the current conditions in Mexico, the fact that revenues have decreased because oil prices are going down and also Mexico has been pretty hard hit by the economic crisis in the U.S., if this may be the right moment for Mexico to request that type of credit line.

MS. ATKINSON: The flexible credit line has already helped, in our view and in the view of the authorities, to stabilize markets and support the recovery in Mexico. So it’s there to be drawn on.

QUESTIONER: How? How does the IMF feel that the fact that this credit line is there has helped Mexico to recover from this crisis, especially when there is a risk that the rating for Mexico could be a little bit lower if the Congress doesn’t vote on a more credible income budget law this year?

MS. ATKINSON: The announcement of the availability of the flexible credit line had an immediate impact in lowering the cost of borrowing for Mexico and supporting the exchange rate, and we believe that the existence of the credit line, of Mexico’s access to the credit line is a source of support to confidence, which, as you know, is a very important element for all countries in ensuring the economic turnaround.

I’m just going to take one more question online, on Pakistan. The IMF in August extended for a year the country’s time to eliminate electricity subsidies. Now the IMF says two price increases will be implemented. Others say this is not possible politically. What is the IMF’s thinking on consumer power pricing in Pakistan?

As I believe you know, the issue of electricity subsidies is primarily being dealt with by the World Bank and the Asian Development Bank. This is a sectoral issue that is typically done by those in development, that is focused on more -- they have more expertise. We are interested in particular, we get involved in particular through the implications on the budget.

And, we also will be having another review of the Pakistan program in early November, and I’m sure different issues will be looked at then.

What is important for Pakistan, of course, is that not just the Fund but that other donors do make good on their promises to support the country.

Thank you all very much indeed.