Transcript of IMF Press Briefing

December 8, 2016

MR. RICE: Good morning everyone, and welcome to this press briefing on behalf of the IMF. I'm Gerry Rice of the Communications Department.

As usual, our briefing this morning is embargoed until 10:30 a.m., that’s Washington time. I'm going to depart a little bit from our normal schedule, because we are releasing today, the Work Program of the IMF, which gives a sense of the priorities and the topics that the IMF will be focusing on over the period ahead- roughly the next six months.

So, we've done this a couple of times before. I think you'll find it useful. And I'm very pleased to say that we have with us this morning, the Director of our Strategy and Policy Review Department, Mr. Siddharth Tiwari. Siddharth has kindly agreed to spend a few minutes with us this morning. He'll give you a sense of those priorities in the period ahead. He'll take a few questions. And then I'll come back, and we'll do our usual thing, and take questions on other topics. Okay?

Siddharth, good morning, and welcome.

MR. TIWARI: Thank you, Gerry. Good morning, to all. We will release our Work Program today. The Work Program translates policy priorities and strategies that were laid out in the Managing Director's Global Policy Agenda, as well as the last IMF communiqué. As you know, the Work Program sets our work concretely for the next six months, and aspirationally for the next 12 to 18 months. Through the three-pronged approach that we have been advocating: fiscal policy, monetary policy and structural reforms. The following four objectives are set out in the Work Program: how we guide the global policy dialogue; two, how we identify policy space and enhanced resilience. Three, how we assess in promoting global prosperity; and fourth, making multilateralism work for all.

On the first, enhancing, guiding the global policy dialogue, the Managing Director's global policy agenda will be at the forefront together with our three flagship publications. The World Economic Outlook will focus on the evolution of labor income growth throughout the world, and how it is affected by technology and globalization. The Global Financial Stability Report will discuss how the low interest rate environment has affected financial intermediation. Fiscal monitor will look at how structural fiscal policies can contribute to improving productivity.

Turning to identifying policy space and enhancing resilience, we will provide more granular advice to our membership on fiscal policy, and the paper will be released later this month. The idea here is to provide a framework through which Article IVs can assess the conduct of fiscal policy in the countries.

We will also explore ways to enhance surveillance of macro-structural issues. Here, we've been a leader in this area. The World Economic Outlook, Chapter 2, talked about it; we've done a lot of work in the G-20 context. It will now be expanded into Article IV consultations.

Another paper will examine the experience with negative interest rate policies. And later this month, we will publish the first paper on review of the institutional view on capital flows. It's a core path of our work. The paper assesses and guides the framework for managing capital flows, and then later be extended to macroprudential policies.

We will also do the annual review of macroeconomic policies in low-income countries, which lay out the priorities for the next 12 months. Here, the focus will be on prospects, risks and vulnerabilities for low-income countries, as they face the new normal of low-for-long commodity prices. And the second focus would be the experience with and policy priorities to improve infrastructure investment.

Review of debt sustainability is underway in low-income countries and will be completed in the next few months. A paper on small state resilience through natural disasters and climate change will also be released shortly.

On promoting shared prosperity, our work, well, as I mentioned, examine global productivity slowdown and seek to identify causes and possible remedies. We will also look at the IMF deliverables for the 2030 policy agenda.

We will help the membership manage change by examining ways to make globalization work for all, including to review the Fund work on governance issues, both economic governance as well as corruption.

Finally, on making multilateralism work for all, we are continuing to work on strengthening the global financial safety net. Here, there are five aspects. The first and foremost policy in strengthening the safety net is good policies, both at home and internationally; second, reserves; third, bilateral arrangements between countries; fourth, regional arrangements; and the fifth, the IMF, which is at the center of the global GFSN.

The Board will also consider the new arrangement to borrow, and the Work Program will also bring forth work on our cooperation with regional financial arrangements as well as currency unions.

Finally, work will start on the 15th Review of Quotas, as well as on the role of SDR in the international monetary system. I'm going to stop here, and if you have questions I'll take them. Yes?

QUESTIONER: Hi. from Bloomberg. Two questions: Can you talk a little bit more about the efforts -- your efforts to examine globalization and, you know, how it may be working, or might not be working, and obviously that’s been a strong theme over the last 18 months or so, with significant political implications? And secondly, can you just give us an update on the discussion on quota reform, the next round? I mean, how do you characterize where things are at? Thanks.

MR. TIWARI: So, on globalization I think it's fair to say that our work has shown that it has cross-country consequences; it has intra-country consequences. It has had significant beneficial effects in terms of better allocation of resources, labor, capital, raising people out of poverty, but it's also had consequences that everyone did not take part in this process.

And the institution, the research in the Fund has focused on inequality and making all citizens take part in the process. And if a few are left behind, what remedial policies are put in place, so that every citizen in this process is supported.

Globalization is tied to technology, and many times it's impossible to separate the impact of both. And initial work both here and elsewhere is determined that you need a critical focus on skilled development, the ability of labor force to adapt to change, as well as active fiscal policy.

On quotas, work will begin. As you know, the Board has determined that the first round of work on quotas would be to look at our lending toolkit, and then move to the role of the Fund in the global financial safety net, and from the size of the Fund and the distribution of quotas. The first part of the work started in November, with the Board review of the toolkit; the second part will be in first quarter of 2017. And we expect by midyear that we will start when the regular quarter discussions- once we know what the role of the institution is in the global economy.

QUESTIONER: (Inaudible) from Mega TV, Greece. Fiscal policies in Europe in recent years have failed to boost productivity, so the ECB is forced to provide greater support. What are your recommendations on this subject?

MR. TIWARI: So that, Gerry will take after me. I'm going to stay with the Work Program.

MR. RICE: Okay. Siddharth, thank you.

MR. TIWARI: Thanks, Gerry.

MR. RICE: That was very helpful. Thanks a lot. As I mentioned, it's great to have Siddharth with us because the Work Program is essentially, as I said, the priorities and the path forward for the institution. It's something that is discussed extensively and indeed approved by our Board, by the Executive Board. And so again, that's why we like to share that with you on a regular basis.

Let me then come to the regular press briefing. And let me go through some upcoming events and travel, and then we'll come to questions in the room. And I can see colleagues online are also beginning to put up a few things, so I'll do both. First a few announcements. I can tell you that Friday, tomorrow, our Deputy Managing Director, Tao Zhang, will be in Vanuatu for the last stop in his visit to the Pacific region, with a particular focus on small states. And indeed I can tell you that next week, Monday, we're going to be publishing a paper on small states and in particular their resilience to natural disasters and climate change. Also next week, we expect to release a Board paper on capital flows. I know that's a topic of interest to many of you. It will review experience, the Fund's view, and outline a set of considerations and indicators to help inform assessments of fiscal space. We also expect quite a few blogs to be published next week, including from our Economic Counselor, Maury Obstfeld. We can give you a bit more detail on that, and you'll see them forthcoming next week. So quite a bit of news next week.

Then just ahead, looking ahead to January, Maury, our Economic Counselor, Maury Obstfeld, will present as usual the update to the WEO, to the World Economic Outlook. Again, I know that's something of great interest to you all, and we will do the usual, get that to you under embargo. The date is going to be Monday, January 16 for the WEO update with Maury. Okay. And, yes, in the United States it's the Martin Luther King holiday. Sorry about that for those of you here in the U.S., but for the rest of the world it's not a holiday, and it turned out to be the most timely day for us in that. We have Davos beginning that week and the Managing Director, Christine Lagarde, and indeed David Lipton, our First Deputy Managing Director, will be going off to Davos. So we wanted to make sure that we got the latest forecasts and update out in time for that. And that's going to be Monday, January 16.

So, with that, let me turn to any questions you might have in the room. Good morning.

QUESTIONER: Good morning. So, Gerry, according to an IMF official, the short-term debt measures that were agreed during the Eurogroup were not enough. The official also said that the IMF insists on 1.5. My question is how are you planning to move forward on the Greek issue when the Europeans do not discuss medium or long-term debt measures. They insist on 3.5? And on the other hand, the Greek government rejects any additional fiscal measures after 18. I mean, all these facts are quite contradictory.

MR. RICE: Thank you. Let me try and unpack -- you've raised a lot of important issues there. First of all, I'd like to say we continue to remain fully engaged in the policy discussions on Greece with the Greek authorities and the European institutions. And in fact, I can tell you those discussions continue to take place on a daily basis, via teleconference at the moment.

On the short-term debt measures that were discussed, as you said, at the Eurogroup meeting the other day, you know, we welcome the short-term debt measures announced by the European partners the other day. We think they're an important step forward. But we also think they are not likely to be sufficient to restore debt sustainability over the medium to longer-term. So, you know, that's been our consistent position on the debt. We've had this twin approach that we want to see the policy reforms that are credible, and on the other hand, the debt relief that can ensure debt sustainability. So we've been fairly consistent on that.

On your point about the primary surplus target. Again, I think we've been clear and consistent on that. We continue to believe that a medium and long-term primary surplus target of 1.5 percent of GDP is appropriate for Greece and can be attained through the measures currently included in the ESM program. So we've said this before - say it again- the IMF is not asking for additional austerity, and we could support a program based on a target of 1.5 percent of GDP. That is our preferred option. If, however, the Greek authorities and the European partners decide on a higher target for the primary surplus for a limited period of time, we could support that as long as it's underpinned by credible and high quality structural reforms.

So, again, just to be clear, our preferred target would be 1.5 percent. We think that means less austerity for Greece and the Greek people. 3.5 percent would involve increased austerity, so that's why our preferred option is 1.5. We think it's more realistic, more credible, and involves less austerity. However, if the decision of the Greek government and the European authorities is to go forward with the higher primary surplus target, 3.5 percent, then it's our job as the IMF to ensure that the reforms and the measures that can get you to the 3.5 are there. I hope that's clear.

QUESTIONER: So the discussion about the fiscal target after 18 is still ongoing?

MR. RICE: The discussions are ongoing, yes.

QUESTIONER: On the target?

MR. RICE: The discussions on the whole -- you know, let me put it this way, the discussions on what would be required for the IMF to participate in a program and with financing for a program, which is still something that we are intending to do, are willing to consider. For that, for it to be considered and for us to take something to our Board, it needs to be based on credible assumptions and measures, both on the policy side, reforms, and on the debt side.

QUESTIONER: Can I have one more?

MR. RICE: Yes, you can.

QUESTIONER: Thank you so much. So the spokesperson of the Greek government said that Paul Thomsen during the Eurogroup actually -- instead of pushing for a lower fiscal target, he accepted the 3.5 and, Gerry, this is something that comes out from EU sources as well. So my question is, when and where did the IMF push the (inaudible) or pressured the Europeans to be more flexible on the fiscal side of the issue, and how much of a fight did you give about it?

MR. RICE: Well, you know that we don't get into the blow by blow detail of what happened in various meetings. But I think you also know, you who follow this, that we have made very clear, very public -- I have said it here, but so have many others at the IMF, at a senior level -- we've made very clear our preference for the 1.5 percent, including in the recent Article IV concluding statement. So there should not be any doubt -- I don't think there's much doubt about the IMF's position. And again, our preference is for the 1.5 because we think it's realistic; because we think it involves less austerity for the Greek people. And then we would like to see debt relief that is commensurate with that. And we need two legs; we need the combination.

So, I don't want to avoid your question in any way, I just think we've said this many times. Ultimately of course, the ESM program is a decision for the European partners with the Greek authorities. But in terms of the IMF role, participation, and what would be required for that, I do think we've been very clear.

QUESTIONER: (Inaudible) from Mega TV Greece. As I understand, I listen to you, you have huge disagreements with the Europeans on the Greek program. My question is how do you expect to persuade the Europeans to share your positions? Otherwise you have to leave completely the Greek program if you don't agree with them.

MR. RICE: Look, in any program, and particularly one where it's a program that we're involved in jointly with other financing partners, there's always a fairly intensive process of discussion and negotiation. And that's par for the course. That's normal. So institutions, authorities, have different views, and those things get discussed, and eventually agreements get reached. So again, that's normal. So we're in the process right now of having those discussions and those negotiations. And it's ongoing.

And I just want to reiterate we're fully engaged, as I mentioned, including on a daily basis. We are fully engaged. And we would like to see an agreement reached like everyone else as soon as possible.

QUESTIONER: I have another question, and I'm done. And I'm going to ask you this because there are a lot of reports from Brussels and Athens about this. As you know, there was a conference call with an IMF official immediately after the Eurogroup. I would like to know whether his views express Ms. Lagarde’s as well, because the Europeans say that they are reaching this agreement in the IMF on how to deal with the Greek issue.

Thank you, sir.

MR. RICE: Again, I can be very clear. There is no disagreement within the IMF. The IMF speaks with one voice.

I see another question -- is there another question on Greece in the room? Because I have one online, which I'll just take, and then maybe we can move on from Greece.

QUESTIONER: Just give us some (inaudible). You said that you wanted to do that (inaudible).

MR. RICE: As soon as possible. I've said here before - we don't have a deadline. What we have in mind are to have the credible measures, have the right package of policies and debt relief and to get to that. So I don't have a date for you. There is a question

that is asking when will we prepare the new DSA, and on that, as I’ve said here before, we plan to publish the DSA as part of the Article IV staff report, so that should be coming soon in the period ahead. The precise timing depends on the Board’s schedule, and we will announce that in due course.

And of course, it goes back to what you’ve been asking about, that our DSA, our debt sustainability analysis, will be based on the staff’s assessment of agreed policies and their implications for the surplus targets and growth, as they always are.

So, we’re still discussing, obviously, that package, and you know, we’ll be updating the DSA in that light.

As I mentioned, our assessment remains that the current policies included in the ESM program are only consistent with a primary surplus target of 1.5 percent of GDP.

I’m going to move on from Greece.

QUESTIONER: My question is about Ukraine. What’s next? When can we expect the completion of this review?

MR. RICE: Thank you. Let me just give a little bit of a status report on Ukraine. The IMF has a $17.5 billion extended fund facility with Ukraine. There was a mission in November to Kyiv. The mission had constructive discussions with the authorities on the policies needed to complete the third review under that EFF arrangement.

What I can say is progress has been made. The authorities need some more time to implement policies to ensure medium term fiscal sustainability, including adoption of the 2017 budget, consistent with program targets. Measures to safeguard financial stability and tackle corruption, and discussions on these policies will continue in the period ahead.

As you know, as I mentioned here before, at the same time as the last mission, we also conducted an Article IV assessment, part of our annual health check-up with surveillance with countries, and the outcome of these discussions, as usual, in the form of our staff report, will be presented for consideration of the IMF’s Board in the period ahead. We expect that to happen soon. I don’t have the date for you.

QUESTIONER: Originally, I think it was planned at least before the end of the current year. So now we can safely rule it out, right?

MR. RICE: I just don’t have the date.

QUESTIONER: Even technically, it’s impossible, I think, even if you start the process at this moment, it will probably not be completed by the end of the year.

MR. RICE: It’s probably unlikely.

QUESTIONER: Okay. Now, are you disappointed about that?

MR. RICE: You know, we do our job. We engage. We try to serve the membership as best we can. As I mentioned in a previous context, part of that is the discussion and the dialogue and trying to support our member country in getting to -- reaching the objectives of their programs. So, we are just fully engaged in trying to get it done as fast as possible.

QUESTIONER: And just to make clear, one last thing, you said that the mission also worked on Article IV. So, is that supposed to be a separate Board meeting, or it can be left in the program Board meeting? How does it work?

MR. RICE: It would probably be together.


MR. RICE: Yes. We’ll get you - advance, you know, more information.

QUESTIONER: Obviously, the Article IV meeting is also not expected any time soon since that one is not.

MR. RICE: Yes, we will try to sync these things, you know, coming forward. Good morning.

QUESTIONER: Good morning. A question on India, one on the dollar on India. What is the Fund’s view on this cash initiative or cashless initiative that Modi has implemented? I mean, sounds like there have been some difficulties implementing it. Folks not being able to get money at ATMs, people getting laid off because they’re only paid in cash.

I mean, what is the Fund’s view on, first of all, the wisdom of the move and the way it’s being implemented?

MR. RICE: I talked about this a little bit before. I mean, the overall goal of the authorities in India is to clamp down on illicit financial flows. We are supportive of that broad objective.

Of course, in these de-monetization efforts, which a number of countries go through from time to time, it’s very important that the process is well planned and implemented, so in terms of the implementation, given the large role of cash in everyday transactions in India’s economy, there clearly is a critical need to increase the supply of new bank notes to avoid disruptions and restore household spending and capacity.

So, the priority is to print, distribute, and replace bank notes so that economic activity and particularly consumption spending is not disrupted for a lengthy period of time.

Our understanding is that the authorities, that means the Ministry of Finance and the Reserve Bank of India, are working very hard to replace bank notes and ease the cash shortages in the economy, and with that, we would expect the situation to normalize gradually.

QUESTIONER: Just to clarify, when you say “new bank notes,” you’re not saying they need to roll this back, right? I mean, it sounds like he’s removed the 500 and 1,000 rupee notes from circulation. It sounds like you’re saying they need new notes, but they don’t necessarily need to be at the same denomination that he has removed. Is that a fair assessment?

MR. RICE: Right.

QUESTIONER: Okay. On the dollar, there’s been a pretty notable increase in the dollar since November 8, the dollar’s value. I think it’s on the order of 4.5 percent. This is expected to continue. I mean, in the past there have been concerns about the effects on emerging markets, the ability of corporates in the emerging markets to service their dollar debt.

What’s the Fund’s view on the increase in the dollar and the implications?

MR. RICE: You’re right that the dollar has been strengthening. It’s clearly something that we’re watching, and we will have more to say on that, including the implications for the emerging markets and other countries at the time of the update, so it’s something we are assessing.

Clearly, the U.S. economy more generally, has been improving. Recent data have been positive. GDP, unemployment, housing investment data, all of that - so we will be taking all of this on board and looking at all of this in context, including the value of the dollar, in the context that we will have the WEO update in January, and that will include our forecast on the U.S. economy.

Go ahead.

QUESTIONER: I asked before about the fiscal policy, Europe. What are your recommendations if you have any on this subject? And also, if you can tell us when the mission is going back to Athens?
MR. RICE: Yes, on the last one, I don’t have a date for you on the return of the mission, but again, as I mentioned, we are engaged on a daily basis.

QUESTIONER: A question on ECB.

MR. RICE: Turning to ECB, let me just say the ECB’s decision to date to extend its asset purchase program to the end of 2017 and adjust the parameters, we believe will help toward meeting its price stability objective and maintain necessary demands for it in the Euro area.

We are encouraged also by the ECB’s continued willingness as reiterated today to use all available instruments as needed to raise the inflation until the medium-term inflation rate objective is secured, including by increasing the volume and/or duration of the asset purchase program as conditions warrant.

Again, we are coming with a WEO update in January. Economic conditions, growth, in the euroxone, as I just mentioned, in the United States, appear to be improving, but we will have a bit more on that in terms of detail specifics and forecasts at the time of the WEO update.

I’m going to take just a few online, and then perhaps we will wrap it up. There were a couple of questions on Egypt, which I will take. There’s a question about tariff increases, and the question is, are these part of the IMF program? So, I will take that.

There’s a question about foreign reserves, and there’s a question about the staff report and documents, so three questions on Egypt, where you know, I think, that our Board recently approved a $12 billion extended Fund facility to support Egypt’s economic reform program.

On the tariffs’ issue, what I can say is the recent tariff increases were not part of the IMF program. While we understand the increases are compliant with Egypt’s obligations to the WTO, increasing import tariffs is usually not the best policy to improve a country’s balance of payments or fiscal position.

The question on foreign reserves - what is the IMF’s view on the increase in foreign reserves? Rebuilding international reserves is one of the objectives of the program, and the recent increase in the central banks’ reserves reflects external financial inflows, including from the IMF, I would just mention, but also the World Bank, the United Arab Emirates Commercial Banks, and others, part of those external complementary financing assurances that have been secured by the Egyptian authorities to close the overall financing gap.

Going forward, maintaining a flexible exchange rate regime, which is part of the program’s objectives, having an exchange rate determined by market forces, will improve Egypt’s external competitiveness for exports and tourism, attract foreign investment, and again, will enable the central bank to rebuild its international reserves.

On the question about the staff report, I can tell you that we expect that staff report and other program documents to be published very soon, within the next few days. So, that’s one more important communication that is going to be forthcoming from the IMF, as I mentioned, over the course of the next week.

There’s a question on Italy that I will take. It’s about the referendum, and Prime Minister Renzi resignation’s, how is it going to impact Italy and the micro-economic outlook. Are you worried about a slowdown and about the country’s implementation of reforms?

We, of course, have taken note of the choice made by the Italian people in the referendum on constitutional and institutional reform. Beyond that decision, we think, and have said before, that it’s important that Italy continue and broaden its reform efforts to improve its growth prospects and strengthen economic and financial stability. So, we are urging that reform momentum be continued.

I’m going to take one last question online, which has just pulled up, and it’s from a colleague of Reuters. He says regarding Madam Lagarde’s trial, can you discuss how the Board will consider the verdict? Will there be a debate if found negligent? Does the severity of the penalty factor enter into whether or not she stays as MD?

You know, on that, I want to reiterate the view of our Executive Board representing our membership, so let me restate that. As we have said before, it would not be appropriate to comment on a case that has been and is currently before the French judiciary.

The Executive Board has been briefed on recent developments related to this matter, and continues to express its confidence in the Managing Director’s ability to effectively carry out her duties. The Board will continue to be briefed on this matter.

So, as I’ve said here before, the Board has been kept fully up to date on this process, and throughout this process, the Board has expressed its confidence in Madam Lagarde, the Managing Director, to effectively carry out her duties, and that remains the case to date.

I am going to leave it there for this morning. I thank you all very much. Watch out for those various communications this week, and we will see you soon.

IMF Communications Department


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