Transcript - IMF Press Briefing

February 9, 2017

MR. RICE: Good morning everyone, and welcome to this press briefing on behalf of the IMF. I'm Gerry Rice, Communications Director at the Fund. As usual, our briefing this morning is embargoed until 10:30 a.m., that's Washington time.

I'm going to start with some announcements, as usual, and then I'll turn to colleagues in the room. And I can see that colleagues are already quite active online as well, so we'll go there too.

Let me start with Christine Lagarde, the Managing Director, who on February 12-13 will be in Dubai in the United Arab Emirates to do a couple of things: on February 12, she will open the Arab Fiscal Forum, jointly organized by the Arab Monetary Fund and the IMF. The topic will be “Generating public revenue to build resilient economies”. And on the same day, Madame Lagarde will attend the World Government Summit, where, amongst other things, she'll have a conversation with CNN on the shifting global economic landscape. Madame Lagarde will also meet with the authorities, with women leaders, the private sector, and some young tech innovators in the UAE.

David Lipton, our First Deputy Managing Director, will also be quite busy. He'll be here in Washington. David will be launching a book “Modernizing China: investing in soft infrastructure” at the Center for Strategic and International Studies on Tuesday, February 14. And then David will be traveling to Germany, including for the third in our seminar series on the shifting global economic and political landscape. And you may recall that we did one event on this at the Annual Meetings and we did another one in Beijing in November 2016. Next one is being held at the German Council of Foreign Relations. That's February 21, David Lipton in Berlin.

Our Deputy Managing Director Carla Grasso will be in New Delhi to participate in the official opening of the IMF's South Asia Regional Training and Technical Assistance Center, or SARTTAC. That will be on February 13 and 14. And then Carla will be moving on to Singapore, to meet with authorities at the Singapore Training Institute.

And finally, our other Deputy Managing Director, Tao Zhang, will present the IMF’s latest report on Economic Developments and Prospects in Low-Income Developing Countries at the Brookings Institution, in Washington of course. That will be on Thursday, February 16.

And with that let me turn to questions.

QUESTIONER: Gerry, I have a long question. I don’t do that often as you know. I’m sure you know that Mr. Regling in an article published today in the Financial Times argues that, and I quote, “If the agreed reform program is fully implemented, debt sustainability is within reach.” He also asked a question on the debt sustainability, namely why does the IMF come to a different conclusion? He gives the following answer: “The Fund has so far not been able to integrate into its analysis of Greece fundamental factors that set a member of the eurozone apart from other countries in the world.” What is your answer?

MR. RICE: Let me take a few questions on Greece, as I imagine there might be more.

QUESTIONER: Given all these statements coming out from Europe, I can't really understand what Poul Thomsen meant when he said that the gap between the IMF and the Europeans is closing regarding the debt and the fiscal targets. And also I have another one: How easy will it be for Poul Thomsen to go to the Board with a proposal that includes fiscal targets of 3.5 for the period after 18, when most of the Executive Directors agreed that the preferred target is much lower and that Greece does not need additional fiscal consolidation at this time?

QUESTIONER: I want to ask you if Mr. Thomsen traveled to Berlin last week. There were many reports that he went to Berlin and met with Mr. Schaeuble. There are reports in Europe saying that they even agreed on how to handle the debt issue. Kindly tell us if they met and if they discussed Greece.

QUESTIONER: German Finance Minister Schaeuble just said today that he was ruling out any debt reduction for Greece, saying that it was forbidden by the EU Treaty actually. So I was wondering, it seems that you are increasingly at odds with your European partners, and how can we expect to find an agreement on remedies while you don't seem to agree actually on the diagnosis?

MR. RICE: Anything more on Greece? There is one more on line from CNN Greece, who is asking: Executive Directors at the IMF looked forward to discussing the operational framework for Fund collaboration with monetary unions. When do you expect to have this discussion and why is this issue raised now?

So let me try and take that clutch of questions. For those who have not been following Greece quite so closely as colleagues here in the room, the IMF actually did a lot of communicating this week on Greece. We had a meeting of the Board earlier this week on Monday on the Article IV Consultation, which is our annual checkup on our membership and economic conditions facing them, and also discussed was what we call an ex-post evaluation, a look back at the previous program. In the usual way with the Fund we published all these documents. They're available to you on the website. So with that, let me try and take some of these questions.

Perhaps I should caveat by just noting that the Board discussion on Monday was not about the program or the IMF participation or potential participation in a program, it was more a look at the overall economic conditions facing Greece in the context of our Article IV. But in terms of possible participation by the IMF in a program, we have said repeatedly publicly that our strong preference is for a primary surplus target of 1.5 percent and that this should be accompanied by significant debt relief. We've referred to this as the two legs of the program that we think are required. We have also said that we think this target of 1.5 percent can be attained by the policies envisaged in the current European Stability Mechanism program. In short, the IMF is not asking for anymore austerity in Greece. That's the baseline of the IMF’s staff position. I know we've said it here before.

We have also said before that if it is at the end of the day the firm desire of the Greek authorities and the European authorities to go with the 3.5 percent primary surplus, we believe that such higher level of primary surplus is sustainable, but for a limited number of years, and only if underpinned by high-quality structural reforms and by growth-friendly measures. We can talk a bit more about what that actually means, if you like. Although, I think it’s been explained in great detail by Poul Thomsen and others. But, again, our strongly desired preference is for the 1.5 percent. And if you look at the summing up of the Board that was issued on Monday, clearly that’s the desired preference of most Executive Directors as well. That’s very clear.

A couple of other things, maybe I can just deal with them quickly. Poul Thomsen was in Berlin for a staff visit. I can confirm that. He did have meetings with the authorities. I don’t have information as to whether he met with Minister Schaeuble or not. But he was in Berlin and met with the authorities.

I haven’t seen the statement you referred to from Minister Schaeuble in the press, so I won’t comment on that. However, it sounds to me like a very consistent statement with what Minister Schaeuble has said before. It doesn’t sound like something new to me. He has said consistently that a debt haircut is not possible. But there’s debt relief and there’s debt haircut. Again, I haven’t seen the statement, so I’m not commenting on that. But it sounds to me like it’s a perfectly consistent statement.

You asked how can we say the gap is closing in terms of the different views on Greece. I think if you take a seven years’ view, which is going back to 2010, and you look at the course of discussions and the issues, I think you can see that there’s more agreement, more consensus around certain issues in terms of reforms. Even in terms of the broad issue of debt relief, if you look back a few years ago, I think you could well argue that there’s been a closing of the gap. There are still differences, clearly, but I think you can argue that there’s been more of a coalition around some of the core issues.

And that brings me then to the final question and it’s the first question you asked about the statement by Mr. Regling this morning in the press. I’ll say a couple of things on that. Number one, again, we issued a lot of information on Greece this week. Included in that information was our debt sustainability analysis, so we stand by that debt sustainability analysis. And most of the Executive Directors are on the record as supporting it too. But on the statement from this morning: I think we would agree that Europe has provided extraordinary support to Greece, and we would agree that it’s encouraging that Europe indicates and reiterates again that it will stand by Greece. We, obviously, welcome both of those things. But I think it’s important to say that this support is not unconditional. It depends on commitments to reforms. It depends on implementation of reforms. It depends on targets being met. And I would add that we have seen twice in the past years, in 2012 and 2015, that Greece has faced a crisis precisely because targets had not been met and Europe withheld support. And on those two occasions it led to the talk of Grexit and crisis and all of that.

So, again, the support is not unconditional, and we’ve seen that in the past. And that brings us to the IMF communication this week: It’s important that targets be realistic. And you saw the sense of that in the summing up of the Executive Directors this week: that targets should be realistic. I think that’s what the IMF is proposing.

QUESTIONER: Just to clarify two things. One, the Board did discuss, as part of the ex-post review of the second program, any potential future financial agreements with Greece that the Fund could consider. So in that sense the Fund did discuss potential engagement, not on a specific program, but just generally speaking. Just a note on that.

But you said, as we’ve heard before, that there’s two legs to the program. There’s the reforms and then there’s the debt relief, and the reforms should be accompanied by debt relief. It’s the word you used: accompany. Now, if I’m taking my wife on a date and I say she’s accompanying me. If I’m making reservations I mean that she’s actually coming with me at the same time. I do not mean that I’m going to arrive first and that she will come an hour, two hours later.

I wonder if you can clarify what you mean by “accompany”? Do you mean “at the exact same time” or do you mean something more -- something that would estrange me with my wife?

MR. RICE: I would never say anything to estrange you from your wife, I hope you know that. I don’t want to pars words, but let me then say -- instead of accompanied -- complemented by debt relief. I don’t think we should get too overly worried about words. We’ve said for a long time: it’s the two legs of the program. We need the economic reforms, complemented by significant debt relief. I’d leave it there.

QUESTIONER: But to be clear, in this sense we’re not parsing, because there is, clearly, an onus on Athens to deliver, right? And you are also providing an onus on Germany and the rest of Europe to deliver? The sequencing is critical here, in terms of political feasibility, which is a key component of any program. So in terms of sequencing, is the IMF asking for that accompanying or complementary debt relief at the same time that Greece approves these reforms or at a later date?

MR. RICE: Again, I’m not going to parse words. And I think it’s a matter for the discussions and negotiations as to what the precise sequencing of reforms and financing and debt relief might be. That’s always the case with IMF programs. So I wouldn’t read too much into parsing specific words.

There was one question I didn’t answer about monetary union from our friends at CNN Greece. And the reference there is to the last line of that summing up from the Executive Directors where it says: “Directors look forward to discussing the operational framework for Fund collaboration with monetary unions.” This is not a new issue. This statement from the Executive Directors was in the context of their comments on that ex-post evaluation that I mentioned. It’s actually in the work program and the discussion is scheduled for later this year.

It was also something that came up in our Internal Evaluation Office report recently, as I think you know, on the euro crisis. It was something that they had recommended so we’re following up on that. It’s not a new issue.

QUESTIONER: You said a while ago that if the 1.5 percent is agreed, then you would not ask for more austerity. But Poul Thomsen said two days ago that the pension and tax reforms are necessary regardless of the targets. In the short term, these reforms will lead to austerity though!

MR. RICE: We think that those reforms are necessary for the modernization and the competitiveness of the Greek economy. But I think we have also said that those kind of reforms can be legislated now, but implemented only in the near future, precisely to give time for the economic recovery to firm up. So we do think they’re needed for the viability of the Greek economy, but we are asking for them to be legislated now, but implemented a bit later.

QUESTIONER: I preface my next two questions in, first, the acknowledgement that the IMF has made major gains in terms of transparency and does seek to do so as evidenced by Madame Lagarde’s willingness to go and discuss the transparency of the Fund herself yesterday. But two questions. One, was the Fund transparent enough about China’s exchange rate policy over the last two decades? Did it play its truth teller role sufficiently in that regard? And, secondly, as you’re aware, the Board changed the timeline for release of Board minutes to three from five years on most cases with very few exceptions. And, yet, the access to the Board minutes only go up to 2010, and we’re in 2017, which is seven years later. Can you help me to understand why there’s a discrepancy there or help to solve that problem?

And then secondly, how concerned is the IMF about the global exchange rates that we’re entering into a period of currency war?

MR. RICE: On the technical aspect of what’s on the website, maybe we can follow up later on that. I’d like to check and, hopefully, be able to clarify that for you.

On the issue of China. That’s a big question, going back over 20 years. Assessing exchange rates, of course, is a core function of the IMF. It’s something that we do on an annual basis with each country in the context of the Article IV consultations; we are doing that every year. It’s also something that we do, taking a more holistic view and a multilateral context, in the context of the External Sector Report.

All of these we publish in a very transparent way so that they are open to criticism and they are open to question. All that we can do is the best due diligence that we can, make the best assessment that we can, and go public with that -- nothing is done in secret, it’s open to scrutiny. I think that’s the best that we can do in that context.

I would say that yes, I think we have been evenhanded and objective in our assessments, not only in the case of China, but across the membership.

On your last question: I don’t see evidence, firm policy decisions made, that would lead us to suggest that we are heading for currency wars. I think that would be premature.

QUESTIONER: I have a question related to the U.S. and related to the travel ban. I was wondering, how does the IMF see any restriction to immigration in the U.S. and do you think it could negatively impact the labor markets? The Fed recently pointed out that there were some labor shortages, especially in the western part of the country. Are you concerned about any immigration restriction in the U.S.?

MR. RICE: I would again say that this is something that is still playing out, as you know, including before the courts. I think it’s way too early to speculate what the economic impact might be. In the course of time, depending on how this is actually implemented and how it plays through, it’s something that we would be looking at: we’d be looking at the economic implications. But right now, it’s just too early to speculate.

QUESTIONER: I am sorry; I wasn’t talking about the travel ban actually. I am talking more broadly about any restrictions to immigration, so it’s not a question of speculation, it’s about assessing if immigration restriction would have any impact on the U.S. economy and labor markets. I am not asking you to speculate on the travel ban that’s currently being discussed before the courts.

MR. RICE: Again, it depends what you mean by restriction on immigration and what policy we are talking about here?

QUESTIONER: Restricting the entry of migrants that would come to the U.S. to work actually.

MR. RICE: Again, I am not aware of the specific policy on that. There has been the travel restriction that is being discussed before the courts and I think we have to wait and see how that plays through and how it gets implemented. What I would say is that we have done a lot of research and work on the topic of migration and refugees, including recently, and the IMF has published all of this. We’ve said that we think the free movement of goods and services and people in general can bring economic benefits. This is all on the record. But I think you are referring to the executive order and its economic implications -- it’s still playing through and it’s too early to speculate on that. It’s something that we would be assessing once we actually know what it is that is being proposed and implemented.

QUESTIONER: I have a couple of questions. On Ukraine, the Managing Director yesterday explained to us the situation with the program, so I am not asking about the program. But even for the countries with the programs, the IMF is supposed to do Article IV consultation every two years. The Ukrainian one is long overdue, when is it coming, why the delay?

MR. RICE: You know that we have been holding discussions with the Ukrainian authorities within the framework of our surveillance of our member countries, and we expect the outcome of these discussions will be presented for the consideration of the Board in a staff report -- jointly with the third review -- in the period ahead. You know this but for others, we are in discussions with the authorities on the third review of the program that Ukraine has with the IMF. What I am saying now is that we expect that the Article IV report will be presented jointly with the third review when that comes to the Board, and we are expecting that soon.

QUESTIONER: And on Moldova, the President of the country visited Brussels a couple of days ago and made a few statements to the effect that he is ready to support the abrogation of the association agreement with the EU. He says that the situation in the economy and the country in general has actually deteriorated with that agreement. And he wants to move in parallel to an agreement with Russia and the neighbors. Two questions, first, is the IMF aware of these assessments, does the IMF agree? The IMF obviously has a program with Moldova, so do you agree with the assessment that life is getting worse, not better, under this agreement? And secondly, how can it impact the IMF program with Moldova?

MR. RICE: It’s clearly a sovereign matter in terms of into which agreements and regional frameworks countries enter. We have said that we think that economic integration has been an important contributing factor to growth and prosperity in many countries. The Moldova Association Agreement with the EU, which you refer to, has been in place for a relatively short time, since mid-2014. There were a lot of different factors at play in terms of the economic impact on Moldova, both domestic and external, which I think complicate an assessment of its benefits.

On the IMF part of your question, just to remind people that the IMF approved a three-year Extended Credit Facility and Extended Fund Facility arrangement late last year for about 179 million dollars and we are still in discussions as to the next steps with the program. The Moldovan authorities have indicated they’re committed to the economic reform program supported by the IMF. The mission for that first review under the program will be from February 14 to 28, and they will be holding discussions with the authorities and assessing the program implementation at that time.

QUESTIONER: So, at this point, from what you just said, nothing has changed, basically?

MR. RICE: No. I think we need to wait for the mission to go into the field and to have the discussion with the authorities. Of course, we'll have our usual statement, and follow up communications at that point.

QUESTIONER: I have a G-20 question, and a follow up on Ukraine, and two Africa questions.

Reuters today, and perhaps some others, reported that Germany is going to seek to press the G-20 to reaffirm its commitment to free trade, resisting currency wars, fighting climate change, when the G-20 process in Germany gets going this year. I'm just wondering if the IMF is supportive of that, it sounds like it’s along the lines of what the IMF view has been on these topics: basically try to avoid having protectionist language, which perhaps the U.S. may be seeking to include.

On Ukraine, can you just clarify more specifically when the decision will come for the next tranche of aid. Do you anticipate any delays in that? What might be the source of those delays?

And then, finally on Mozambique: can you give us an update on the debt audit there? Kroll is working on that, do you anticipate they are going to be asking for another three months? Would you accept the outcome of a partial audit if there's not enough time to complete that?

And also on Ghana: the new government there has said that it is going to miss its fiscal deficit reduction targets. What's the IMF's reaction to that? Will it upset that program?

MR. RICE: On the issue of trade, I haven't seen the German statement to which you refer, but we have said many times that we think that well-implemented, fair trade agreements are an important source of economic prosperity. And it's one to the tenets of the IMF, and we've repeated this publicly very recently: that

we think trade that is free, fair, well implemented and benefitting all, is an important factor in prosperity for the world. So we would like to see those policies pursued.

On Ukraine, in addition to what I said, you may have seen that we've said recently that good progress has been made on the policies needed to complete the third review under the program arrangement that the IMF has with Ukraine. We are in close contact and discussions with the authorities. In fact, Madame Lagarde met with President Poroshenko a few weeks ago, in the context of Davos. There are few remaining issues that need to be resolved. It's related to finalizing the Memorandum on the Economic and Financial Policies and the timing of some upcoming measures. Assuming that those remaining issues can be resolved, we expect to propose the completion of the third review to our Board in the coming weeks.

There's also a question online on Ukraine It's related to your question: the Social Minister has expressed opposition or disagreement with IMF, urging the raising of the retirement age, and what's the issue there related to the next disbursement.

I would say the authorities agree on the need for comprehensive pension reform to ensure the sustainability of the pension system, and to be able to provide better viability of the pension system and to be able to provide better pensions to retirees. This includes the consideration of all options to move toward a more modern and fairer system with clearer rules that provide incentives for longer employment and later retirement.

You had asked about Ghana: there is a staff team on the ground in Accra right now and they will be discussing these issues with the authorities. As you know, the part of the context here is that in January the authorities informed the IMF staff of the previously undisclosed expenditure commitments as related to the deficit issue you raised, and of course this is something that will be discussed this week. We expect that the program will continue, but again, the detailed discussions are ongoing and we will issue a statement at the end of that mission.

On Mozambique, let me tie your question to a question that is online: “Please provide IMF’s response to the critique that a new IMF program should only be agreed when all those responsible for the undisclosed debts are held to account, including banks, which facilitated the lending, and that the burden of payment must not fall on the Mozambique people.”

The IMF has been strong in its view as to remedial steps that need to be taken to address the issue of undisclosed debt. As part of that effort, and in agreement with the government of Mozambique, there is an audit underway. The contract for this independent audit was signed in late November, between the public prosecutor and Sweden, which is the donor financing the audit in consultation with the IMF. The audit is underway and to the best of my knowledge is progressing.

QUESTIONER: Iceland adopted a formal policy that some are saying are discrimination against foreign investors -- especially when it comes to the Krona -- American investors as well. Their government says that the IMF is supporting this policy. Does the IMF support policies that allow governments to discriminate against foreign investors?

MR. RICE: Well as a general -- let me just say this.  I’m not familiar with those statements from the Iceland authorities nor the details of the issue so maybe we can come back to you after the briefing on that if we have anything.  In general, no, we do not support those kinds of restrictions.

The following answer was sent to the journalists after the conclusion of the press briefing: What Iceland is doing, so to speak, is to advance its effort to liberalize and eventually eliminate its capital controls. The effort has included a series of auctions over 2011–16 to allow offshore investors to exit the country; the resolution in early 2016 of its bank estates; and, more recently, steps to ease outflow controls on residents. The IMF has been and remains strongly supportive. Our most recent report on Iceland, the Staff Report for the 2016 Article IV Consultation, published in June 2016, sums up staff’s advice in this area as follows: “Further capital account liberalization should be executed cautiously. The final effort to resolve the offshore króna overhang is appropriate before attention turns to residents. Permitting significantly more outward investment by pension funds is a logical first step for residents, and should be matched by steps to strengthen governance and risk management provisions in the Pension Fund Act. A strategy should be drawn up to calibrate the easing of restrictions on households and firms. This should embed concrete commitments to further improve bank oversight.” The Icelandic authorities’ cautious and phased approach has been consistent with Fund advice. There is no impending “trouble” between Iceland and the IMF.

QUESTIONER: Can you tell us when the mission is going back to Greece?

MR. RICE: I don’t have a date for you.

QUESTIONER: I understand that you said that concern about currency wars would be premature at this point. Perhaps I need to rephrase my question. President Donald Trump has said that there may be cause to intervene in the U.S. dollar if it appreciates too strongly. He has said it is too strong, it needs to be weaker. He has consistently attacked China’s currency as undervalued, and Japan’s, and he called Germany a currency manipulator. In this environment, with increasing trade protection which the IMF has talked about, how concerned is the IMF that currency volatility or currency intervention could destabilize the global economy?

MR. RICE: Again, I think we can only assess these issues once policies have actually been announced and are implemented -- and then we will make an assessment. In terms of issues of trade and currencies, I think our views are very well known -- we talk about those things all the time. But on the specifics of your question, we have to wait and see.

QUESTIONER: I have kind of a housekeeping question. It relates to the U.S. I was reading an article saying that currently the U.S. doesn’t have a confirmed representative at the Board. If so, does it prevent the Fund from making big decisions, especially going back to Greece for instance.

MR. RICE: I have no indication that changes in the U.S., the incoming administration, has had any effect on our position on Greece -- I’m not aware of any evidence of that. On your other question, the situation regarding U.S. representation at the IMF Board has not changed -- it is exactly the same as it has been for quite some time, which is that the position of the Executive Director for the U.S. remains vacant. However, we have an appointed Alternate Executive Director for the U.S., Mr. Sunil Sabharwal. So again, the situation has not changed, and what I can tell you is that this office is functioning and continues to play an important role in the business of the Fund.

I am going to take my last question online because it takes us to the part of the world that we have not visited and that is the Middle East North Africa: “The government of Tunisia has serious difficulties to respect its engagement vis–à–vis the IMF and to retrieve a new growth path. Is there a chance to revise the actual arrangement or to replace it by a standby arrangement?”

I would just remind that the IMF has a program, an extended fund facility with Tunisia, for about 2.9 billion dollars, to support Tunisia’s economic reform program. The recent IMF mission had constructive discussions with the authorities on actions needed to ensure the health of public finances, increased public investment and the move ahead with delayed structural reforms in support of stronger job-creating growth. And we believe that these actions, if sufficiently strong, can pave the way for a review mission under Tunisia’s arrangement with the IMF in the coming months.

Let me leave it there. Thank you all for coming. Thanks to our colleagues online and we’ll see you in a couple of weeks.

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