MR RICE: Good morning everyone and welcome to this press briefing at the International Monetary Fund. I'm Gerry Rice of the Communication Department and, as usual, this morning this briefing will be embargoed until 10:30 a.m.; that's Washington D.C. time.
Let me begin with a few announcements and I'll come to your questions in the room and take a few questions on line.
Upcoming events -- On March 14, that's next Tuesday, we will be releasing our G20 Surveillance Note. This will be accompanied by a blog by Christine Lagarde, Managing Director; and this Surveillance Note will set the stage for the IMF's views going into the G20 Finance Ministers and Central Bank Governors meeting which is going to be in Baden-Baden, Germany, later that week. So, those of you who follow the Fund, you know that this is a regular occurrence and the G20 Note is something to look out for. That's next Tuesday.
On that same day, Christine Lagarde will be in New York City and she will be participating as a member of the UN's high-level panel on women's economic empowerment. So, that's the same day next Tuesday.
A couple of days later then, March 16, Christine Lagarde will be participating in an event with the IIF, that's the Institute of International Finance, and she'll be in a discussion with Tim Adams who is the president of the IIF, during their conference, which is being held in Frankfurt, Germany, related to the G20 meeting, and under the title of that discussion, the G20 agenda under the German presidency -- so, busy days.
On March 17 and 18, Christine Lagarde and David Lipton, First Deputy Managing Director, will be participating in the G20 meeting that I mentioned in Baden-Baden. So, that's the Managing Director's schedule and activity next week.
Let me tell you that also next week on Monday, Maury Obstfeld, our Economic Counselor, will be releasing a paper on labor and product market reforms in advanced economies; fiscal costs, gains and support. Maury will be presenting that paper at a conference in Berlin at the German Institute for Economic Research; and we will be getting all this stuff to you in the usual way -- to media friends -- under embargo and in advance.
Finally, let me mention that on March 18 and 20, there will be the China Development Forum in Beijing, and our Deputy Managing Director, Tao Zhang will attend the CDF in Beijing and represent the Fund. I mentioned the Managing Director's blog a bit earlier -- and IMF's been quite active on the blog front recently -- so, I'd like to, by way of conclusion on this part, draw your attention to a blog that we will be publishing today, titled Public Spending on Healthcare Under IMF-supported Programs. You may have seen some commentary on this issue in recent days, recent weeks, so we thought it useful to set down some factual analysis in this blog which is by Sanjay Gupta and Baoping Shang. So you can, perhaps, look out for that today.
Thanks very much.
Since we have some new guests with us, let me turn to you and give you the first opportunity today -- welcome.
SPEAKER: Thank you, Gerry. Good morning. I have two questions. First, China's premier recently said in the Country Work Report that GDP gross target over 2017 at around 6.5 percent, a little lower than the tax range of 6.5 to 7 percent last year. It seems to me that Chinese policy makers would like to tolerate a little slower growth rate to manage financial risks. I'm wondering could you update the Fund's view of China's efforts to balance stabilizing economic growth and also concerning financial rates.
And the second, U.S. President Trump's trade advisor Navarro recently said in a speech that trade at that stage became a threat to economic growth and the national security. As many economies have strongly rejected his analyst, I'm wondering -- I'm quite confused -- how the Fund looks at the trade to tax issue. Thank you.
MR. RICE: Thank you very much. On China, and your question about the growth target, we believe China's current strong economic momentum is likely to make 6.5 percent growth for 2017 achievable. Having said that, we continue to advise less focus on high GDP growth targets, per se, and more focused on tackling excessive credit growth, hardening budget constraints on state-owned enterprises, and boosting the social security system. More broadly, the work report highlights China's efforts to maintain stability while guiding the economy toward a more inclusive, environmentally-friendly, and sustainable growth path; and determined implementation of the envisaged reforms will help achieve this path. We also welcome China's stated strong commitment to multilateralism and international trade.
In terms of the reforms and what we think, you know, needs to be done, I'd say, you know, while impressive progress has been made, it has been uneven on both rebalancing and reform; and we see more on switching from industry to services, but less on tackling credit growth. We see more on liberalizing financial markets, but less on improving governments and hardening state-owned enterprise budget constraints. As a result, vulnerabilities are still rising and buffers are eroding. So, this calls for, in our view, more urgency in the implementation of the reforms. Let me add that, of course, the Chinese authorities, we know, are well aware of the challenges they face, and have made clear, including in various policy announcements and the latest five-year plan. So, again, the urgency of implementation has become greater and we've recently noted, for example, increased regulatory action against financial risks. So, that's what I'd say on your questions about China.
On your questions on trade -- let me step back a bit -- you know, we've said here and in many other places that, the IMF sees trade as an engine of growth for all countries -- and, you know, you mentioned the U.S. -- for the U.S., and the global economy. And in terms of your question about deficits, trade deficits specifically, you know, in the IMF assessments, we look at broad external accounts, including real overall trade and current account balances. We do it in a multilateral consistent way, and this forms the basis of our assessment in the External Sector Report, the ESR, which we publish every year and there will be another one updated -- upcoming in a few months' time.
So, just to sum up, trade deficits and surpluses are part of our assessment. So, trade is part of the growth equation, but not the only part. And, I think, the advantage of the IMF analysis, again, is that it takes this comprehensive approach. I hope that helps.
QUESTIONER: Do we have a date for the board on Ukraine? Because I understand the Ukrainian finance minister was here, so if you could give us any idea of what was accomplished with him would be helpful.
MR. RICE: Yes. The finance minister, Danylyuk, visited the Fund this week during his trip to the U.S., and actually, he met with David Lipton our First Deputy Managing Director and staff for discussions on policies going forward.
The board meeting has been scheduled for March 20. Okay?
QUESTIONER: You know, it’s a broad question that I think underlies everything that you basically do or needs to underlie everything that you need to do. This past Sunday I donated some clothes to my local church, and it turned out that they were sending out those clothes to Ukraine. And they said there is a dire need in that country, so giving that sort of help.
And what surprised me the most is they specifically cited tariffs, and how do you mean? Like, they say the tariffs have become so high for energy, for energy, basically. That people cannot afford food and clothing. And I said, you know what? Next time I go to the IMF I’ll let them know that you said so unprovoked, and I’ll ask you, are you aware of that situation? What can be done? Is this situation somehow envisioned with your plans with Ukraine? The new ones that you just discussed with Danylyuk? And what’s in store for the Ukrainians in terms of those tariffs going forward and in terms of their pensions? Thank you.
MR. RICE: Yes. We are absolutely acutely aware of the challenges facing Ukraine and the Ukrainian people, and, indeed, that’s why the Fund has gone to, I think, such extensive efforts in terms of its support to Ukraine. I think you know that. That we have approved a $17.5 billion facility for Ukraine in the recent period.
And I think the good news was last weekend when we were able to announce that the IMF staff and the authorities have agreed on the third review of the program. So in terms of, if you look at the history of IMF support for Ukraine, I think this is as far as we have ever come in terms of progress in programs with Ukraine.
And remember, the whole point of the program is to assist the Ukrainian government and the people to meet the severe challenges that you described and get Ukraine back on the path of sustainable and inclusive growth, jobs, and all that goes with it. That’s the whole point of the program.
On the pension --We think that the pension reform is crucial to ensure the sustainability of the pension system. And, indeed, to be able to provide better pensions for retired people and for those most in need. And I think the authorities agree on the need for comprehensive pension reform. So we’re working together with them on designing that appropriate pension system.
QUESTIONER: Lastly, the same lady, the same woman I was talking to said you know what in terms of the -- when I mentioned the IMF. She said, you know what? We’ve made some calculations. I don't know whether they did it themselves. They probably -- she picked out, picked it up somewhere in the press, I’m sure. But, apparently, in Ukraine people are making a calculation between the amount of money provided by the IMF under the program that you described and the amount of newly found riches that the deputies, parliament deputies, are declaring now in their income declarations, tax declarations.
Again, if it’s a real problem, if it’s a perception problem I have no way of knowing. But I think you need to know that at the IMF.
MR. RICE: Well, I take that very seriously, and we do at the IMF. But, you know, the IMF has stringent guidelines and safeguards on how IMF funds are used and very carefully tracked. And, you know, the IMF’s been doing this for more than 70 years, and I think the record in terms of the governance of IMF funds and financing is very strong. And that’s something we are vigilant on an ongoing basis.
QUESTIONER: Let me ask you about Brazil. Brazil faces some challenge. Brazil faces some challenge as far as growth and the GDP 2016 decreased at 3.6 percent. What would be the main challenge as far as a fiscal and monetary policies that Brazil would face in near term?
MR. RICE: Thank you. So just on the economic status as we’ve said before on Brazil is still facing a challenging economic situation as the just released Q4 data underlines. Nevertheless, we still think that the Brazilian economy will come out of recession this year. In the April World Economic Outlook, we will be updating our growth forecast for Brazil, as well as others, and incorporating information on that last quarter in 2016 and other factors.
On the reform efforts and, in particular, the fiscal policy you mentioned we welcome the authorities’ emphasis on addressing the unsustainable trajectory of debt and the decision to act on the spending site where many of the sources of budgetary imbalance can be found. The passing of the Constitutional amendment on the federal spending cap represents an important progress in that regard.
Now, going forward, we believe it will be important to enact social security reform to bolster the viability of the spending cap and to ensure that social security can be there to support future generations. And we think those measures will boost confidence and spur growth.
QUESTIONER: Just to come back to the G-20 next week and maybe ask you to give us a little bit of a glimpse of the surveillance report that’s coming, and the question of trade deficits raised by my Chinese colleague. The administration, the new administration here in the United States seems to have a view of the world that frets more and more about global economic imbalances, not just with China, but also with Germany and Mexico in the form of trade deficits.
So my first question is does the IMF see a growing problem from economic imbalances in the world or are those headed in the right direction with a mind to the 2008 crisis and the preface to that?
And secondly, Steve Mnuchin, the Treasury Secretary, in his first call with Madame Lagarde mentioned the idea of currency manipulation in IMF surveillance. Do you expect that to be on the agenda in Baden-Baden? Do you expect any new initiatives or new direction in discussions there on currency and currency manipulation?
MR. RICE: Thank you. On the G-20 agenda and what might be discussed there, you know, from the IMF side I think our focus will be on growth, maintaining the growth momentum and making ways to make growth more inclusive. I think that will be our priority, and the second one of overall strengthening global integration. I do not have, you know, specific information on whether currency manipulation will be on the agenda, but I mean, I would expect that the ministers and the governors will be looking at that global outlook and the international financial architecture, and, you know, financial regulation, international taxation, and other issues. I’m sure that exchange rates will be, you know, a topic of discussion as well. Just to remind that, you know, not related to Shawn’s question, but as part of the Germany presidency of the G-20, Africa is also a big part of that agenda.
You know, on imbalances this is something that the IMF is looking at on an ongoing basis, and, you know, we look at that in terms of a country basis on Article IVs, as you know. And we look at it more broadly when we do this external sector report that we’ll be publishing later this year. So I don’t have anything for you today specifically on imbalances, but just maybe to point toward the G-20 discussions. And following on that, of course, we’ll have the World Economic update in April and the spring meetings of our membership. And then as I mentioned, Shawn, we’ll have the external sector report coming up a bit later. I think that’s the sequencing of where we will be giving our views on imbalances.
Let me take Greece and then I’ll come a few more in the room, and then I see we’re piling up online and I do want to get there. Eleni, you seem to be the representative of Greece today.
QUESTIONER: Any Greece update on the status of the negotiations in Athens? What are the difficulties on ground, in general?
MR. RICE: Look, I’m going to make a statement on Greece and I’m not going to say anymore on Greece beyond that. Okay?
And the reasons is, you know, the standard practice for the IMF. The mission is in the field and when the mission is in the field actively discussing we try not to interfere with that. So I want to be fair to those involved in the discussions, the Greek authorities, European partners, IMF staff, and not say very much.
But what I can say is there has been progress in some important areas and we welcome that. However, differences remain in important areas. Again, I won’t get into the detail of that. The last thing I would say is that it’s still too early to speculate on when an agreement might be reached and there is still much work to be done. I’m talking about the IMF reaching an agreement in the negotiations that are ongoing. Okay?
QUESTIONER: I actually have just a quick Greece follow up. I know that you’re somewhat constrained right now, but.
MR. RICE: I’ll try to help, but I’m not sure.
QUESTIONER: I do have to ask though what extent have specific figures on the level of a possible IMF contribution to Greece been discussed at the board level?
MR. RICE: I’m not aware of any discussions on that topic at the board level. Okay? And I think you asked me this question two weeks ago, right?
QUESTIONER: Oh, did I? Okay. Just, you know, keeping you on your toes. I also have a Mozambique question. So, Exxon has purchased a substantial stake in a gas project in Mozambique and, you know, obviously this will have tax implications for the government, probably positive tax implications. I'm wondering if the IMF has a view on that, whether it changes the government's fiscal picture in any way; if it changes the Fund's view of that restructuring there.
MR. RICE: I just don’t have anything on that issue
QUESTIONER: Do you have anything -- Do you have anything -- What's your most recent, the most recent view you have on Mozambique?
MR. RICE: You know, I think we've talked about it here before; Mozambique faces a very challenging situation. Mozambique defaulted, as you know, in January on a bond payment, a coupon payment. What I can tell you, is an IMF Mission was there. We are very much engaged with Mozambique to help them face the situation. We have been, as you know, emphasizing the importance of the independent audit to take account of the spending that was discovered a number of months ago. So we continue to follow that independent audit, and in that context pursue discussions on the possibility of a new IMF-supported program. That’s probably as much as I have for you on Mozambique. QUESTIONER: I just want to follow up on the G20. I'm sure you’ve seen reports from some of our news agencies about an early draft of the G20 Communiqué which did not include explicit pledges against protectionism and competitive currency devaluations, although made references to previous -- I mean any previous pledges. How important is it for the IMF -- I mean, this language was sort of negotiated long and hard over several years, how important is it for the IMF to maintain that language in there, since this thing a way to go before we get to the final version?
MR. RICE: I'm not going to comment on different draft communiqués, as you might expect; or wording, I'm going to leave that for the ministers and the governors there, next week. But we've said, again, as I've said earlier many times, that we believe that trade has been an engine of growth for the global economy, and at the same time we need to pursue policies that better extend the benefits of trade, openness and integration to all.
So, I think we are clear, the goal of open trade conducted under fair rules are well enforced, is an IMF objective, I think it's a shared objective of the membership. And we think that well-implemented trade agreements can be an important source of, again, economic prosperity for all. So, the objective of open trade, conducted under fair rules well, enforced. And that’s the IMF view on that.
QUESTIONER: Has the IMF seen any effort from the Trump administration, the New Trump administration to change sort of the status quo on trade and currencies?
MR. RICE: I think, we need to wait and see and what actual announced policies will be. So, no, I haven't seen anything specific on that in terms of policy. So, I think we want to wait and see before we would make any assessment. Are we on trade?
QUESTIONER: One of the consistent messages coming out of the G20 has been urging its members to resist protectionism, since the crisis. How important is it from the IMF's perspective for the G20 to keep up that message on protectionism?
MR. RICE: Again, I'm going to leave G20 statements to the G20 next week. You know, I would just say, the IMF has supported for more than 70 years an open trade system, so that continues to be our position, and our overall view. But again, I don’t want to speculate on what might be said at the G20 or otherwise. I'm going to leave that to the G20.
QUESTIONER: Thanks. Thanks for the opportunity. Back to China's reform needs, you mentioned during last press briefing that, regarding to China's transform and balance of the economy, there remain a number of reform areas where more needs to be done, including China's external trading capital flows, which remains some distance from a sustainable balance.
I wonder what the external trading capital flows you are referring to? Is it an FDI, or it's a general capital outflow? And can you elaborate more in specific, on any other reform areas needed to be done that is sustainable or unsustainable?
MR. RICE: Yes. You know, I think I covered this in the -- maybe you came on a bit later, but I actually responded to a question on China reforms at the beginning of the briefing, so I don’t want to repeat that. Maybe, you know, I can just refer you to that. Again, you know, the IMF has been encouraging China's own efforts to transform and rebalance its economy for many years.
And as I said earlier, the effort has made major progress on many fronts, including the external sector, where the large current account surplus of a decade ago has been much reduced. But this effort is by no means finished and, you know, many challenges ahead, and I mentioned some of those again in my earlier statement.
On capital flows, you know, capital flows are a natural consequence of China's progress in liberalizing its capital account and changing global financial conditions. And, you know, I think the capital outflow would only become a concern if it would give rise to a disorderly adjustment in the exchange rate and the economy more broadly, and we don’t see such a concern warranted right now.
I am going to go online to be fair to those who are watching us online, and take a few questions there. And it's good, because it lets us get to some other parts of the world as well.
There is a question of Cameroon, from Matthew Lee, "After the Mission what is the status of talks for a program; and since the IMF cited civil unrest in the neighboring Central African Republic, please state the IMF's awareness of civil unrest and arrests in Northwest and Southwest Cameroon? And also known as the Anglophone areas, and their impact?"
So, the background here is, I think important the context. So, the Fund's engagement here in the CEMAC Region, CEMAC is the six Central African Economic nations that comprise the Central African Economic and monetary community. They met in Yaoundé on December 23rd. The Managing Director was there. And in that meeting, heads of state discussed the economic situation, the severe shocks that have hit that CEMAC region in recent years, including the sharp decline in oil prices, and decided to act collectively and in a concerted manner. And the heads of state requested the assistance of the IMF to design economic reforms needed to reestablish macroeconomic stability in each country and in the region as a whole.
So, again, context: I can tell you that the funders already sent missions to Gabon, Republic of Congo. And a reminder to you, that we already have programs with Central African Republic and Chad. Okay?
Now, we also have sent a mission to Cameroon, which is the question. And we did issue a press statement, which the question referred to, just on Tuesday. That was the Corrine Delechat reference.
So, the specific question, to turn to that. We are indeed aware of the events in the so-called Anglophone regions of Cameroon. The macroeconomic impact of any event that could affect production and/or consumption, is typically felt with a certain lag. So, these events started in November last year, and thus are likely to have not had a significant impact on production in 2016.
For 2017, the risks to our growth outlook include a combination of external and domestic factors, including continuation of the sociopolitical events in the northwest and southwest regions of Cameroon. And as our press release the other day indicated, our view is that the medium-term outlook for the Cameroonian economy remains positive, subject to the implementation of appropriate policies.
I’m going to take a question on Jordan from the Jordanian News Agency, Petra. And they’re asking: Jordan has taken measures to increase revenue. And there are reports that the IMF imposed these measures, which have affected the poor and middle-income classes. Is this true? What was your recommendation in this regard, says Fayeq Hijazin of the Jordan News Agency, that’s Petra.
So, I mean number one, I do want to clarify, just in general, as we’ve said many times. The IMF does not imposed programs on any of our members. We partner, we support with your members to support their programs. So, just sort of a general clarification.
On the specific questions, on Joran. What is true, is that Jordan has come under very difficult conditions due to external shocks. So, the IMF is supporting the government’s reform program that was designed to promote more inclusive growth, with the focus on sustaining macroeconomic stability while advancing structural reforms in various areas to promote investment and employment.
In order to end the rapid increase in public debt, the program emphasized the need to broaden the tax base as part of the revenue reform, while alleviating the impact on the most vulnerable.
The IMF has not made any specific recommendations on which products should be subject to higher taxes. The IMF has also emphasized not raising the prices of goods that are consumed by the poor. So, I hope that helps to clarify what is, of course, a very difficult situation facing Jordan.
I have a question on the ECB action this morning. So, I want to give you our position on that. That’s the ECB’s latest monetary policy decision this morning.
So, I would say, as was expected, the ECB kept interest rates and its nonstandard monetary policy measures unchanged. The ECB’s accommodative stance is improving credit conditions and supporting a recovery of output and a gradual rise in inflation. We are reassured by the ECB’s continuing commitment to use all instruments available within its mandate, to ensure a sustained adjustment in the path of inflation, consistent with its medium-term price stability objective.
I am going to take one last question, and then I have some breaking information that I can give to you.
The question is on Egypt, where we have a program, as you know. Please state the relationship, if any, between the IMF program requirements and the reduction in our modification of (inaudible) subsidies and protests. Again I would say the IMF is not imposing programs on the membership. We’re working in partnership with the membership.
On Egypt, broadly we think the program is going well. And both the Minister of Finance and Central Bank are implementing policies as agreed. We will have a formal assessment of that program during the coming months in the context of the first review mission. And I can confirm that an IMF team is meeting with Egyptian authorities as of today, as part of our continuing dialogue with the government –- and to prepare for that first review mission which will be in April. Chris Jarvis of course is within that discussion.
On the question, there is no plan to reduce food subsidies in the authorities’ programs supported by IMF’s EFF arrangement. Social protection is an important element in the government’s reform program supported by the IMF.
To that end –- and I’ve said this before -– we strongly support the decision of the government in November to increase food subsidies with budgetary savings that come from other measures. And I think what we’re seeing -– to my understanding -– is the transitioning to a better targeted system of subsidies.
QUESTIONER: I just have a question of (inaudible) the other day, they set goal that in order for the Greek, that we use -- to be sustainable, it needs to be used overall and not only in terms of services. And I was wondering if that means that you’re asking for a nominal reduction and how did the Europeans respond on that approach? Thank you.
MR. RICE: I don’t think there’s anything new here. I think, you know, we’ve been clear, I think, all along, that we’re not, in terms of debt relief, there are many ways to achieve debt relief. And we have been clear that we’re not talking about a haircut.
I’m going to leave it there for today and see you in a couple of weeks. Good luck at the G20, those of you who are attending. Thanks very much.
* * * * *
