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.
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