Transcript of IMFC Press Briefing

April 22, 2017

MR. RICE: Good afternoon, everyone. Welcome to this press conference on behalf of the IMFC. Delighted to have with us this afternoon the chairman of the IMFC, Mr. Augustin Carstens, and the Managing Director of the IMF, Madame Lagarde.

We are going to be short and sweet this afternoon, so please keep the questions succinct, and I'm going to ask the chairman to begin with some opening remarks, and then we will get straight to you.

CHAIRMAN CARSTENS: Thank you. Good afternoon. Let me start by thanking Madame Lagarde and the IMF staff for all their support in organizing the very fruitful meeting of the IMFC.

The technical documents prepared by the Fund have enriched our discussions which have focused on how we can collectively address the challenges faced by all countries in the context of changing global environment.

As you see from the IMFC communiqué, the membership's view is that the economic outlook is improving, although subject to downside risks. We have made a lot of progress in overcoming the crisis and achieve greater financial stability.

Now, our efforts should focus more on preserving the growth momentum and enhancing resilience. In other words, we are shifting from primarily focus on the financial sector to the real sector.

For this to happen, we agreed that we must work together and remain committed to a range of policy actions. The committee welcomed and endorsed the Managing Director's Global Policy Action (GPA) , and as outlined in the document, we stressed the importance of the three‑pronged approach of mutually reinforcing monetary, fiscal, and structural policies.

At the same time, we recognize that trade, financial integration, and technological progress have broad‑based benefits, including improving living standards, and lifting hundreds of millions out of poverty. However, the prolonged period of low growth has brought to the fore the concerns of those who have been left behind.

Now, as the communiqué states, I quote, "It is important to ensure that everyone has the opportunity to benefit from global economic integration and technological progress."

We also covered a range of IMF institutional issues. I won't go through all of them, but let me note that we stated our support for the Fund's efforts to provide a more rigorous and candid assessment of global excess imbalances and their causes, and exchange rates, both during Article IV consultations and in the External Sector Report (ESR).

We encouraged the IMF to explore options for further strengthening the financial safety net, including by collaborating with regional financial arrangements. To further enhance the effectiveness of the IMF's lending toolkit, we support its ongoing work to develop proposals for a possible new short‑term liquidity facility, and a non‑financial policy instrument to provide monitoring and signaling of member policies.

The membership also welcomed steps to maintain the lending capacity of the Fund, and stressed that they remain committed to strong, quota‑based and adequately resourced IMF, which is important for the global financial safety net.

So, with this, I think we can open the floor for questions.

QUESTIONER: Mr. Carstens, Madame Lagarde, today at this meeting and all week there has been a lot of optimism over the direction of the global economy. There has been a lot of worries about policies from the Trump Administration, tomorrow's election in France, Brexit, I'm just wondering how you have balanced these issues? Is it a case of having to just be optimistic because that is all you can do, and you push forward with your agenda here, no matter what happens, these other threats to the economy?

CHAIRMAN CARSTENS: What I would say to that question is that we had a very, very rich discussion. I think that a lot was said and a lot was analyzed about the very positive strengths that have been appearing in the global economy but also we were not shy in pointing out that there are still downside risks. Some of the risks are in the area you mentioned. So, I would basically say that the mood in the room, in this meeting was of cautious optimism. It is certainly important in all the efforts we have been involved in during the last years, it is important that we recognize that they have been producing positive results, but they were not at the point where we can declare victory. At the same time, there are other issues that have been coming to the fore that we need to address. So, I think it was a very balanced discussion, where, yes, we recognized that there has been progress and successes, but we still have important assignments in front of us.

MANAGING DIRECTOR: I will add a little something to what Augustin indicated. There was a clear recognition in the room that we have probably moved from high financial and economic risks to more geopolitical risks. There was also clear recognition in the room that policies going forward are going to be needed in order to move from that growth momentum to more sharing and more inclusive growth. And we had a lot of discussions on these issues.

QUESTIONER: A question for both of you.

Madame Lagarde, you warned of the sort of protectionism hanging over the global economy. The IMF has also warned of the risk of a trade war sapping 2 percentage points off global growth. Did you hear from the U.S. reassurance that they will keep in mind the risk of a global trade war? And did you hear from the surplus countries, Germany and China, a responsiveness to accelerate their policies to reduce surplus and reduce the risks of ‑‑ you see where I'm going. I don't need to elaborate.

MANAGING DIRECTOR: What I take away from these Meetings is that at the time when growth is picking up, where there is that momentum, and to avoid the syndrome of the green shoots turning brown, there is a recognition that we need to secure what has been conducive to growth, and what has served the international community over the last few decades. But, if anything, I'm encouraged for the IMF to be as specific as possible, to secure that. So when we are asked by the whole community to continue working hard on the ESR, for instance, and when we expect that there will be a clear focus on that, I think that is exactly where we should be expecting from the membership as well, that it be taken seriously. And, we will be seeing in the Article IV of the next few months and the outcome of the ESR which will be this coming July, how seriously it is taken.

CHAIRMAN CARSTENS: What I would say is that you mentioned protectionism. It is certainly a relative term. There is no country in the world that doesn't have any sort of provision or restriction on trade. So, instead of dwelling on what that concept means, we manage to sort of put it in, I would say, a more positive and more constructive framework. And the membership agreed to counsel against inward‑looking policies, and stressed that we should work to strengthen the contribution of trade to our economies. This was a very strong consensus, and I think that is, I would say, a more positive or constructive way to address issues that at the end of the day have to do with free and also fair trade.

QUESTIONER: Actually, I'm going to ask a question on the same issue, and it is related to the communiqué itself. Back in October the IMFC statements explicitly referred to the threat of protectionism, but this reference has disappeared in the statement you released today. I wonder, the same thing happened to the G‑20 Finance Ministers communiqué back in Baden‑Baden. So I was wondering, is it a way of saying that the threat of protectionism has receded, or is it something that is a result from pressure of the U.S. Administration to get rid of that word?

CHAIRMAN CARSTENS: As I said before, what we tried to do in this type of meeting is strike a positive, constructive balance. And the use of the word protectionism is very ambiguous. And, therefore, in different sections of the communiqué, the issue of the contribution of trade to growth, the issue of promoting a level playing field in international trade, was mentioned. So, it depends, is the glass half full or half empty? What we tried to do is basically focus on what we can leave, and actually what our final goal is. Our final goal is, yes, to take advantage of trade. Nobody denies that. And, I think everybody is in line that we need free and fair trade, and I think that is what is really reflected in the communiqué.

QUESTIONER: Also to compare this statement to what happened last October, the other thing that is notably not mentioned is the commitment or any statement about climate change support. Is that because there is no longer agreement within the group on that, or does it reflect a toning down of your support for anti‑climate change policies?

CHAIRMAN CARSTENS: In general, let me start with something that I think is very important here. It is hard to notice, because it is a nuance, but for the first time in several, I would say, years the Global Policy Agenda of the Managing Director was fully supported by all the membership. And, in this document there are very clear views on issues that have to do with climate change, but also have to do with the open and inclusive trade policies with the cooperative, multilateral approach for trade and financial integration, and with other aspects that are macro relevant.

So, implicitly very, very overwhelming support for the MD's GPA, this issue was supported.

Also, it was the view of the membership that the IMF [U.S.] should continue its work in surveillance of what I mentioned already, which is macro‑critical areas, including the 2030 SDGs, which certainly include the climate change component.

MANAGING DIRECTOR: I'm happy to address that as well. Unfortunately, in addition to doing a compare, you are going to have to look at the exhibits or the documents that are referred in the document itself, and really, I encourage you to have a look at the Global Policy Agenda and its exhibits, because it not only refers to the work we do and will continue to do on climate change, but the work that we do and will continue to do on gender, and the inclusion and the contribution of women to the economy, and on and on. There are really issues about inclusiveness within countries, across countries, and across generations. And, all of that is encapsulated in the proposals I put to the IMFC under the leadership of Mr. Carstens, for their review and approval. For the first time ever since I have been Managing Director, the whole Global Policy Agenda has been approved, at large, without restrictions. In the past, we have tried to include the Global Policy Agenda in the communiqué, because somebody didn't like this, somebody didn't like that, objection to this, that or the other, it was never embedded in the communiqué. Now it is. Everything in there, is approved and we are going forward with it.

QUESTIONER: Thank you, Mr. Carstens, and Madame Lagarde.

I want to clarify a little bit about the facilitation of multilateral solutions to meet global challenges, specifically how do you think it must be changed or deepen the analysis or even the supervision about both Article IV and even external sector reports, on the effects that volatile capital flows around the world maybe even a country like Mexico, which has a very open capital balance sheet, and we have liberalized our exchange rate, and even in the tough times, there has been voices inside that ask for intervention of the exchange rate, and we didn't abandon that policy.

Now, the economy has 40 percent devaluation that has as part of that devaluation comes from the international capital flows. Can you comment on this kind of policies that you would pursue in the IMF that could help even a country such as Mexico to remain open in this tough and especially protectionist environment?

QUESTIONER: I have two questions. One for both, and then one for Mr. Carstens.

There has been a lot of talk in these Meetings about the necessity to make sure that the growth is inclusive. This is something that has been reaffirmed by the IMF, the G20, and economic blogs across the world. I was wondering, do you feel that the promise of more inclusive growth delivers and brings to those who fell behind on the benefits of globalization and trade, that eventually this will help to recede the rise of populism across the world and maybe the support for those politicians who promote populism in policies?

For you, Mr. Carstens.

(Interpreted) I will ask my question in Spanish. Perhaps this is a summary of a lengthy and brilliant career. My question is whether in these months you have had time to reflect upon your life in the public arena, and in particular how do you feel you are leaving Mexico at this time when the country is facing somewhat turbulence owing to external conditions, but also owing to the electoral process which we will face next year.

CHAIRMAN CARSTENS: I will start, and then I will give the floor to Christine.

With respect to the question, there was strong support expressed about all the Fund's efforts to provide a more rigorous and candid assessment of global excesses, imbalances and their causes. And, of exchange rates both during Article IV consultations and in the ESRs. How would this manifest itself in the case of Mexico? This is probably more for the Managing Director to answer, but I think if there is a country that is ‑‑ many countries are very well analyzed, but one in which I think the Fund rightly so pays a lot of attention is Mexico. Why? Because I think that the Fund has a strong commitment with a country like Mexico through the Flexible Credit Line (FCL). So in our case, I think that this is something for the Managing Director to ratify, but it is clear that we have a very open account, capital and current account. We have a flexible, fully flexible exchange rate regime. Certainly, there is no intention of Mexico to manipulate it. And more than anything, we have been adjusting our macro policies toward achieving financial stability and strengthen our balance of payments position.

There are very strong results on inflation, and we are working along those lines.

This will depend on country by country. If it is referred to Mexico, I would say that, in a way, it has been tremendously helpful for us this dialogue that we have had with the Fund, in terms of discussing this and other issues. And, probably that can be a good example for other countries.

Obviously, here, the issue of addressing this in a more multilateral framework is important.

Now, with respect to your question on inclusiveness I think that we didn't go into labels, have to respond to this or that political tendency. I think that one of the very important contribution that the IMF did in this Spring Meetings and that is reflected in documents like the WEO and others that are publicly available, is the fact that they sat down and documented many of the issues that have to do with those left behind. What does it really mean? How has it been manifested in advanced and emerging markets? What can be done? Of course, a lot of it depends on local considerations. But, I think that what the Fund tried to do is provide very objective analysis about many of these issues that have been blurred under a label, that to some extent are very subjective. I think that there was a very strong appreciation about the work that the Fund is doing under the label of inclusiveness. But, I want to underline this, I think the very strong contribution of the Fund is that it is doing on the very objective fashion, really looking into the facts, being very transparent about it, and so that we can derive the best possible policy actions to address them.

So, that is my take on this issue.

You asked about my future, basically. First of all, you will still see me here in October, because I will start my new position at the Bank of International Settlements (BIS) in December. Mexico has done well. There are two things that allow me to go to the BIS, that Mexico is a country, as time passes, of more and more institutions. And second, probably one of the strongest institutions is the Central Bank of Mexico, Banco de México. What characterizes an institution is precisely that it doesn't depend on one person. So the fact that we have a strong institution allows me to move elsewhere, and I'm sure that Banco de México will continue contributing very strongly to the positive development of Mexico.

MANAGING DIRECTOR: I can only add to that, to pick up the first question, clearly, the FCL, which Mexico has benefited from for now a few years is a testimony to the good macroeconomic policies that have been in place, thanks to the leadership of the country, both at the Central Bank and at the Finance Ministry level. Clearly, the fact that there is a floating currency, there is an inflation targeting monetary policy in place, there is a very steady and strong hand at the helm of that Central Bank is not indifferent to the willingness and determination of the membership to renew that flexible credit line, which has been used by Mexico.

One quick point on capital flow management. As you know, we have re‑formed our view, now called the institutional view of the IMF on capital flow management. I would refer you to a paper we released a few months ago which takes into account the practical implementation of those views, and how it is conducive to stability, how it is legitimate. We are going to continue using that instrument, and that analytical work on a much more rig regular basis in the bilateral surveillance that we do. That was endorsed by the membership on the occasion of the Spring Meetings just now.

On your question about inclusive growth, quite interesting actually that actually the more inclusive the growth, probable lip the less risk there is of inward‑looking policies. So it is critically important, actually, to be encouraged as an institution to work on this issue of inclusive growth. Within countries, across countries, across generations. And, you can use fiscal for that, by having growth‑friendly fiscal policies, by making better use of the fiscal space available. And certainly by looking deeply into productivity and what is going to be conducive to more productivity. So, the expertise we have as an institution can actually really well serve those purposes that we have been assigned.

MR. RICE: Thank you, Madame Lagarde. Thank you, Chairman Carstens. Thank you to all of you for being here.

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