Transcript of IMF Press Briefing
IMF News, May 25, 2017
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- Published: May 25, 2017
Announcements and logistics
- Briefing held on May 25, 2017; embargoed until 10:30 a.m. Washington time.
- Press officer: Wafa Amr; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.
- Managing Director Christine Lagarde: series of high-level visits to Europe beginning with the G-7 Summit in Taormina, Italy (this weekend), and attendance at the European Development Days in Brussels on June 7 (speech at the opening ceremony and other events).
- Deputy Managing Director Tao Zhang: visiting Armenia, June 8 to 11, and delivering a speech in Tbilisi on June 12; also visiting Georgia during this trip.
Greece — status of discussions, IMF position, and procedural options
- Current status:
- Greece has legislated a strong package of reforms; IMF has welcomed the package.
- Key outstanding issue: specificity of debt relief measures and assurance of debt sustainability.
- Discussions summarized at the end of the Eurogroup meeting on Monday; further discussions ongoing with another Eurogroup meeting scheduled on June 15.
- IMF’s consistent position (preconditions for financial participation):
- Both "legs" required before IMF financial participation:
- A strong package of policy reforms (now legislated).
- Assurance of debt sustainability via specific debt-relief measures.
- Until both legs are secured, IMF financial participation cannot be proposed to the IMF Board.
- Primary surplus and fiscal path:
- IMF view: Greece can underpin a primary surplus of 3.5 percent of GDP in the medium term, until 2022.
- Over the longer term, IMF continues to believe a 3.5 percent of GDP primary surplus is not sustainable and should come down to create fiscal space for growth-supporting measures (investment, capital spending, lower tax rates, modern social safety net).
- Assumptions on growth and long-term primary surplus have not been agreed and are directly linked to debt-relief calibration.
- Procedural flexibility and precedent:
- IMF exploring "all options within our existing practices and rules"; historical precedent exists for approvals in principle without immediate disbursement, but specific measures and assurances are required before financial participation.
- IMF Board makes the ultimate decision on financial participation; any proposal would need Board approval.
- On timing and political context:
- IMF rejects characterization that it is uniquely favoring any party; stresses even-handed role and duty to ensure realistic growth assumptions and medium-term debt sustainability.
Specific numerical references and disputes raised in briefing
- Primary surplus discussed:
- IMF cites medium-term target: 3.5 percent of GDP until 2022.
- Other scenarios referenced in questions: 2.2 percent or "two percent until 2060" and a referenced 1.5 (questioner asked about 1.5, noting IMF had mentioned it previously).
- Procedural/meeting dates:
- Eurogroup next meeting referenced: June 15.
- Managing Director events: European Development Days on June 7.
- Deputy Managing Director visits: Armenia June 8 to 11; speech in Tbilisi on June 12.
- Embargo time: 10:30 a.m. Washington time.
Brazil — political uncertainty and growth forecasts
- IMF Spring Meetings forecast referenced (April/May context):
- Brazil GDP forecasts mentioned: 0.2 percent in this year and 1.7 (percent) in the next year.
- IMF assessment and process:
- Too soon to assess implications of recent political developments (riots, political crisis, discussions about impeachment) on outlook and reforms.
- IMF will present a more informed view to the Board after completion of the Article IV consultation in July.
- IMF note: Brazil has built buffers over time and has instruments to deal with market volatility and preserve financial stability.
Ghana — program review and potential extension
- Ongoing Fourth Review discussions to support Ghana.
- Key priority: bring public-sector debt on a clearly declining path.
- IMF and Ghanaian authorities are discussing a possible program extension; any extension would have to be requested by the Ghanaian authorities, who are considering the matter.
Saudi Arabia — sovereign wealth funds and fiscal adjustment
- Blackstone deal:
- IMF view: Blackstone deal is part of diversifying public investment funds toward international assets; not directly related to pace of domestic fiscal adjustment.
- Fiscal stance:
- IMF agrees with authorities’ objective of balancing the budget over the medium term, but does not see the need to achieve fiscal balance in the next two to three years as suggested in the fiscal balance program.
OPEC decision and oil-price outlook
- OPEC decision referenced: prolongation of oil supply cuts for nine months announced earlier the morning of the briefing.
- IMF response:
- IMF will reassess oil-price projections in the context of the next WEO update in July.
- Short-term effect: expected to help oil-producing countries temporarily; spot prices had increased after Saudi Arabia and Russia agreed an extension in mid-May.
- Medium-term expectation: U.S. shale production likely to offset OPEC cuts, limiting medium-term impact.
China — growth momentum and financial risks
- Moody's action referenced: first downgrade in 28 years (questioner cited this as context).
- IMF stance ahead of Article IV:
- Will assess outlook and risks to China in the upcoming Article IV consultation.
- Noted pickup in near-term growth momentum and welcomed recent Chinese government efforts to address financial risks.
- Continued efforts needed to resolve debt vulnerabilities from high credit growth and an increasingly large and interconnected financial sector.
- Public statements from high-level Chinese central bank officials noted risks from high leverage and high credit growth and their determination to take policy measures.
United States — budget assumptions and Article IV timing
- U.S. budget growth assumption mentioned by questioners: 3 percent annual growth for 2018.
- IMF approach:
- IMF is engaged in Article IV discussions with the United States and will assess the U.S. budget proposal in that context.
- IMF expects to have commentary toward the end of June.
Closing and next steps
- IMF will continue discussions on Greece with Eurogroup and other parties; exploring options within existing practices and rules.
- IMF will update macroeconomic projections (including oil prices) in the next WEO update in July.
- Article IV consultations upcoming for Brazil, China, and the United States with more detailed assessments to follow in July and late June respectively.
Source: Transcript of IMF Press Briefing, May 25, 2017 — IMF Communications Department.