Transcript of IMF Press Briefing
IMF News, June 8, 2017
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- Published: June 8, 2017
Announcements and Logistics
- Briefing embargo: 10:30 a.m., Washington, D.C. time.
- Press officer: Lucie Mboto Fouda. Phone: +1 202 623-7100. Email: MEDIA@IMF.org
- Managing Director Christine Lagarde travel and speaking schedule:
- Monday, June 12 — Berlin: conference “G-20 Africa Partnership, Investing in a Common Future” (Compact with Africa).
- Wednesday, June 14 — Frankfurt: Bundesbank symposium “Frontiers in Central Banking.”
- Thursday, June 15 — Luxembourg: Eurogroup meeting; presentation of preliminary conclusions of euro area Article IV consultation.
- Thursday, June 22 — Valencia, Spain: keynote speech at the annual plenary of the Financial Action Task Force, the FATC.
- First Deputy Managing Director David Lipton travel:
- Beijing: June 11 to 14 to participate in China Article IV discussions; press conference expected on June 14. Subsequent travel to Japan for Article IV discussions.
Greece: Policy negotiations, options, and IMF procedures
- Context and status:
- Staff-level agreement reached recently between Greece, the IMF and European institutions on a package of policies; package subsequently legislated by the Greek parliament.
- Ongoing negotiations focus on debt-relief aspects and creditor financing.
- Discussions ongoing since the Eurogroup meeting on May 22; characterized as "making progress, differences are narrowing."
- Target: hope to reach agreement in Luxembourg next week on June the 15th.
- IMF policy stance and requirements:
- IMF priority: the "two legs" — reforms (policies) plus debt relief sufficient to ensure debt sustainability.
- For IMF approval and disbursement: debt relief must be specific enough to "add up and to deliver the debt sustainability" required.
- Approval in principle (AIP) procedure — description and possible use:
- AIP allows the IMF to approve a financing arrangement based on agreed policies while making any IMF disbursements contingent on creditors agreeing to necessary debt relief.
- AIP historically used in situations where policies were agreed but creditor financing or debt relief had not been finalized.
- Use in Greece: presented as a second-best option if full package cannot be agreed before mid-July, when Greece will need further support from the European Stability Mechanism to make large repayments.
- IMF position: AIP would maintain IMF insistence on debt relief prior to disbursement; AIP is not a way to avoid debt relief.
- Precedent and Board process:
- AIP has been used "about 19 cases in the past."
- The following list of countries was provided after the briefing: Sudan (1983), Ecuador (1983), Zaire (1983), Madagascar (1983), Sudan (1984), Jamaica (1984), Zambia (1984), Côte d’Ivoire (1984), Kenya (1985), Somalia (1985), Chile (1985), Zaire (1986), Republic of Congo (1986), Mexico (1986), Nigeria (1986), Argentina (1987), Côte d'Ivoire (1987), Yugoslavia (1988), Brazil (1988).
- AIP has not been presented to the IMF Executive Board for this case; any AIP would be presented to the Board for approval and modalities discussion.
- Modalities, deadlines, and guidelines:
- Past Board-approved guidelines (developed in the context of the 1980s debt crisis) addressed issues such as potential reduction of creditor pressure, 30-day lapsing of AIP if program not agreed, and requirement for specific debt-relief timetables.
- IMF response: modalities would be discussed with Greece and the Board if AIP were to be used; precedent cases had unique modalities and the IMF would draw on precedent while tailoring to Greece’s circumstances.
- On deadlines: precedent includes instances both with and without set deadlines; any deadline would be a modality for Board consideration.
- Rationale for IMF involvement and rebuttals to criticisms:
- Benefits cited if AIP used:
- Preserves progress on reforms already legislated.
- Helps catalyze financing and debt relief from creditors.
- Avoids potentially disorderly financial stress in July when major repayments are due.
- Maintains IMF principles by making disbursements contingent on debt-relief assurances and debt sustainability.
- IMF position: using AIP is not special treatment for Greece; it is an established procedure available when appropriate and is not a breach of IMF rules.
Cybersecurity and past incidents
- Incident reported after briefing: a personal (non-IMF) email account of a member of an Executive Director’s office staff was hacked some time ago; IMF statement provided after the briefing:
- "There is no indication the IMF was the target of this activity, and no IMF information nor systems were exposed to risk. The IMF takes cybersecurity very seriously and has extensive measures in place to protect its information and systems."
- Historical context:
- IMF has been subject to cyber-attacks in the past (references to incidents in 2011 and 2013).
- IMF has strengthened safeguards since those incidents; the Board has been briefed on follow-up and has been satisfied with the follow-up process.
ECB policy stance and inflation outlook
- IMF reaction to ECB communication change:
- The ECB’s accommodative stance is improving credit conditions and supporting recovery of output and inflation.
- IMF reassured by ECB’s continued commitment to ensuring a sustained adjustment in the path of inflation consistent with its medium-term price stability objective.
- ECB’s removal of a sentence suggesting possible further reductions to key policy interest rates reflects diminishing deflation risks while maintaining commitment to very substantial monetary accommodation.
Banco Popular and Euro-area resolution framework
- IMF view on first decision under the Single Resolution Board:
- Welcome for "swift and coordinated action" by the European Central Bank, the Single Resolution Board, and the European Commission in dealing with Banco Popular.
- Outcome: removal of a source of uncertainty in the Spanish banking system and Euro area financial markets more generally.
Mozambique: forensic audit and program discussions
- Forensic audit:
- IMF welcomes delivery of the international forensic audit report on EMATUM, Proindicus and MAM, submitted to the office of the public prosecutor of Mozambique.
- IMF looks forward to publication of a summary of the report "in the coming weeks" and, in due course, the entire report.
- IMF will provide an informed view on the audit and its implications once the report is published.
- Program discussions:
- Talks with Mozambican authorities on a possible new program were initiated last December.
- Technical discussions ongoing over the last few months; Fund staff remain engaged.
- Results of the audit will be an important element of the discussions.
Qatar: economic impact of recent diplomatic actions
- IMF assessment:
- Economic impact on Qatar and the region depends on depth and persistence of disruptions in trade and financing flows and confidence effects.
- Given recent occurrence ("only taken place in the last several days"), it is premature to judge the magnitude of economic effects.
Egypt: fuel subsidy reform and fiscal implications
- IMF commentary on fuel subsidies:
- Egypt plans to phase out subsidies on major fuel products over three years, following a plan outlined by the president and the government.
- Rationale: fuel subsidies represent a big share of government spending and mostly benefit those who are better off.
- Expected fiscal and social implications:
- Reducing subsidies can help bring down the deficit.
- Savings could make room for more spending on health, education and social spending that directly help the most vulnerable people in Egypt.
- Specific figures referenced by questioner: cutting fuel subsidies to 1.75 percent of GDP this year and less than 0.5 percent (these figures were cited in the question to the IMF in the briefing).
Closing
- Final remark: next press briefing in two weeks.
Transcript of IMF Press Briefing — June 8, 2017 — IMF Communications Department