Transcript of IMF Press Briefing

June 8, 2017

MR. RICE: Well, good morning, everyone and welcome to this press briefing on behalf of the IMF. I am Gerry Rice of the Communications Department. As usual, this morning, our briefing will be embargoed until 10:30 a.m., and that's Washington, D.C. time. Let me make a few announcements, then I will come to your questions in the room, and I think we have some questions online also.

So, our Managing Director, Christine Lagarde on Monday, June 12, will be in Berlin to participate in the conference “G-20 Africa Partnership, Investing in a Common Future.” The conference, organized by the Germany presidency of the G-20, will see the participation of African heads of states, development partners, as well as representatives of the private sector. That’s next Monday, June 12, the Compact with Africa.

On Wednesday, June 14, Madame Lagarde will be in Frankfurt to participate in the Bundesbank symposium “Frontiers in Central Banking.” And she will be there with an illustrious panel, including Jaime Caruana of the BIS, Mario Monti of Bocconi, and others.

The next day, Thursday, June 15, Madame Lagarde will attend the Eurogroup meeting, which takes place in Luxembourg. As has been the case in recent years, the Managing Director will present to finance ministers of the Eurozone, the preliminary conclusions of our euro area Article IV consultation. That’s Thursday, June 15 in Luxembourg.

Finally, for the Managing Director, on Thursday, June 22, she will travel to Valencia in Spain to deliver the keynote speech at the annual plenary of the Financial Action Task Force, the FATC. We will make her remarks available to you at that time. Thursday, June 22.

Let me also, just for your information, note that David Lipton, our First Deputy Managing Director will travel to Beijing June 11 to 14, to participate in the China Article IV discussions. As you know, we are in that cycle right now of the major Article IVs, so we expect David to host a press conference in Beijing on June the 14th. And he will then travel to Japan to join the Article IV discussions there as well. With that, let me come to your questions in the room. Good morning.

QUESTIONER: Good morning, thank you. My question is on Greece. Are you planning to go to the Board with the proposal for a program in principle, and if yes, why? And, I mean, why don’t you just let the Europeans deal with the Greek problem if you cannot find a common ground? Thank you.

MR. RICE: Good. I'm anticipating a few questions on Greece. Shall I take a few and come back, and then we can do another round to make sure I'm specific enough in responding. You have one. Good morning.

QUESTIONER: Good morning. So, as you are probably aware, the Board developed guidelines for use of the approval in principle procedure. One of those was that due consideration would need to be taken where it might reduce the pressure on creditors to come to an agreement. That programs used in principle should lapse after 30 days if the available program hasn’t been agreed to, and that for the approval in principle program to be approved, that there would have to be a pretty specific debt relief timetable - not just for the debt relief itself, but for a debt relief plan to come together. It seems as though that if the IMF were to move forward with this approval in principle procedure, that it would breach these guidelines approved by the Executive Board. Can you comment on that, please?

MR. RICE: Thank you, yes.

QUESTIONER: Hi, Jeremy with (inaudible). On the same topic, can you confirm that if you move ahead with this solution, that will be the first time that you are using it with - for an advanced country? I understand that it has been used in the past for countries such as Brazil, Sudan or Argentina, but so that will be the first time for an advanced country. And I had another one on this.

MR. RICE: Okay. Let me begin with those, and then we can come back. Let me just step back a little - and again, I will be more specific on your points. For those who don’t follow it just as closely as you do on Greece - a relatively short time ago, there was a staff level agreement reached between Greece, the IMF and European institutions on a package of policies. So, we had agreed on that. It was subsequently legislated by the Greek parliament, so that was a very important step.

Now we are discussing the debt-relief aspect of the negotiations. You will recall that we have said here repeatedly that for the IMF to go forward, we would need to see what we call the two legs of the program - the reforms and the debt relief that would make the program sustainable. So, as I said, we have reached staff level agreement on the policies, now we are discussing the debt relief. I have said before this debt relief does not need to be fully specified up front, but we do need assurance that the measures - the debt relief measures - are specific enough to add up and to deliver the debt sustainability that we think is required. So again, just the context.

Discussions have been ongoing since the last Eurogroup meeting on May 22. I would characterize the discussions as making progress, differences are narrowing. But we are not there yet. So, we continue to work hard toward the goal of reaching agreement we hope in Luxembourg next week on June the 15th. I say all that because I want to emphasize that the IMF's primary object remains the full package of reforms plus debt relief. That’s our priority. That’s what we are working toward. If we can achieve that, we would then be in a position to go to our Board for outright approval of a program. But as I just said, we are not there yet.

So, turning to your questions and what you have asked about, which is the option of using the approval in principle that would possibly come into play. Again, if it proves impossible to reach agreement on the financing and the debt relief measures before mid-July - when Greece will need further support from the European Stability Mechanism, the ESM, to make some large repayments. And as the Managing Director Christine Lagarde noted in a press interview a few days ago, there is this option that would enable the IMF to approve the financing arrangement based on the policies that have been agreed but - and this is very important - but while making any actual IMF disbursements contingent on creditors agreeing to the debt relief that’s necessary to ensure debt sustainability.

So, this is the approval in principle, which allows more time for the negotiations to proceed and for the creditors to come to agreement -in this case on debt relief. This is an approval in principle - a procedure that was used on many occasions in the 1980's in cases in which understandings on policies underlying a Fund-supported program had been reached, but where no agreement has been reached with creditors on debt relief or in some cases new financing for the member. So, this is precisely the situation in which Greece finds itself today. It has agreed on the polices with the Fund, but the financing and debt relief has not yet been agreed by its creditors. So, the Fund’s involvement in these situations can help to catalyze financing and debt relief from the other creditors. So, that's the procedure, and that’s the rule of the Fund, and that's why we think that it could be an option in this case. Has it been presented to the Board? No. We are not near that stage. As I just said, our first, best option is the two legs - straight-forward reforms, debt relief, and that is what we are working toward now.

QUESTIONER: We are not there…

MR. RICE: We are not there yet. That’s right. It's premature, and again definitively, it has not been presented to the Board. Were that option to be adopted - were we to go forward with that option - of course it would be presented to the Board for approval. I can't say for sure whether any advanced economy has been a beneficiary in the past of the approval in principle. What I can tell you is that it was used many times - about 19 cases in the past, where it has been used. So, it's a procedure that's there, has been used, and can be used again.

QUESTIONER: Sorry, Gerry, I'm sure you had the time to dig up in the archives of the IMF, and that you know for a fact that it hasn’t been used for any of those countries. If you know the list of the countries, that you mentioned 19 cases, so I assume you must know for a fact, whether it has been used in advanced economies. So, can you, please, tell us what the case is there?

MR. RICE: I can't give you that definitively, but I can follow up with you afterward, and we can give you the list. [The following list of countries was provided to the reporter following 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).]

QUESTIONER: But Gerry, we've been asking this question for weeks now, to your team, so it's --

MR. RICE: Okay. I was not aware of that. But we can certainly follow up with you after this.

QUESTIONER: I am a bit surprised.

MR. RICE: Straightforwardly, the countries, I think you know, have included Brazil, Argentina, and so on. But again, I don't want to give you information that may not be absolutely correct, so let's follow up then, and we'll do that.

I also want to follow up on his question because it's very important. The IMF, of course, would not be breaching -- in breach of its rules, were it to go ahead with this option. And I want to, again, stress it's the second-best option at this point. The first best option is the reforms plus the debt relief, but it's a procedure that's been used before, that can be used again.

And in terms of the specific modalities, I just don't think we should get ahead of ourselves. The modalities were the approval in principle to be applied, again, would be something that would need to be discussed, of course with Greece, with the member, and of course with our Board, as I just said. And I think the guidelines to which you refer, were developed in the context of the 1980s debt crisis.

So, clearly we'll draw upon what was done in the past, but will take into account the specific country circumstances were it to be applied today. So, again, I just would urge, we don't get too far ahead of ourselves in terms of modalities, and what was done in the past, and what's going to be done today, and I think we have to wait for the discussions to take place, and to see if this approval in principle would actually be something that's going to be implemented. And then of course the Board will be looking at the modalities of that very carefully.

I see more questions on Greece. Okay, let me take one more.

QUESTIONER: Gerry, why don't you acknowledge that there is no way that the Germans can agree to a debt relief before the elections, so that it's totally unrealistic for you to tell -- you know, not to rule out the possibility of a total package that you were mentioning? And also, how do you challenge the notion that this solution would once again amount to new special treatment for Greece?

MR. RICE: Okay. Let's take a few.

QUESTIONER: Following his steps, I needed to ask you this. It seems to me -- and I think I asked you before -- it seems to me that you are bending your rules, once again, to save this for political needs. And really, what is your answer to say that lately your position may be – the process is deeply politicized.

QUESTIONER: In case we approval in principle, are you planning to set a specific date for the debt discussions? Are you planning to set a framework into which the Europeans should decide these measures?

QUESTIONER: Yes. And to declare, I'm not suggesting that the Fund is going to breach its lending rules, but rather, as you pointed out, its guidelines, that the Board specifically approved for the use of this. And I think, and if I can just clarify what I think you to be saying, I don't want to put words in your mouth, but it seems as though you are saying that times have changed over the last 30 -- 3 decades, and that if the Greece application of this principle may breach those guidelines, then the Fund Board may consider changing those guidelines so that it will fit Greece. Like the 30-day lapse, like there must be a specific timetable for debt relief, like, et cetera, et cetera.

MR. RICE: So, again, really, just taking your question. I don't think we should get ahead of ourselves. Number one, we are still pushing for the first best option of the debt relief, plus the reforms. Number two, the modalities would need to be discussed at the time.

What we have, as I mentioned, is some 19 or so cases of this, and what we have is a lot of precedent for how this approval in principle was used in the past. And as I said, this would allow us to respond to the situation today. We would take that into account. So, I think that's what we would be basing any decision on.

Drawing from the experience of the past, and the precedent, some 19 cases all of which had their own unique modalities, so I think we would have a similar set of potentially unique modalities were it to be applied to Greece. Drawing upon what we've done in the past, but customized to the Greek case, because obviously, we want to be as relevant and as helpful to the member as possible.

So, I don't think it would be a case here of breaching guidelines, or as I said, bending or breaking rules, I would want to push back strongly, against that notion.

Is Greece receiving special treatment? No. This is a procedure that has been used in the past. We can use it again. When we feel that it's in the best interest - it would be in the best interest of the member country.

So, what would be that best interest? How would Greece benefit in this case? Well, a few things. It would clearly preserve the progress made on reforms, and I think the Greek government and the Greek people deserve that. They deserve the efforts that they’ve made to be preserved. It would, secondly, as I said before, help catalyze financing and debt relief. The possible alternative being to go ahead with a program without the IMF involvement, but would not have debt relief contingency.

It avoids a potentially, disorderly financial situation in July, when Greece has some major repayments coming due. It's our understanding that the European partners could go ahead, were it decided to do this approval in principle, could go ahead with disbursement on this basis. So, it would avoid a destabilizing situation in July, and we've seen those situations in the past. And I think it's good to avoid that financial stress on Greece.

And finally, it maintains the IMF principles that we have been consistently advocating. Without right approval, which is our first best option, we would be insisting upon reforms plus debt relief. Okay? With approval in principle, the second-best option, we would still be insisting on reforms, and debt relief before the IMF would disburse any of its funds. Okay?

So, the principles are maintained. So, this is not in any way a backing down, or a walking away, in any respect. On the contrary, it's a strengthening of the IMF position, we are holding to our principles.

So, I’ve got your question. And on the question of -- I can't remember --, did you ask about the deadline?


MR. RICE: So, on the deadline question.

Again, it's one of the modalities, it hasn’t been discussed, because again, we’re not sure we would even be employing this principle, but it would be one of the modalities to be discussed, and if you look back again, on precedent, and I mentioned 19 or so different cases, I mean the modalities really depend on how you can make the arrangement as effective and as helpful as possible to the member and that would be a decision for the Board. What I can tell you is that in the 1980s, when we used this, there were occasions where the IMF set deadlines because we thought that would be helpful to capitalize the needed resources and cases where deadlines were not set. So again, we should not get too far ahead of ourselves here, and number one, wait to see what gets decided in terms of IMF program, either outright approval or approval in principle, and then there will be a discussion of the modalities, and of course we will communicate them to you in due course. One more from you. One more from you, and then I’m going to move off Greece.

Questioner: I would just note that you didn’t mention a third option, which was to not do anything.

MR. RICE: I did, just for the record, but I’ll come back to you.

Questioner: I missed that. Please forgive me. You did say a lot, and I appreciate you doing that. But if the IMF doesn’t move, then Germany has an option to see turmoil within the eurozone and may decide that finally after Greece meeting, as the IMF says, all the requirements it needs, that it could go ahead with debt relief. So, just pointing out that that breeches the concept of the approval in principle, which is to catalyze a debt-relief discussion or a debt-relief agreement. And it doesn’t appear it’s catalyzing a debt-relief discussion, or a debt-relief plan. It seems to be just approving, giving Europe approval to disburse funds without debt relief.

MR. RICE: Well, I would say, I would put it this way. The approval in principle is not a way out without debt relief. As I just said, with outright approval, or with approval in principle, the IMF’s disbursement of any financial assistance is going to be conditional on debt-relief assurances being in place. In other words, on the debt being sustainable, which is the same criteria that we apply in all our programs and with all our members. It’s not special treatment, okay?

But we do think where the first best option proves to be impossible to be reached and with the prospect of some financial instability resulting, we do think that it could possibly be to the benefit of the member to apply the approval in principle. Again, possible option. We also think, and I said this earlier, we think that it is better to have the IMF involved even were it to be under the option of approval in principle than to not be involved. And what I had said earlier, the reason I say that is that were the IMF not to be involved, and the program were to go ahead with the Europeans, then there’s the distinct likelihood that debt relief, the prospect of debt relief disappears.

With the approval in principle again - I’m being boringly repetitive – the IMF will insist upon debt relief and debt-relief sustainability before we would disperse any IMF funds. So again, we would stay in the program, give the creditors more time to discuss the debt relief, but with the IMF financial participation and disbursement being contingent upon debt-relief assurances. We think that would be better than- why shouldn’t the IMF just step aside.

QUESTIONER: What do you make of the fact that Greece itself, that you are supposed to be serving as a member state, is opposed to that solution, because basically, it’s not going to reassure the markets? And secondly, if you were to choose that option, would that be possible to have it in the package as of next Wednesday, for the next Eurogroup meeting?

MR. RICE: Let me say, as I said at the beginning, we’re hoping that there can be an agreement next week. We’re making good progress; differences are narrowing. So, we hope there can be agreement next week. In terms of Greece’s position on this, and I stress again, this possible option, not the first best solution that we are working toward, I think it’s really for, - I wouldn’t dare to speak for the Greek authorities, so you need to ask them, but the way I would put it right now is that, discussions are ongoing, and views are being formed on all sides, and we hope that there will be a conclusion next week, if we can narrow the differences. Okay, I’m moving off Greece guys, okay? Thank you very much.

Questioner: An IMF official was recently alleged to be the target of a cyber-attack – a cyber-hack, by Russia’s FSB, Russia’s intelligence services. That made me wonder, one, is the IMF investigating that, two, whatever happened to the two cyber-attacks against the Fund, the cyber-hacks against the Fund 2011, and I think there was one in ’13. Has there been -- is there any resolution to that investigation? Has the Board been briefed on who is responsible?

MR. RICE: I’m not aware of the case to which you refer, so let me follow up on that afterward, I’m just not aware. [The following press line was provided to the reporter after the briefing: “We can confirm that a personal (non-IMF) email account of a member of an Executive Director’s office staff was hacked some time ago. 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.”] On the broader issue of cyber-attacks, indeed the IMF has been subject to those attacks in the past, and of course, we’ve been putting in place strengthened safeguards over that period, and it’s something on which our Board is briefed on an ongoing basis. That’s something we take extremely seriously, of course, and we update the Board from time to time on the steps being taken to the best of my knowledge. The steps that have been taken have been fully effective up to now. But I will come back to you on the case you mentioned.

Questioner: Was there resolution of the investigations into those attacks? It’s my understanding that if they were carried out by a member country, then they would breach the IMF’s articles of agreement, so there would have been officially required some sort of hand slap or penalty, adjudication, et cetera? Has that process gone through, or has the IMF ignored it?

MR. RICE: We don’t ignore those things, as I just said. But what I can assure you without being at liberty to give you the details is that there was a full process of follow up that steps have been taken, as I said, to strengthen the IMF safeguards in this area, and the Board has been briefed and has been satisfied with the follow up process. Yes?

QUESTIONER: Can you please, do you have any comment on the fact that the ECB today had removed a sentence suggesting that they are willing to lower their interest rate in the future - in the short term?

MR. RICE: Yeah, I can give you a statement on that actually. Thank you for asking. On the ECB, the ECB’s accommodative stance is improving credit conditions and supporting, affirming a recovery of output and inflation. We are reassured by the ECB’s continued commitment to ensuring a sustained adjustment in the path of inflation consistent with its medium-term price stability objective. And the ECB’s removal today of the possibility of further reductions to key policy interest rates reflects diminishing deflation risks while maintaining the commitment to very substantial monetary accommodation.

I’m going to go online and take a few questions, and then I’m going to let you go. There is a question on Spain, and it’s about Banco Popular, and this was the first decision under the new European single resolution board. Does the IMF think the takeover and the timing was appropriate?

To which I can say we welcome the swift and coordinated action taken by the European Central Bank, the single resolution board, and the European Commission to dealing with Banco Popular. This removes a source of uncertainty in the Spanish banking system and Euro area financial markets more generally. So, I probably just leave that there.

There is a question on Mozambique, and can we clarify the status of discussions with Mozambique and in particular the forensic audit? To which I can say we welcome the delivery of the international forensic audit report on EMATUM, Proindicus and MAM, which is being submitted to the office of the public prosecutor of Mozambique. We think this is important. We now look forward to the publication of a summary of the report in the coming weeks and in due course, of the entire report, and at that point, we’ll be able to provide an informed view on the audit and its implications.

In terms of the IMF, the talks with the Mozambican authorities on a possible new program were initiated last December. Technical discussions have been ongoing over the last few months, and Fund staff have remained engaged with the authorities. The results of the audit will obviously constitute an element, an important element let me say, of those discussions with the authorities.

There’s a question on Qatar, which of course has been much in the news. This question on Qatar, asking - Qatar has been implementing an ambitious diversification strategy, which appears to be violently retarded by the embargo recently imposed. Do you believe that the recent development could have a serious impact on Qatar and the region?

What I would say on Qatar is that the economic impact on Qatar and the region will depend on how deep and sustained are disruptions in trade and financing flows and how confidence is affected at this stage. Given that this has only taken place in the last several days, it’s premature to say how quickly the tensions will be resolved and therefore, it’s difficult to judge, today, how large the economic effects would be.

The last question is from Mat Lee of Inner City Press, asking about Egypt. It said, starting July 1, for fiscal year 2017-'18, there will be another sharp price increase as a result of the IMF loan requirements, including cutting fuel subsidies to 1.75 percent of GDP this year and less than 0.5 percent. What is your response?

What I can say on that question is that - on the fuel subsidies we are following the plan outlined by the president and the government to phase out subsidies on major fuel products over three years. Why? It's useful to remember why. And that’s because these subsidies represent a big share of government spending. And, perhaps even more importantly, mostly benefit those who are better off. Reducing them, we believe, can help bring down the deficit, and also make room for more spending on health, education and social spending that directly help the most vulnerable people in Egypt.

I'm going to leave it there. Thank you all for coming. We'll see you in two weeks.

IMF Communications Department

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