Transcript of IMF Press Briefing

July 20, 2017

Mr. Murray: Good morning, everyone and welcome to this press briefing on behalf of the International Monetary Fund. I am William Murray from the Communications Department here at the International Monetary Fund in Washington. As usual this is one of our regular briefings, and it’s embargoed until 10:30 a.m. Washington time.

Before I run through upcoming events and take questions from the journalists here in the room and those online, let me introduce a special guest that we have with us today, who will brief you on the latest update of the Work Program of the IMF Executive Board.

Alfred Kammer, who is Deputy Director of our Strategy, Policy and Review Department, will walk us through the latest version of the Work Program, and he’ll also take questions online, so if you have any questions from the document that was supplied to you under embargo, please submit them online, and we’ll facilitate that as necessary.

With that, let me invite Alfred to take the floor.

Mr. Kammer: Thank you, Bill. The Work Program sets out the policy priorities for the Fund’s membership and helps shape the Executive Board agenda over the next 12 months. In line with the Fund’s strategic priorities, this Work Program focuses on three areas that are relevant for our membership: How to support efforts to sustain the recovery, lift productivity and increase resilience; how to promote sustainable policies toward a more inclusive global economy; and how to facilitate multilateral solutions to meet global challenges.

These areas follow the directions set out in the Spring 2017 Policy Agenda and the Communiqué of the International Monetary and Financial Committee.

Before I delve into specific topics in each area, I want to highlight some of the work that will be discussed at the Board in the coming days. As you know, tackling corruption is a priority for the Fund. It affects economic efficiency, inequality and macro-stability, and frankly, tackling corruption is the right thing to do.

To this end, we have a paper going to the Board tomorrow on the role of the Fund in governance issues. This will be followed by a second paper in April 2018 on the same topic that will propose principles and guidelines to better clarify and enhance the Fund’s role on this important issue.

On Monday, the Board will discuss the External Sector Report, which provides our Annual External Sector Assessments of the world’s largest economies. And on Wednesday, the Fund will consider issues relevant for the international financial architecture, specifically looking at our collaboration with regional financing arrangements.

Now turning to the three areas of focus for the Work Program: on sustaining the recovery and lifting productivity, the Fund’s emphasis on the three-pronged approach of monetary policy, fiscal policy and structural reform continues to inform the Work Program. For instance, we will look at ways to assess fiscal space and how we can better integrate structural reforms in our work.

On sustainable policies for a more inclusive global economy, we are expanding our policy analysis on how to address rising concerns on inequality. On facilitating multilateral solutions to meet global challenges, we refined our work on capital flows and macroprudential policies, and we will continue to assess the external sector of the largest economies as previously mentioned.

The Fund is also continuing work on supporting the 2030 Sustainable Development Goals and the financing for development agenda. This includes recent work on building fiscal capacity in fragile states, as well as work to explore country experiences to strengthen domestic revenue and public financial management. And we will continue our work to complete the 15 th Quota Review by 2019.

Our flagship reports, the World Economic Outlook, the Global Financial Stability Report, and the Fiscal Monitor, will continue to help guide the policy dialogue and will further address our efforts to make the global economy work for all.

The analytical chapters of the next World Economic Outlook, or WEO as we call it, will focus on understanding recent wage dynamics, the effects of climate change on macroeconomic activity, and on the magnitude and determinants of spillovers from fiscal policies in advanced economies.

The Global Financial Stability Report, the GFSR, which draws out the financial stability implications of economic issues highlighted in the WEO, will consider the impact of the exit from unconventional monetary policies, investigate the relationships between household debt, income and credit, and their implications for financial stability, and delve into the relation between financial conditions and downside risk to future economic activity.

In addition to analyzing the latest public finance developments, the Fiscal Monitor will discuss fiscal policy options for advanced, emerging and developing economies that wish to address rising concerns in the area of inequality, and the challenges in managing the tradeoff between efficiency and equity.

A few more highlights. We will have new work on reviewing measurement in the digital economy to explore the measurement challenges for growth and productivity. We continue to help our members tackle vulnerabilities through our work on sovereign debt restructuring, FinTech, correspondent banking relationships, and on bank resolution frameworks, and we will take stock of our pilots on gender, inequality and climate change later this year.

These are some of the areas which we identified as macro-critical for the Fund to strengthen surveillance in; pilots help us to strengthen our analytic basis, and develop tools and gain experience in country cases. This approach was used successfully in our macro-financial analysis, which is now included in our surveillance across the membership.

With that, I’ll be happy to answer any questions.

Questioner: Two questions: do you have a date for the External Sector Report? And secondly, is the Fund doing any work on inflation, and as a subset of inflation, on the whole issue of wages? That seems to be a conundrum right now that a lot of people in the market, a lot to economists are struggling with: why we are not seeing a bigger pickup in inflation, in wages in particular.

Mr. Kammer: On your question on inflation and wages, that is one of the topics which will be taken care of in our flagship publications. The WEO, in particular, we’ll be looking at wage dynamics, at the de-link between unemployment and wage developments, and labor market developments over the last two years, which addresses the issue you have been mentioning.

On the External Sector Report, what was the question?

Questioner: I just wondered if you had a date for that yet.

Mr. Kammer: That is going to happen on Monday.

Questioner: The discussion will happen on Monday?

Mr. Kammer: Yes.

Questioner: Since the Trump administration has been promoting its “America first” polices, Managing Director Lagarde has talked more about promoting free and fair trade policies. I’m just wondering where that fits in with the Work Program. Does that come under facilitating multilateral solutions?

Mr. Kammer: I think it’s a broader work program we have in place. And I think it’s going beyond the Trump administration. We had a backlash against globalization, which was experienced in many countries, and there were questions raised on the negative impact of globalization, but also of technology, in particular on labor. And as you know, the WEO did already a chapter on the declining labor share and income in the spring.

We are looking at three buckets. One bucket is how do you use domestic policies to address the impact of technology and globalization domestically, and these could be fiscal policies, labor market policies, et cetera. We also have a second bucket that looks

into fairness across time: that means sustainable fiscal policies, pension systems etc.

And the third bucket, which you were referring to, is the multilateral system. To look at making it useful for our membership, addressing any concerns they have. And that’s also what we are going to do. I see we also have a question online: When do you expect the Board will engage on better credit engagement and sovereign debt restructuring, review of existing modalities and possibly reforms? Will you submit new proposals to extend the collective action clauses?

On this one, I will need to get back to you. I don’t have the precise date available here.

Before I hand over to Bill, one final note. The Fund will also continue to work to help members strengthen their tax systems, including through a pilot of 15 countries, to deepen the integration of international taxation issues and bilateral surveillance.

Mr. Murray: Alfred, thank you very much. And, again, thank you all online. We’ll turn to the regular briefing in a second. But if you do have any follow-up questions on the Work Program, this is under embargo as well until 10:30 in Washington time. Contact Media Relations. They can follow up with Alfred.

Let me turn to IMF events, and then I’ll take questions from journalists here and those online.

Just to start off, on Monday, July 24, we will be releasing the World Economic Outlook update. This update will be launched in Kuala Lumpur, Malaysia, on Monday, July 24, at 11 a.m. local time. I think that’s the evening here in Washington, Sunday, July 23. The press will be getting, obviously, the material under embargo.

The event itself, press briefing by Maurice Obstfeld, our Economic Counsellor and Director of Research Department, will be webcast live, both on our main website and through this press center. So, you have two options for watching the event live if you so choose.

Again, on Monday, July 24th, at 10:30 a.m., Washington time, Managing Director Christine Lagarde will be at the Center for Global Development. The event will be entitled, “Global Economic Challenges: A conversation with IMF Managing Director Christine Lagarde.” This is going to be an opportunity for Madame Lagarde to discuss the WEO update, as well as other issues that are shaping the work of the Fund, some of it which was just touched upon by Alfred Kammer.

Reminder, this is the last IMF press briefing before the Executive Board’s summer recess. That takes place in the first half of August. The Board will go back into session in the second half of August.

However, Media Relations will not be in recess in August. There will be a whole series of Article IV consultations that’ll be concluded by our Executive Board over the next weeks. They are with a number of the systemic countries and regions. And, obviously, this will translate into some publications into the early August period.

Media Relations will be in contact with you regarding specific details. But let me give you a couple dates that you can mark in your calendar: July 21 is euro area policies. July 24 is the conclusion of the U.S. Article IV consultation. July 26 is Japan. July 28 is China.

You earlier asked about the External Sector Report. That will be, as we noted, discussed formally by our Executive Board on Monday, July 24. Media Relations will be in contact with you as well regarding the publication plans. Most of the reports associated with these Board discussions will be coming out within a two-week window or so.

And with that, let me take questions. Start here in the room, and then we can go to those online.

Questioner: First of all, can you tell us the modalities, what time is the Board today? What time it’s going to convey about the conditions, the decision of the Greek program?

Mr. Murray: I’m not going to have much fresh to say today on Greece. As you tipped toward, we have the Executive Board discussion on the new Greece program with the IMF. That discussion is going to take place in the afternoon. We expect that there will be press releases and commentary associated with that Board discussion today. I don’t have a precise time and when the Board will conclude. It’s going to be late afternoon before we’ll know anything. Media Relations will be in touch with you and others interested in the Greece program when they’re aware of when we’re launching the associated paperwork.

Questioner: The question before the Board meeting is: do you think that Greece should return to markets at this point? Do you think that the country’s ready to return to the markets?

Mr. Murray: I don’t really have anything specific to say other than to underscore that virtually all IMF programs have debt ceilings associated with them. How countries manage their debt, their liabilities, influences the debt ceiling. But beyond that, I don’t have anything further to say on Greece. You’ll see in some of the paperwork that’s likely to be released later today, what the Greece debt-ceiling analysis is and the commitments are.

I understand, as well, just before I came down here, that a spokesman for the Greek government mentioned that the plan would be to go to markets in 2018. Let me remind you that the whole point of IMF programs, whether it’s Greece or any other country, is to ultimately bring a country back to private capital markets. So, you create stable economic conditions that facilitate, ultimately, capital market borrowings. That’s clearly a function of this Greece program.

The other thing to keep in mind is that this Greece program remains predicated on the two legs that we’ve long mentioned, which are: one, a specific, credible debt sustainability proposal and actions from Europe. And secondly, economic policy implementation, which is part of this program once it’s approved by our Executive Board and then put into place as economic policy implementation.

Questioner: There are reports that the Board is not going to give today, to the Europeans, a deadline about the Greek debt.

Mr. Murray: I’m not going to get into that specific level of detail. Just stay tuned to see what comes out. We have every reason to want to explain what we’re doing and why we’re doing things. Let’s let the Board have this discussion, and then we’ll come -- we’ll be completely prepared to discuss all aspects of the Greece program.

Questioner: I just wanted to see if the IMF had any reaction to yesterday’s high-level meetings between the United States and China? As you know, they really didn’t come up with anything to agree upon. I’m just wondering how concerning is that, for example, does that open the door to unilateral actions by the United States, such as steel tariffs?

Mr. Murray: I’d have to speculate about what ifs, and we don’t do that. We don’t have anything to react to. As you know, there was no formal statements issued, but they’re still engaged, and that’s what we really want to see. We want to see all countries engaged.

Obviously, it’s a bilateral engagement, but we also like to see multilateral engagement. The United States and China are members of the IMF, and they engage through this institution on a regular basis as well. Engagement is important. But beyond that, I don’t have any reaction to what happened here in Washington yesterday on their bilateral economic discussions.

Questioner: We spoke of the two legs of the programs and debt restructuring, which was pretty much the second leg. So, are we going to keep seeing the Greeks kicking the can down the road? Because with this agreement in principle we have discussed, you will typically not violate your rules. But if this agreement does not have a specific deadline and in the end, we don’t see an efficient debt restructuring, it means that you will have endorsed a program in a country that based on your claims, the debt is not sustainable.

Mr. Murray: I don’t want to really get into the nitty gritty of this. Let’s see what comes out of the memorandum of understanding between us and the Greek authorities. You’ll see in the staff report. We’ll be repeating our views on debt sustainability. All IMF programs, whether it’s Greece or any other country, requires a degree of debt sustainability. There has to be assurances that a country can have a sustainable debt profile. And that’s not going to change anytime soon. That’s a standard practice.

But beyond that, I don’t really have anything further to add on Greece. We’ve been pretty clear on what our overall goals are. And again, it gets back to what I said earlier when he was asking about the debt ceiling. The ultimate goal is to get Greece into a more normalized situation where it can return to private capital markets and function in a less stressed economic situation.

Questioner: I have a monetary policy question. Do you have any comment on the ECB’s decision today and the commentary surrounding that from Mr. Draghi?

Mr. Murray: Just a brief remark here. Nothing too detailed. The ECB made no change to its monetary policy stance today, as you know. The accommodative stance is improving credit conditions and supporting the recovery in Europe. 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.

Questioner: And the second question, I wanted to just follow up, he mentioned steel briefly. There’s been some discussion about the U.S. possibly imposing sweeping tariffs on steel imports from all countries. This was something that came up at the G-20 discussions. Does the IMF have a position on this?

Mr. Murray: Not specifically until we see what happens. I don’t have a specific position, but our general principle is that we want free and open markets, within a multilateral context, so we’ll see what happens, and how that fits into that context.

Let me take a couple questions online.

Ghana President, Nana Akufo-Addo, on Tuesday said the country will not extend its three-year aid program with the IMF beyond April 2018. The IMF had urged it to do so to give it time to complete the program’s goals. Did the IMF so urge?

A step back real quick for some context. Right now, we’re in the process of completing the fourth review of Ghana’s ECF program. We’ve made significant progress in program discussions, and we expect to reach understandings in all remaining issues in the coming days. The discussions are going to continue and as a result of these continuing discussions, a Board discussion to complete the fourth review probably won’t take place until late August. Again, Media Relations will get back to everyone on the exact timing. But it’s probably late August when Ghana’s fourth review will be taken up by the Executive Board.

Now, the question that was just posed was regarding a comment about extension of the ECF next year when it’s scheduled to expire. The President made it clear that he would like to move Ghana beyond aid. And successful completion of the IMF-supported program could be instrumental in achieving this goal by restoring macroeconomic stability in Ghana. A request for program extension is essential for our ability to complete the review of this program overall. And given the significant fiscal slippages from last year, it will also take longer to bring debt onto a clearly declining path, which explains the need for the program to cover performance into later next year. This was something that was outlined in a press release issued by the finance minister on July 18th.

Mozambique: the IMF’s Mr. Lazare, our mission chief, has said that, quote, “critical information gaps remain unaddressed regarding the use of loans, proceeds”, close quote. Please be more specific about what the IMF sees as the information gaps, and how they can be filled, with what information and in what detail?

First of all, we welcomed and continue to welcome the fact that the delivery of an international forensic audit on three companies to the office of the public prosecutor of Mozambique has taken place. We commend Mozambique public prosecutor for undertaking this important audit and for releasing the summary of the report. Transparency and good governance are key conditions for sustainable, inclusive growth, and that applies to all countries. Now we look forward to the publication of the entire audit report in due course. At that point, we will be able to provide an informed view on the audit and its implications.

Questioner: I just wanted to follow up on that. So the audit found that about a quarter of the money still remains unaccounted for. Do they need to track down the rest of that before the IMF can even start talking about reengaging with Mozambique?

Mr. Murray: I’m not sure of your characterization. There’s unaccounted for and undocumented issues. I’m not sure it’s that category. But one of our main conditions is that we want to see full publication of this audit report for transparency. And as it stands right now, the report has only been partially published.

Questioner: Does there need to be more auditing done to do this more adequate, as far as you can?

Mr. Murray: Don’t forget that we stated at the time when the summary was published -- that was back in June -- that publication of documents constituted an important step toward greater transparency regarding loans amounting to $2 billion by these three public companies. The report provides useful information on how the loans were contracted and on the assets purchased by the companies. However, there are information gaps, in particular on the use of the loan proceeds. We want to see those information gaps closed.

Let me turn now to a question by Interfax on Ukraine. The prime minister said that the Ukraine would discuss with the IMF land reform and possibly remove this issue from the program. Could you clarify whether this has already been expressed by the authorities, and where we are as regards the fourth review of the program?

Thanks for that question. Let’s turn to the review. Consideration by the Executive Board of the fourth review will be possible once the policies needed for this review are implemented. The focus of this review is on pension reform and on measures to speed up privatization and ensure concrete results in anti-corruption efforts. It’s equally important that the program remain on track and fiscal and energy sector policies remain consistent with program commitments.

Land reform remains an important condition under the program, however, given the need to design the reform well and reach consensus on key steps ahead, there was a need to reset its timing to later in the year. In the meantime, it’s important that authorities move ahead in the coming months with necessary preparatory work and the timely implementation of an appropriate land reform that has the potential to transform Ukraine’s agricultural sector.

We’re getting a lot of online questions. I’m going to take more of those right now and then turn back to the room before we conclude. Belarus and the IMF have been negotiating the program for two years. What is the present status of these negotiations, are they stopped, suspended? Can there be a moment when it becomes obvious that documents produced over this time have become out of date and all the work should be started anew?

It’s correct. There’s been negotiations toward a three year EFF with Belarus. There was a staff visit as recently as June -- just to discuss recent economic developments and advance preparations for an upcoming Article IV. Discussions toward a program are on hold pending clarity on whether there is high level support in Belarus for policies, particularly in the state-owned enterprises and utility sectors. Our next mission, as I indicated earlier, to Belarus, will be to conduct an Article IV consultation, which is currently scheduled for late October.

We’ve got another question, and I think it’s going to be my last question online. It’s on Zimbabwe. The IMF Board in its assessment critiqued the country’s support programs to agriculture, calling for a cost-effective and well-targeted approach. What funding model do you suggest to return Zimbabwe to a breadbasket of the region?

Let me just recap briefly. We concluded the Article IV consultation on July 5 and issued a press release around that time. The main finding regarding Zimbabwe is that growth in 2017 will be boosted by the bumper harvest due to exceptional rainfall. The challenge really is to sustain growth in Zimbabwe. This will require timely action to reduce the deficit to a sustainable level and reforms to attract investment. Excessive government spending, if continued, could exacerbate a cash scarcity, further jeopardize the external and financial sectors, and ultimately fuel inflation in Zimbabwe.

Another key finding of the Article IV consultation was that a policy action is needed to reduce the deficit, accelerate structural reforms and for Zimbabwe to reengage with the international community to access much needed financial support.

All of the elements of this approach are essential and without adjustment reform and reengagement, Zimbabwe will have difficulty addressing its structural issues.

In terms of the funding model that you asked about and the breadbasket concept, we focus on the fiscal implications of the agriculture program in Zimbabwe. Our analysis suggests that the current design of the program creates significant fiscal risks and overall effectiveness could be improved by ensuring that the beneficiaries are those most in need. There are also organizations better placed than the IMF to advise on broader structuring and financing of the agricultural sector. So, I would refer you to those various organizations, and I’m sure you’re familiar with those in Zimbabwe and elsewhere.

Questioner: The first question I have is that Gerry Rice told us that Madame Lagarde received an invitation from the government to go to Athens. Do you have any updates on that?

Mr. Murray: I recall your question about that but I don’t have anything fresh to offer.

Questioner: Can you find out?

Mr. Murray: Sure, we’ll follow up.

Questioner: The other thing: I see there are many reports that say that the Europeans are extremely angry with the IMF and the way you move behind everybody’s backs. This is what they are saying, and they are saying about this ceiling. What actually they say is that the IMF staff changed the wording in the agreement with the Greek government and replaced the ceiling on the overall stock of government debt. From what I understand from my colleagues, the Europeans are very angry with you. Do you want to comment on that?

Mr. Murray: I have nothing to offer you on that, thanks for asking. Again, just a reminder to recap, there will be a Board meeting this afternoon here at the IMF on the latest program with Greece. Media Relations will be actively reaching out to all of you that are interested in the Greece program to advise on timing. I expect it to be much later in the day, obviously for planning purposes. Last question.

Questioner: Just a quick technical question. I think you mentioned U.S. Article IV, but I thought the U.S. Article IV was already done. Is this the full report?

Mr. Murray: Correct. A few weeks ago, you had the concluding mission statement. There was a press conference here at IMF headquarters by Alejandro Werner, Nigel Chalk, Stephan Danninger, the Western Hemisphere Department staff, where they walked you through the concluding mission statement. The Board will now be reviewing the full staff report on the U.S. economy, so there will be much more detail. That’s what that will be -- the staff report itself. I believe July 24 is the Board date. We have to so the summing up -- the Board views are summarized, so again, Media Relations is going to have to reconfirm this date because it is predicated on the completing of the summing up. I think the U.S. report will be out by July 27 or thereabouts.

This wraps up our latest press briefing. Again, it’s under embargo for roughly another 15 minutes. That’s 10:30 a.m. Washington time. We will not be holding another briefing until after the Executive Board recess, which concludes in mid-August. Thank you very much, and I look forward to seeing you again.

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