Transcript of the IMFC Press Conference

October 14, 2017

Mr. Rice - Well, thank you, and good afternoon. Welcome to everyone. This is the press conference on behalf of the International Monetary and Financial Committee. I am very pleased to have with us this afternoon the Chair of that committee, Mr. Agustin Carstens. We also have with us the Managing Director of the IMF, Madam Christine Lagarde.

I will ask the Chairman to make some opening remarks, and then we will proceed with your questions. I know you all have the communique already, so we will proceed on that basis. Thank you, Mr. Chairman.

Mr. Carstens - Thank you very much, Gerry. Well, good afternoon to all of you. Allow me to summarize the main points from our meeting of the IMFC.

There was a strong consensus that the global outlook is strengthening and that this welcome upturn is a window of opportunity that we now should use to address key policy challenges that remain and that will be of the essence to raise potential growth.

Now, this does not mean that we are declaring victory just yet over all the economic and financial strengths that emanated from the global financial crisis. You will see from the IMFC communique we agreed that near-term risks are broadly balanced, even though medium-term risks remained tilted to the downside. We agreed there is no room for complacency.

In terms of deepening the current recovery, the membership agreed that monetary policy should remain accommodative, where inflation is still below target and output gaps are negative.

It was also agreed that monetary policy alone cannot support the recovery. Growth-friendly fiscal policies that still ensure public debt is on a sustainable path are needed, as are policies that boost productivity and promote inclusiveness. Well-sequenced structural reforms adapted to the members were also stressed by the IMFC to further lift productivity and to promote growth and employment.

The committee strongly endorsed the Managing Director’s Global Policy Agenda and the IMF’s work in support of the membership’s effort to deepen the recovery, build resilience, promote inclusion, and expand opportunities for all.

We also covered the range of IMF institutional issues, as you will see from the communique. I will point you to just a few.

We supported the IMF’s work in support of the 2030 Sustainable Development Goals and welcomed the ongoing efforts to strengthen the effectiveness of capacity development. We also endorsed a review of the IMF’s lending facilities for low-income countries, including to prepare for and to respond to natural disasters and to help fragile states to recover from conflicts.

The committee also supported the IMF’s further work on governance and corruption issues, external sector assessment, and the strengthening of the global financial safety net, having the IMF at the center of it.

Last but not least, we are continuing our work to agree on the way forward on the members’ quotas.

Before I give back the floor to Gerry, allow me to say that, as you know, this is my last IMFC meeting as Chair. I want to thank IMFC members for their invaluable support. Also I would like to thank the staff and management of the IMF for their hard work during my chairmanship of the committee, which I assumed in March 2015. Of course in the future I will continue my long engagement with the Fund, so I look forward to seeing everyone again. That includes you, Christine, who I must also take the opportunity to thank for hosting the IMFC and for working so effectively with me in my capacity as Chairman of the IMFC. It has been a pleasure to work closely with you and to witness in real detail the tremendous skill you have in managing this institution. So thank you very much, Christine.

Mr. Rice - Thank you very much, Mr. Chairman. OK. Ready for your questions. Let us start with the lady right here with your hand up. Yes, ma’am.

Question - Madam Lagarde, I have two questions for you. The first, if you could sum up the overall flavor of the Annual Meetings and the one message that you would like the world to hear. And the second is specific to India. I know the IMF lowered the growth forecast for this year to 6.7 percent, citing demonetization as well as GST as transient reasons, but is there a deeper issue of jobs and growth for all? In fact, less than 2 percent of Indians who apply for jobs every day get those. There are more than 30,000 people applying for jobs and 450 getting them, so what is the larger message for the Indian administration to deliver on that? Thank you so much.

Ms. Lagarde - Well, thank you very much. Let me preface my response to you by a very, very warm, strong word of acknowledgment and gratitude to the Chair of the IMFC. It has been a joy to work with Agustin, he and his whole team, because the work involves a number of people. But he and his whole team have been a joy to work with. They have led the exercise of conducting the meeting, preparing for the meeting, rallying support, generating consensus; and Agustin has been a force of leadership in a very special way, in a very amicable, friendly, almost family-like way; and that is, I would say, the Mexican way, which is highly appreciated.

Turning to your question, clearly the message that we received loud and clear was we agree with you that it is when the sun is shining better, that we need to fix the roof. And I think each and every country in the room, the 189 members, are going to go home, I hope, looking at their own house, looking at what part of the roof needs a bit of fixing, whether it is fiscal policy, monetary policy, other structural reforms that were difficult to do in hard times and which will be much easier in better times because the output is stronger and because there is less fatigue on the shoulders of people when the growth is picking up, when jobs are created.

So it is when the sun is shining that you need to fix the roof, that message I think was received 100 percent. We too have to look at the international roof and make sure that it is fixed and it is solid and it continues to be rules-based, evenhanded, and protecting the economies in this international economy that is so strongly interconnected.

Turning to India, you are right, we have slightly downgraded India; but we believe that India is for the medium and long-term on a growth track that is much more solid as a result of the structural reforms that have been conducted in India in the last couple of years. Now, of course, the demonetization that took place, of course collapsing 40 different taxes into one single GST is a monumental effort, and given the implementation associated with it, it is hardly surprising that there is a little bit of a short-term slowdown as a result. But for the medium term, we see a very solid track ahead for the Indian economy. And we very much hope that the combination of fiscal, because the deficit has been reduced, inflation has been down significantly, and the structural reforms, will actually deliver the jobs that the Indian population, particularly the young Indian people, expect in the future.

Mr. Rice - Agustin, do you want to comment on the broad message?

Mr. Carstens - On the broad message I can only underline what the MD mentioned. I mean, I think that the title of the Global Policy Agenda, which is A Window of Opportunity, is the right title. Right now when it seems that we are starting a process of sustained growth, we need to reinforce that process by taking care of some legacy issues, but also implement strongly with a lot of determination structural policies to address productivity growth and the higher growth of wages and employment. So I think that the MD covered the territory very well.

Mr. Rice - Thank you very much. I am going to the front row. The gentleman with his hand up, yes, sir. Indonesia.

Question - I have three questions. The first one is what can we, public policymakers, and you yourself, expect for the annual meeting in Bali next year? The second one is about Indonesia. What is your outlook for the Indonesian economy and your policy recommendation for inclusive growth so that jobs are enough created and the poor is included? The third one, and finally, Indonesia and many other countries suffer from tax evasion. Is there anything IMF can contribute in the international cooperation to fight tax evasion? Thank you.

Ms. Lagarde - First of all, I think everybody is looking forward to the next annual meeting in Indonesia. What is in it for Indonesia? It is going to be for a week the magnet of the financial world because all Finance Ministers, all central bank Governors and many, many actors of the financial sphere will be converging towards Indonesia. So it is a time when all eyes in that financial and economic world will be looking at Indonesia. That is number one. So it is a perfect time to showcase the success of the country.

Second, there is business for Indonesia because these people sleep in hotels, eat in restaurants, spend money in the country; and the fact that we have so many submissions every three years when we hold a meeting outside of Washington is to me an indication that there has to be some strong return on the investment of hosting an Annual Meeting.

In relation to Indonesia, the fact that it was retained to host the 2018 annual meeting is a clear indication of its performance, of its focus, and of its efficiency. Its success from an economic point of view is demonstrated by the forecast of growth, 5.2, 5.3, those are the forecasts that we have for Indonesia going forward. It is sustained by a strong policy mix which can be even strengthened with a stronger focus on growth and resilience, with the continuation of the structural reforms, and a continuation of the focus that particularly the Finance Minister, Sri Mulyani Indrawati, has had on tax collection, has had on revenue generation. I know that the tax amnesty was a clear effort which has paid back. Clearly the tax efforts have to continue going forward, and we certainly support the policies that have been put in place to that effect. And that touches on your third point, which we will both take up. Of course, there has to be coordination between the countries in order to deliver on the BEPS, which is the Base Erosion Profit-Shifting Project, which has been undertaken, and of course there has to be a collective fight against tax evasion, and of course there has to be a collective endeavor against anti-money laundering, against the financing of terrorism. You see, very much all these three things are combined together, and they need to be addressed and they need to be fought head-on by the international community of the Finance Ministers, the central bank Governors, and the policymakers.

Mr. Carstens - And I just would complement on this last point that Christine mentioned that what will facilitate all this is the advantage that we all can make from technological development and from the IT revolution. I think that the fact that the systems talk among each other internationally, that there is the possibility to share information and to double check the veracity of some declarations I think is of the essence. And that will help not only in Indonesia, but it will help all the countries in the world.

Mr. Rice - Back here, lady in the second row with your hand raised. Mexico, yes. Thank you.

Question - Thank you very much. Ms. Lagarde, one question too is inclusive, and it is about inclusion. As you said and Mr. Carstens said, in your agenda one of the most important things is the inclusiveness to grow, to push up the progression of the growth. But without inclusion of women, without combating corruption in countries like Mexico, for example, it could be not only a lag; it would be something that is lagging forever. How could it be implemented with the support of the IMF a new strategy where people believe in what we are doing about anti-corruption systems and anti-corruption measures? Thank you.

Ms. Lagarde - Anything that we do has to go beyond the nice words that I say in those press conferences. So we need to document first with the analytical work that our teams can produce, and then we need to take that work on the road, so the work that we do is based on strong analysis, well-researched documents; and then we take those in an operational way to countries. In relation to the inclusion of women in the economies, we have done that, and we have more than 20 pilots now completed, another 13 underway; and we will systematize those policy recommendations and work that we do in terms of capacity-building for the countries to make sure that women are better included. And that takes multiple forms. It is gender budgeting. It is public spending in areas that will actually facilitate the access of women to the workforce. It is changing the tax system in such a way that there is an equal taxation of men and women so that the woman is not always the secondary earner who is marginally the highest taxed. Those are some examples of what we do and what we recommend to the authorities with which we work.

In corruption, the Board has now approved that we do further work on the analytical tools that we will use to identify corruption, to expect transparency, particularly in contractual terms, in procurements from the countries with which we do work, both in surveillance and in programs countries as well. So that will be the first point of entry of the work that we have been doing for many, many years. In anti-money laundering, in the countering of the financing of terrorism, we have worked with more than 120 countries now, and we will continue doing that; but we will be deeper and more granular in terms of identification of corruption.

Mr. Rice - I think we have time for one more.

Question - Thank you very much, Madam Lagarde and Dr. Carstens. I wanted to ask you. I see a couple mentions of trade in the communique, and as these meetings have been taking place this week, we also have across the Potomac in Virginia, negotiations for the North American Free Trade Agreement and that update or overhaul process. I wanted to ask you about the risks that presents for the growth outlook for North America, for the three countries involved, as well as those for the world, if you might be able to address that. Thank you.

Ms. Lagarde - Thank you. What our analytical work, as well as the work of many others actually, has demonstrated was that trade is actually a very powerful engine for growth, for innovation, for competition, and for productivity. And we have talked all along this week about growth, about innovation, about competition, and about productivity. So major engine, there is no question about it. That it has to be fair is certainly something that everybody agreed upon. It is also the case that when you have longstanding agreements that have not been revised, it is perfectly legitimate because the world has changed that they be revisited, improved, that there be new versions of them. But hopefully if it is well done, it can be a win-win for all countries in those negotiations, and it would then continue to be an engine for growth, for productivity, fueled by innovation and competition.

Mr. Carstens - Well, I just would like to echo what Christine just said. I think that Mexico — well, Mexico definitely is negotiating in good faith with the expectation of reaching an agreement. NAFTA has been tremendously important for the Mexican economy; and as Christine just said, there is plenty of room to modernize NAFTA, to make it fair and productive for the three countries, so we are betting and expecting a win-win situation. The road in all these negotiations is winding, but I am sure that we will be able to navigate to a safe port through the next sessions of negotiations.

Ms. Lagarde - Can we take one because then we have parity, two women, two men.

Question - So I am from Iran. So I want to ask when President Trump strongly requested that the World Bank and the IMF do not provide loans or funds to Iran. Regarding to the situation right now, I want to know that what effect will these words have on your decisions?

Ms. Lagarde - You know, we operate with 189 members, and we only provide support and enter into program negotiations when a country asks for it. And we see no reason to change anything in the guidelines that we have received from the Board and to continue to operate in the same manner. Thank you.

Mr. Rice - Thank you, Mr. Chairman. Thank you, Madam Lagarde, and thanks to all of you for coming today. We will see you next time.

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