Transcript of IMF Press Briefing

December 14, 2017

MR. MURRAY: Well, good morning, everyone, and welcome to this press briefing on behalf of the International Monetary Fund. I'm William Murray of the Communication Department. And, as usual, this morning the embargo for this briefing will be 10:30 a.m., and that's Washington time. It’s I think 15:30 GMT.

Going to go through some upcoming travel and events and then take questions from the journalist here in the room and those of you online. If you’re online, please start submitting your questions, so we can make sure we get as many in as possible.

Today as many of you probably know, Managing Director Christine Lagarde is continuing her visit to Africa. She’s in Ethiopia. And then we’ll conclude her visit to the continent on December 18th in Djibouti.

She has some press events already in Addis today. And I think you’ve seen stories on that.

In Djibouti on the 18th, Managing Director will deliver opening remarks and moderate a panel at the high-level regional conference entitled Leveraging Trade and Technology for Inclusive Growth. Lessons for a Small State. She’ll also have meetings with authorities and also various stakeholders in Djibouti, as she is in Ethiopia. Media Relations can give you more details if you want to follow up on that.

On December 20th, the Managing Director and our U.K. mission team will be in London to conclude the Article IV staff mission to the U.K. The Managing Director and the mission chief are scheduled to conduct a press conference at 10 a.m. London time on the 20th at the U.K. Treasury.

They will review the preliminary findings of the IMF’s annual review of the U.K. economy. We call it the Article IV. And, of course, media relations will have more details on that event closer to December 20th.

January 22nd in Davos, Switzerland, the managing director will introduce the economic counselor and the director of our research department. Maury and some of the members of his department will conduct an update of the world economic outlook. That is where the world economic outlook update will take place in January.

And, of course, the managing director and First-Deputy Managing Director, David Lipton, are participating in the World Economic Forum’s annual meeting in Davos as well. Media Relations has further details for you on that.

Now, beyond the mission travel and the events abroad that I just mentioned, I just to flag to you that today, we’ll be releasing a blog by the economists in our Marketing and Capital Markets department. The blog explores the impact of Federal Reserve policy on portfolio flows to emerging markets. This blog builds upon findings that were initially published in the Global Financial Stability report back in October.

Another publication today that you should be aware of is that the Middle East and Central Asia department will be publishing a series of papers, basically, an economic review of the Gulf Cooperation Council Countries. It’ll cover fiscal policies, liquidity management, a whole host of things in the context of a low-oil-price environment. So, it’s some interesting research on the Gulf Cooperation Council Countries.

That’s it for some of the housekeeping things. This will be our last briefing of 2017. So, for those journalist in the room and those of you online, I want to wish you all, happy holidays and a very happy new year. We’ll reconvene our next briefing -- right now we’re scheduled for January 18th. So, again, I’d like to wish you all happy holidays.

With that, I’ll open the floor to questions. Let’s go the gentleman in the back.

QUESTIONER: The U.S. obviously is about to have a fairly substantial shift in fiscal policy. It looks pretty clear that’s about to happen. And I was wondering if you could actually just discuss what the venues and kind of timing of the IMF’s response to that would be? What would be kind of the ways in which the IMF is going to respond over the coming months as it evaluates the shift in fiscal policy in the world’s largest economy?

MR. MURRAY: Okay, thanks, Josh. I’m going to give you a little fill on our general views on the U.S. But before I do that, some of the natural points are going to be the World Economic Outlook Update, obviously, that I just mentioned on January 22nd. Because assuming tax reforms are adopted in the next week or so, that’ll have growth implications for the United States, and, that will obviously feed into our global forecast.

We have a regular process. We call them “Systemic Five,” the five largest systemically important economies or grouping of economies in the world. The United States is there with China, the Euro zone, Germany, etc.

That process is essentially getting underway. The annual review of economies takes a number of months to conclude. There’s preparty work and things of that nature that go into it, staff analysis. And then there is a series of private outreach that the staff does with the government with players in the economies that we’re analyzing.

So, the U.S. Article IV process will get underway in full throttle in the coming weeks. And, typically, we issue a concluding mission statement, much as we’re doing with the U.K. at the Treasury Department in a few weeks. The staff will issue a mission statement, hold a press briefing. That typically happens in the June/July period.

The way processes work here, is the Executive Board is actually the one that concludes the review of any economy that staff conduct analysis of. So, that’s the multilateralization of our analyses. So, the Executive Board will probably take up the U.S. economy sometime in the July period. And we’ll be releasing detailed reports on our findings regarding the United States. So, it’s a fairly long process of a number of months.

But given this question, let me just give you -- it’s mostly a reminder, and I think, you know, you’ve heard this from us before, but I want to make it clear where we stand.

I mean in context of the tax overhaul that’s underway here in the United States. In principle, as we’ve said, we agreed with the Administration that tax reforms are important and necessary.

We have also stressed, as our U.S. Article IV report said last July, that, “Supporting low and middle-income households and promoting investments in human and physical capital formation would feed back into better growth and lead to more broad-based improvements in living standards over the medium term.”

The overall plan to simplify the U.S. personal and business tax system, expanding tax bases and reducing marginal rates, is welcomed. The reform, even though we’re looking for more details and final details, what we’re seeing is that the reforms contain elements that the IMF has argued for in the past, which is limiting the mortgage interest deduction, allowing expensing of capital investment, limiting the debt bias in the corporate tax system and moving to territorial system with a minimum tax on offshore profits of U.S. multinationals.

QUESTIONER: (Inaudible. Question about de-monetization process in India) Is it worth it for other countries to carry out single reforms?

MR. MURRAY: Okay, let me see if I can give you some guidance on that. You know, monetary reforms are very country specific. So, let me speak about India rather than what each country should do because it’s a big question. I don’t really have clear guidance to offer you on that. But let’s give you a sense of India the year after.

You know, while demonetization led to temporary disruptions in economic activity, primarily, private consumption and small businesses due to cash shortages, the effects are dissipating.

In the medium term, demonetization could have possible effects, including through greater formalization of and the information on economic activities and a more efficient payment system with a greater use of the banking system and digital payments.

So, the bottom line is that we see salutary benefits from the demonetization that took place a year ago. And there are potential benefits going forward.

QUESTIONER: Two questions for you. One, again, on just returning to fiscal policy and it’s cycling on the fed. Just to follow up on your thoughts on the tax cuts. Does the Fund kind of have a bottom line right now on whether this could lead to overheating in the U.S. economy and the global economy?

MR. MURRAY: We always look at risks. I mean that’s part of what we do and, you know, over the horizon-type risks. But at this juncture, our general feeling is that the fed is on the right track.

We’ve been supportive or recent FOMC decisions, including yesterday’s decision to raise interest rates by a quarter point. And as long as the fed continues to communicate well, its process of policy normalization, helping to minimize market disruption and unwelcome spillovers to other markets is a good track to be on.

Future moves in the policy rate should be gradual and dependent on the data, ensuring there are greater signs of wage or price inflation than are currently evident.

In terms of the context of your question, we’re not declaring that as a clear risk. But, also, let me remind you in the context of the last world economic outlook, you know, back in October, that we published, one of the key messages that came out in the autumn, was that the world is on a much more robust growth path than it had been for some time. Still has a long way to go. Still a lot of risks. That’s why we want to fix the roof while the sun is shining. But the sun is shining.

We also, flagged, in the context of the autumn WEO, that there were medium-term risks, and including financial market disruptions, issues related to volatility, things that you could associate with forms of overheating. But that was viewed as something that was medium-term in nature. At this time, we think the Central Bank is on the right track.

QUESTIONER: Just to follow up. I was actually, thinking, specifically, about the tax cuts. I mean I’m glad you answered about the fed. Does the Fund have a bottom line right now?

MR. MURRAY: You’ll see in the World Economic Outlook that we’ll have to make adjustments in our growth forecast. But right now, not knowing exactly what the tax measures are, what they are going to do to the economy, it’s a little too early for us to declare that a real concern.

But we’ve said all along, even absent tax reform in the United States, that a medium-term risk was always going to be things of that nature. You know, they tend to stem from recoveries and economies, generally, not just the United States. So, everybody’s watching out for signs of that, but so far, we haven’t seen it.

QUESTIONER: I got one more, and then I’m done. Just a return to the fed, for a second. You mentioned this paper and this blog post that you put out on the potential effect on EM flows. Can you summarize that?

MR. MURRAY: We haven’t published it. It’s going to come out after this briefing breaks up. Sorry, I’d be violating embargos. But, you know, basically, it revisits the GSFR, which did raise some, you know, just, basically, was a warning call to emerging markets to get ready for shifts in portfolio flows once the monetary policies started tightening in the U.S.

QUESTIONER: Thank you. I have a question on Egypt. I saw somewhere that the Board should meet next week. Could you confirm the date, and are they going to discuss about the second portion of 12 billion disbursement?

MR. MURRAY: That’s correct. The Board review on Egypt is scheduled for December 20th. The program. There’s a program review.

QUESTIONER: But should we expect any news?

MR. MURRAY: Yeah, I mean standard practice at the Fund for any program country we issue a press advisory, press statement so you'll get an update once the Board -- you'll get a full update from us on Egypt once the Board concludes the discussion on the 20th. You are correct, there is an upcoming Board date on the Egypt program.

I assume you're going to go on to Greece. Let me take a couple of questions from the screen here and then I'll come back to you because I know we can cover some territory. This first question is on Zimbabwe. “What is the IMF's assessment about the current political developments in Zimbabwe as it relates to economic prospects?” We've had a mission on the ground in Zimbabwe this week. I think they just wrapped up. It is part of our regular interim, Article IV review cycle to update our assessment of Zimbabwe's fiscal position. Foreign exchange developments and to inquire about the new administration's economic plant. It is a fairly detailed mission. I don't have anything specific from that mission to share with you at the moment but what I can tell you is what our general views are on Zimbabwe. Let me just recap that briefly.

The Zimbabwe economy faces severe challenges. Unsustainable fiscal deficit has led to severe liquidity shortages, created inflationary pressures and threatened the viability of the financial sector and the exchange rate regime. Restoring growth will require concerted efforts to tackle the fiscal deficit, including through rationalizing and better targeting of the expensive agricultural support programs. These efforts should be complimented by structural reforms to strengthen the role of the private sector by improving the business climate and reducing policy uncertainty in Zimbabwe.

Our understanding as a result of this mission but also in our ongoing context is that the authorities are cognizant of the challenges facing Zimbabwe and have expressed their determination to address them. They presented their 2018 budget on December 7th and that budget stresses that the government's intention to re-impose budget discipline, reform and open the economy and engage with the broader international community. In this regard, the clarification and simplification of what's called the Indigenization Policy is a step in the right direction.

Lastly, and you've heard this before from us. The IMF stands ready to support the authorities in their efforts to address their challenges. In addition to a strong and coherent reform program, a concerted international effort will be required to revive and reintegrate the Zimbabwe economy. An IMF financial arrangement, for example, would only be possible, and we were asked about this recently. It would only be possible after progress is made in resolving Zimbabwe's arrears to other international financial institutions and other creditors. Thanks for that question.

I'm going to take one more question. This is on Ukraine “The National Bank of Ukraine expects that the $3 billion and $3.5 billion tranches from the IMF will arrive in 2018 and also, an IMF mission will visit Kiev in January. Could you confirm?

Basically, we have no review mission planned. The second half of Antoine's question is, will there be an IMF mission to Kiev in January. There is no review mission planned at this stage. In terms of the tranching of the program, I'm going to have to get back to you. As standard practice, we have a program with the country. When you look at the staff report, the indicative tranches are built into the staff reports that we make public on all countries. We'll go look at that and get back to you on the notional tranching. There is a way to go with Ukraine in terms of completing its review. So, the tranching is theoretical at this stage.

[Post briefing addendum: Consideration by the IMF Executive Board of the 4th review will be possible once the policies needed for this review are implemented. As we have noted before, the focus of the 4th review has been on the implementation of a few key actions, including pension reform, the formation of an anticorruption court, energy sector policies, the 2018 budget, and a revised privatization law. While some progress has been made, some actions are still pending. As indicated by David Lipton, First Deputy Managing Director of the IMF during his visit to Kyiv in September 2017, Ukraine should take advantage of the favorable external environment to advance reforms and transition from stabilization to growth. The timing of a review mission has not yet been decided.]

QUESTIONER: The new chief of the Europe group for Mr. Mario Centeno said yesterday that there are still some committees that before the debt restructuring talks with Greece. As you understand, he doesn't agree at all with you. Do you have any answer to that?

MR. MURRAY: I'm not aware of any disagreements with him. That characterization is yours, not mine. Let me tell you just where we stand on that. We continue to believe that agreement on debt relief can be reached soon. If this were not the case, IMF staff would not have recommended the new program for the executive board's consideration a few months ago. As you know, I'm saying this for the record. We approved a Greece program in principle a few months ago. We wouldn't have brought that forth if we didn't think that debt relief was possible. Like I said, we think an agreement is possible and can be reached soon.

Also, let me remind everybody that we have made a tremendous amount of progress with the debt discussion since 2015, it has been going on for some time. While not all differences have been bridged yet, we believe there is scope to do so. From our part, we're committed to work with our partners, including the Europe group to arrive at a positive outcome on debt relief, one that can credibly alleviate Greece's debt burden so it can embark on a sustained recovery.

QUESTIONER: It is obvious that you don't agree, of course. I have another question. Occasionally, your staff has addressed micro critical political social production issues. According to the Eurostat, one in three residents in Greece face material deprivation. But what is your answer to those who say that this statistic is approved that your program face.

MR. MURRAY: I haven't seen those numbers, so I'm not going to respond to it. Any country that goes into such severe economic situation, distress, is going to have issues along these lines. That's why we have a program because the whole point is to stabilize the economy as quickly as possible to avoid deprivation as much as possible. I think the notion that the Fund is in that game is incorrect. The whole point of the program is to raise, stabilize Greece and to get it into a situation where it is going to be growing and producing less poverty.

QUESTIONER: I have a follow up. In your opinion, who is responsible for the fact that Greece is under programs for more than seven years? Do you think the government of Greece is responsible?

MR. MURRAY: I'm sorry, I didn't catch that.

QUESTIONER: In your opinion, is it possible for the fact that Greece is still under program. This is now seven and a half years.

MR. MURRAY: I think the sooner that we have agreements on critical macroeconomic issues, debt and sustainability and things of that nature, the sooner things resolve themselves. Right now, we're focused on the immediate situation which is we have an agreement in principle for a program that runs for a number of months.

I have another Greece question online. I'm going to read it and then this is just for continuity here. A question on Greece from CNN Greece. In mid-September, you had told us that "an assessment of the financial sector strategy and plans in this regard, will be the focus of the first review of the program supported by the arrangement". Is this still valid?

Thanks for that question. Basic answer, yes, this is still valid. Let me repeat the question so everybody is clear on this. In mid-September, you told us that "an assessment of the financial sector strategy and plans in this regard, will be the focus of the first review of the program supported by the arrangement". Is this still valid? Yes, it is. There is an assessment of the financial sector strategy is still part of the process once we have our review.

I think that's it for online. Let me turn to the room and then we can wrap up.

QUESTIONER: One question about the Rohingya crisis in Bangladesh. What is IMF's assessment of the impact that it will have on the economy of Bangladesh.

MR. MURRAY: Thanks for that question. Roughly a month ago, we completed the annual review of the Miramar economy. They looked at the ramifications there, found very little evidence because it is a local problem. In Bangladesh, we are carefully looking at developments there because there is this large influx of refugees. There is an ongoing analysis right now, it is not complete. We are looking at the whole range of, it's a humanitarian crisis that we hope is resolved as quickly as possible and we join the whole international community in voicing our concerns about the humanitarian crisis that is evolving there. In Bangladesh itself, what we have to look at, what our economists are looking at is the fiscal impact of the refugee influx and how that is absorbed or is not absorbed by the economy. That is underway but we probably won't see the results of that for some time. The Bangladesh annual review won't be complete until the Spring. I don't have anything for you this week. I don't think we'll have any clear answer on our initial assessments of the spill over effects of this humanitarian crisis for at least a number of weeks.

QUESTIONER: Just a question on Venezuela. I don't know if you have new development in the contact of the last few weeks with Venezuela.

MR. MURRAY: Yeah. There have been absolutely no fresh developments but thanks for asking. Thank you very much. We are embargoed until 10:30 a.m. Washington time, 15:30 GMT. I look forward to seeing you in the new year. Have a very good New Year. Thanks.

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