Transcript of IMF Press Briefing

March 29, 2018

MR. RICE: Good morning everyone and welcome to this briefing on behalf of the International Monetary Fund. I'm Gerry Rice of the Communication Department. As usual, our briefing this morning will be embargoed until 10:30 a.m. Washington time. Let me begin with a few announcements regarding travel and events and then I'll turn to questions from colleagues here in the room and take questions online.

So, in terms of travel and announcements, let me begin with the Managing Director, Madame Lagarde who will be visiting China between April 9 and 12. She will attend the Boao forum and offer some remarks there during the opening ceremony. That's on April 10. And then Madame Lagarde will be delivering our so-called Spring Meetings Curtain Raiser speech in Hong Kong on April 11. So again, that's the speech that serves as the prelude to the Spring Meetings which will be coming up very shortly and will lay out the issues that the IMF sees coming up on the agenda for the Spring Meetings. So that's the Curtain Raiser speech on April 11 and that's going to be in Hong Kong.

And then Madame Lagarde will travel to Beijing to attend the joint IMF-PBC, the People's Bank of China conference on the Belt and Road Initiative where she will also be making some remarks. And, of course, Madame Lagarde will also be meeting with Chinese officials whilst she is in Beijing. So that is Madame Lagarde and the trip to China April 9-12, upcoming.

I mentioned the Spring Meetings. They are going to begin the week of April 16. Those of you who follow us, know what that entails. It's a packed program, official meetings, lots of press events, seminars and so on. We will have the usual update on our economic forecasts in detail in the World Economic Outlook. We will have the Global Financial Stability Report and the Fiscal Monitor. Amongst the key themes for this year's meetings in addition to the outlook, of course, which will be of great interest, will be issue of digitalization and the challenges that it's bringing across the global economy. And the issue of rebuilding trust in public institutions is another theme that we expect to be covered. We can indeed give you more information. Be in touch with us via the website or via the Media Relations Division should you want any more information on the Spring Meetings.

A few other things. Our First Managing Director, David Lipton, will be in Spain early next week where he is delivering a key note speech at a conference we are co-sponsoring with the Central Bank of Spain. It is on the topic of Spain from Recovery to Resilience. One of our other Deputy Managing Directors, Tao Zhang, as we speak is also talking at the Center for Global Development here in Washington on the issue of debt in low income countries. We released a report on low income countries just about a week ago and his event today comes on top of that report last week. So that is debt in low income countries.

Finally, on April 6th, Mr. Zhang will be participating in the so-called Cedar Conference which aims to mobilize concessional lending and private investment for Lebanon, for the Lebanese economy. Again, we can get you further information on all these. Thank you very much and let me turn to any questions you might have in the room. Good morning. Let me start with Lanie in the front here.

QUESTIONER: Thank you. Gerry, there are many reports mainly coming from the Europeans. They say that the Eurozone would be better off without the IMF and that the IMF does not know how to operate in the monetary unit. I was wondering how do you comment on that?

MR. RICE: We've talked about that kind of commentary before. We serve at the request of our membership and our member countries. That has been and is the case in Greece. So, we try to do that to the best of our abilities and for the best outcomes for the member country. That has involved significant efforts, of course, first and foremost by Greece and the Greek people themselves. But there have also been significant efforts made by the IMF. We continue and will continue to support Greece as long as the Greek government sees that as being in the best interest of Greece and the objectives that they have in terms of sustainable economic growth, jobs and so on.

QUESTIONER: Gerry, good morning. Can you tell us something more because all the reports insist that the IMF is at odds with the Europeans? We hear bad things, Gerry, about the IMF from Brussels, for example, that you don't understand Europe and the Europeans, that your people just want (inaudible) in Athens. Please tell us, how do you view your relations with the Europeans and how do you characterize the cooperation with them. Thank you.

MR. RICE: I think we have excellent relations with the Europeans so that's how I would characterize the relations. We have relations with our membership in Europe on a broad array of issues and a broad array of countries. That includes Greece, of course, but it is far from limited to Greece. I would characterize those relations as very healthy and excellent. They are ongoing and we are in continual discussions.

Just to remind you, I mentioned that the relationships go beyond Greece but there have been even programs recently in Europe in Portugal, in Cyprus, in Ireland. There has been support in terms of advice and surveillance for the financial sector in Spain, just by way of example. There are many others. Where I think many would be of the view that the outcome of the IMF support in these cases and these examples has been very helpful and indeed positive for the countries concerned. I think we just have to be careful not to be selective in who is making certain comments because I think broadly, the IMF's relationship with Europe, as I say, and our member countries in Europe is excellent. Let me take one more on Greece and then turn to the rest of the room.

QUESTIONER: The European's also say that the IMF in order to join the Greek program will ask for the reduction of the tax exemption threshold to be implemented next year at the same time as the pension cuts. What is the truth?

MR. RICE: Again, maybe just stepping back for a second and then I'll answer your question. We've said that we want to move ahead with the program in Greece. It is contingent on these two aspects of implementation of reform and debt relief for Greece. We continue to push on both of those fronts as does the Greek government.

What I can say is that technical work and discussions on debt relief have intensified and we are working with our partners to arrive at a positive outcome that will indeed credibly alleviate Greece's debt burden. So again, we think that effort is intensifying. I don't have timing for you on all of that nor do I have timing on the next Greek mission but that’s the general context.

In that context then to come to Lenny's question about details of tax and so on, I would expect that the discussion of Greece's 2019 fiscal policies will take place with the Greek authorities and the European partners in the coming months and in line with the previously agreed pacts. So, I think that's the context in which to look at that. Let me move away from Greece and take other questions.

QUESTIONER: Good morning. Madame Lagarde proposed a rainy-day fund for the European Union which could make the EU and the Eurozone more resilient which is perhaps a Greek question too. Of course, traditionally Germans are not very eager to do stuff like that. How do you comment on the feedback Madame Lagarde got for this Eurozone rainy day fund?

MR. RICE: So maybe just to set in context for those who may not have followed it. Just a few days ago on Monday in Berlin, Madame Lagarde made a speech on the issue of European integration, the strengthening of the Eurozone and how that can be done. It is a very topical question that is being discussed at many levels in Europe. Indeed, it is an example again of the IMF having a strong relationship with Europe. And the IMF, in this case, contributing to the debate, an intellectual contribution really, in this case.

As I said, Madame Lagarde made a speech in Berlin on Monday on this topic and underlying her speech was a piece of research that we had done and which we also released at that time. In essence, the proposal made by Madame Lagarde and in that paper, is for a strengthening of the Eurozone essentially along three lines. A stronger capital market union, banking union secondly and then fiscal union. And this central fiscal capacity which, I think, is what you are asking about.

So, this central fiscal capacity which we have described as a rainy-day fund is something that would combine for the Eurozone both risk reduction and risk sharing. Countries would essentially save in good times by making contributions to this rainy-day fund. And then in more difficult times, they would be able to call upon this fund to help them. Of course, countries’ own fiscal policies would be the first line of defense. Resources from this fund would complement those efforts and help cushion the impact of a downturn. So that was the basic idea of the rainy-day fund. Countries would contribute to this in good times and then they would be able to draw upon it when there might be a downturn.

So, I think the speech got a lot of attention and has caused a good deal of, I would say, very healthy discussion. That was the whole point to make a contribution to the intellectual debate. I think that's a role the IMF plays. I think one of the questions that was raised coming back to your comment was a concern that this could lead to permanent transfers to certain countries. I think that the staff's proposal in this paper and in Madame Lagarde's speech really has several features that would avoid this issue of permanent transfers. Three things really.

Again, a country would pay a premium in good times based on the transfers it had received in the bad times, if you will. In a way, if you think about it, it's similar to raising the cost of insurance after an accident. I think we made that analogy actually in the speech. Secondly, and perhaps this point did not come through strongly in the commentary, we’re actually proposing a limit, a cap, on how much countries need to contribute in total, so there is a cap on that. There is also a limit, a cap, on how much a country can receive. So just by way of clarification, I mentioned those points. The bottom line is that we think a central fiscal capacity could indeed be an important element of strengthening the Eurozone going forward. We estimate that such a fiscal capacity along the lines that we have proposed could reduce the negative effects on output during a downturn by more than 50 percent. So, it is significant and the costs are relatively moderate around 0.35 percent of GDP.

QUESTIONER: (off mic)

MR. RICE: What I would say is again, another question was well isn't this duplicating the ESM and where the ESM to become a European Monetary Fund. I think there are many significant differences. That's a good question. It is not meant to be a substitute for the ESM. It's, as I said, a rainy-day fund. So, countries save money in good times to use it in worse times. By this we mean, as I said, a cyclical downturn, not a crisis. So, the ESM comes into play in a crisis. This is more in a cyclical downturn. A country would receive these transfers from the central fiscal capacity to cover for the loss of revenue instead of having to issue new debt, for example.

The central fiscal capacity would not have the conditionality, for example, that's associated with the ESM. Though countries would need to respect the common fiscal rules. And, you know, if there were a large shock, you know, a crisis, clearly the ESM with its appropriate conditionality would continue to be the appropriate instrument. So, we don't really see it as duplicating the ESM at all.

QUESTIONER: I mean, it feels like what you're trying to say to the Europeans with all these suggestions is that they have to find a way to deal with their own problems by themselves.

MR. RICE: You know, I think in all countries, first and foremost, the challenge of meeting an economic problem lies with the country itself and I think, you know, that's just true in general. But I think, again, what we're trying to do here is to contribute to the debate that is already ongoing and the European Council is discussing these issues, others are discussion these issues.

And, as I said at the beginning, the idea here is that we contribute, we hope to contribute to the debate that is already ongoing with some ideas that could help to strengthen the Eurozone going forward. During that speech, Madame Lagarde talked quite a bit about how much the Eurozone architecture has contributed in the past to helping overcome crisis and the introduction of things like the ESM, for example. But I think everyone recognizes that there are areas where the Eurozone architecture, if you'd like, can be strengthened. And, again, we're looking to make a contribution to that debate, which I think is one of the roles the IMF plays with our membership. QUESTIONER: Question on India. India, as you know, the latest figures reflects that India is now the fastest growing country among all the emerging economies. But at the same time there's quite a high rate of unemployment in India. People and economists say that growth is not reflected in the jobs being created in the country. Do you think that India is experiencing a jobless growth? Or what's IMF's take on that?

MR. RICE: Thank you very much. As you just said, India has been one of the fastest growing large economies in recent times, 7.2 percent GDP growth in the latest quarter, and this has led to important gains in poverty reduction and improvements in living standards. Our view is that recent reforms, particularly the implementation of the GST, the National Goods and Services Tax, should help boost efficiency and productivity, and over time will contribute to job creation, you know, just coming to your question. We think that it will help create jobs in the formal sector. In addition, the government recently took a step toward more labor market flexibility by modifying labor rules to permit fixed tenure on contract jobs across all industries.

And, again, we think that these reforms will help to increase employment, perhaps, not overnight, but over the medium term. And, of course, the continuation of appropriate macroeconomic policies, greater investment, structural reforms including end product and labor markets, as I mentioned. We think this will not only boost India's long-term growth, but create jobs. So, we think all of this will help to spur India's continuing catch-up with advanced economies and create the many jobs that are needed to employ India's young people and the growing labor force. We will have more to say on this and on India's economy including an updated forecast at the time of the World Economic Outlook, so that's in a couple of weeks' time now.

QUESTIONER: (off mic)

MR. RICE: You know, the way I would characterize it is, clearly, India faces a challenge in terms of providing sufficient employment for the number of people who are looking for work and, particularly, amongst the young people. But, yes, I think the measures and the reforms that India is undertaking will over the medium-term help to create jobs and help to meet that challenge.

QUESTIONER: On Madame Lagarde's travel to China and her speech at the One Belt, One Road initiative conference. Do you know what she'll be talking about? Do you have a feel of the speech of what the theme would be?

MR. RICE: You know, I don't have a preview of the speech for you. What's happening in China, as I mentioned, is that there's a joint one-day conference being sponsored by the People's Bank of China and by the IMF. So, we're going to have, you know, various participants from the private sector, from government, academia, and so on, to discuss various aspects of the Belt and Road initiative. So, I don't have a preview of the speech, but we will, of course, get it to you in real time. What we've said about the Belt and Road initiative is that we think it's a very important initiative that we think can foster regional cooperation including in trade and investment, and finance, and it could indeed make a very significant contribution in terms of infrastructure, connectivity to countries and, again, all of this supporting trade and growth.

On the other hand, we've also said, you know, like other major initiatives of this type, it can entail risks, including issues of debt sustainability and spillovers to other countries, as well as, you know, risks for China, including credit risk. So, the key is to balance, obviously, the potential benefits which we see, with the potential risks. And I'm sure that will be a topic of discussion at this conference. I mean, above all the key is to implement these projects well to ensure the high project quality, debt sustainability, government standards, open procurement and, of course, encouraging private sector participation as well. And all of that will help minimize the risks, maximize the benefits. And I think that's the objective that we want to see.

QUESTIONER: So, the IMF thinks the One Belt, One Road needs to be more transparent with the world?

MR. RICE: Well, you know, as I said, the way I'd like to characterize is we see large potential benefits from this initiative, but there are also potential risks and, you know, as I've just said, I think there are areas where, in particular, that can guard against those risks. And the ones I mentioned here were, you know, high project quality, debt sustainability, government standards, open procurement. And I think these are the kinds of topics that will be discussed at that conference in April.

I have a number of questions online. Let me try and take them pretty quickly, and then I'll take a quick swing back inside the room. There is a number of questions on trade including on South Korea. This is from Matthew Lee. The U.S. says it's Treasury Department is finalizing an understanding with South Korea to avoid practices that provide an unfair competitive advantage. What does the IMF think of such bilateral forex arrangements? There are other questions on trade, so let me just take that. On the U.S.-Korea discussions on trade, I don't have the details of that. So, you know, I wouldn't speculate on that. What I would say more generally is that we believe bilateral and regional agreements can bring important benefits by building on a strong multilateral trade system that promotes transparency and includes well-enforced trade rules that promote even-handed competition, is what I would say on that one. There is a question on the African Continental Free Trade Area Agreement, again, on trade signed last week. And we did, in fact, issue a statement -- Madam Lagarde made a statement on that on Tuesday where we welcomed the signing of this agreement. I believe it's among 44 countries and where we said that, you know, if implemented, this could make a significant contribution to jobs, investment, and to growth across Africa.

Let me see there's another question, several questions on Zimbabwe. Basically, their authors are asking how can the IMF move forward on Zimbabwe with a financial arrangement. And as I've said here before, there are a number of conditions that would need to be met, steps that would need to be taken before we would move forward with the financial arrangement in Zimbabwe. This includes the clearance of arrears to other partner institutions. It includes the reform path that we are discussing with Zimbabwe being implemented. What I would say is that we're in active discussion with the Zimbabwean authorities and looking to be as supportive as we can of the steps that they are taking.

There's a question about Tunisia. We've had a couple of queries further to last week's board meeting on Tunisia that completed the Article IV Consultation for Tunisia. And, also, importantly, the second review of our financial arrangement with Tunisia which is an Extended Fund Facility. So, there was agreement to disburse another installment under the Extended Fund Facility which is bringing total disbursements by the IMF to Tunisia under this arrangement to well over US$900 million. The Board also approved the Tunisian authorities request to move toward quarterly reviews from the current semi-annual schedule. Though, I would underline overall disbursements available throughout the program remain unchanged. So, the review schedule changes a bit, but not the overall disbursements. And we think that the more frequent reviews will also send a positive signal to the international community and to investors in terms of Tunisia’s macroeconomic policies and their implementation.

I want to take one more question online, and it relates to the Republic of Congo. Again, a good deal of interest in the Congo, various questions on the status of our discussions. The context is that the Congo has requested Fund’s financial assistance in the context of the CEMAC regional reform strategy, that's the Central African Monetary Union as you know. So, significant progress in our discussions including on debt and on governance issues. And the news is that the IMF’s mission is scheduled to be in Brazzaville in early April, maybe just as I said, as part of those discussions about potential IMF support. There has been an emphasis on the need for bold an immediate governance reform to anchor the expectations of positive change in the management of public resources and in that regard, we welcome the government's intention to approve a governance study that will guide future reforms. That's on Congo. Michael.

MICHAEL: Easy questions.

MR. RICE: Crazy questions?

MICHAEL: Easy, very easy…

MR. RICE: Oh, easy questions.

MICHAEL: Yes. You talked before about the successful programs for Portugal, Cyprus, and Ireland. Gerry, do you consider the Greek program as successful -- a success, too? That's one question.

MR. RICE: You know, what I would say is that I think the Greek reform program is still, you know, a work in progress. I think that the efforts made by the Greek government and the Greek people in the course of what was, in many ways, an unprecedented crisis that they were facing. I think those efforts, you know, deserve to be commended, and I think a lot of progress has been made if you look back to where Greece was at the beginning of the crisis. And, again, first and foremost, the Greek government and the Greek people deserve the credit for that progress. But it's important that the effort continues and I think the Greek government and people are also, you know, on the same page in that respect.

MICHAEL: I have another question. I saw these reports that the IMF is going to re-enter the program on April 1st. I understand April 1 st is a Fool Day, of course, but really are these reports correct? And how will it work since Greece is getting out of the European program on August 26?

MR. RICE: Yeah, I don't have a date for you. I haven't heard that date; no knowledge of that. And I don't have a timeline, Michael. What we've said before is that it's not so much the calendar year or a specific date, but we want to move ahead with that program that we've approved in principle, and that means a continuation of the reform effort, and it means more progress on debt relief. And then we hope that that program will be able to make a contribution to what the Greek government is, you know, the objectives that they have for their program. And, as I mentioned earlier, responding to Lenny, I think, the technical work and the discussions on debt relief have intensified. So, we are, you know, we're hoping for a positive outcome there.

Okay. I'm going to leave it there. We look forward to seeing you and everyone else, hopefully, at the spring meetings. I think it's going to be very interesting; a lot going on. And we'll be in touch with you with the various products and events. Thanks very much.

IMF Communications Department


Phone: +1 202 623-7100Email: