Transcript of IMFC Press Conference

April 21, 2018


Christine Lagarde, Managing Director, IMF

Lesetja Kganyago, IMFC Chairman and Governor of the South African Reserve Bank

Gerry Rice, Director of Communications, IMF

Mr. Rice - Good afternoon, everyone. A very warm welcome to this press conference to Governor Kganyago. It is also my pleasure to introduce the Managing Director of the IMF, Madam Christine Lagarde. I will ask the Chairman to make some opening remarks, and then we will have time for a few questions. I think you all have the communique? It has been distributed.

Ms. Lagarde - While you are looking for your document, I take this opportunity to actually congratulate our new Chair because he is succeeding Agustín Carstens, and I have to confess that the opening of the IMF session was actually us two congratulating warmly former Chairman Carstens, who left as Chairman and stayed as observer as head of the Bank for International Settlements. So sometimes you have those funny circumstances of one person going, being bid farewell, and then coming back through the window. It is quite funny. And we talked a lot about fixing the roof, having the window of opportunity open. And I am sure that our new Chair will explain to you all of that. We talked about bridges as well.

Mr. Kganyago - Yes, the bridges are working. Good. Thank you very much, Gerry, and good afternoon, everyone. I am pleased to be back in Washington, D.C., to convene the International Monetary and Financial Committee, which is also my first meeting as the committee's Chair. I will briefly summarize a few of the key findings expressed by the IMFC in its communique and then we will turn to your questions.

Our discussions and dialogue over the last two days established that we agree global growth is stronger and more broad-based, with its main drivers being trade and investment. While we have turned the corner after a decade of crisis, we agree that there are some dark clouds on the horizon, and we need collectively and individually to focus on deeper economic reforms to ensure higher, sustainable, and inclusive growth.

As the communiqué notes, and I quote: "Risks are broadly balanced in the near-term but remain skewed to the downside beyond the next several quarters." This is because rising financial vulnerabilities, increasing trade and geopolitical tensions, and historically high global debt threaten global growth prospects.

The committee has identified demographic headwinds and subdued productivity growth that have the potential to reduce higher and more inclusive growth in the future. But not all is gloomy. Many of these challenges can be addressed through decisive policy actions and collaboration. We agreed that the current environment of strengthened growth is still an opportunity to act. The sun is still shining. And as the communique says, the window of opportunity remains open and should be used expeditiously.

Our discussions this week were conducted against this backdrop and in the context of sharing our experiences over the public policy challenges that we all face. So to point you to the key passage we stated, and I quote: "We will cooperate to tackle shared challenges. We affirm the importance of implementing the conclusions of the G20 Hamburg Summit on Trade and recognize the need for further dialogue and actions."

The communiqué also notes that countries are working to strengthen the contribution of trade to our economies at a time when there are heightened concerns over evolving tensions. As I mentioned earlier, we are concerned about rising debt vulnerabilities in many countries; but debt in low-income countries was highlighted in our meetings. We agreed that the IMF and the World Bank Group should develop a multi-pronged work program to address the problem, enhance debt transparency, and help countries improve debt management capacity. This requires collective efforts by debtors, creditors, and the entire international community.

We also endorsed the Managing Director's Global Policy Agenda and supported the IMF's work in six broad areas, namely: promote a stable international monetary and financial system; secondly, help countries tackle shared challenges; thirdly, safeguard debt sustainability; fourth, enhance systemic resilience for higher and more sustainable growth; fifthly, develop more tailored policy tools; and lastly, strengthen the international monetary system. In so doing, we ask the IMF to continue collaborating closely with other institutions and relevant stakeholders. We also reaffirmed the IMF's role at the center of the global financial safety net.

Now, before I take your questions, let me once again thank Christine Lagarde for hosting the IMFC this week. We had very productive and informative discussions, and they came at an important time in the current global economic cycle. Thank you, Christine, for being our host, and with that, I would like to turn to the questions.

Mr. Rice - Thank you very much, Mr. Chairman. So let's take a few questions. Please identify yourself by name and affiliation.

Questioner - Hi, everyone. My question is to Christine Lagarde. This week you are insisting of the need of dialogue between countries on the trade issue. After the meeting this week, do you see any improvement on this issue? And another question related to that; yesterday Steven Mnuchin said that he sees more problem with trade unfair practices, which is a threat for the global growth. What do you comment on that?

Ms. Lagarde - So I think there was, on the occasion of this meeting, a clear momentum towards dialogue. Our job as International Monetary Fund is to identify the links between trade, growth, stability, prosperity; and certainly I leave these meetings with a Global Policy Agenda that points us in the direction of continuing to provide that level of analytical work, data, identification of issues, and we will deliver on that.

Now, clearly this is not the end of a process that has begun. I am sure that discussions are going to continue. We will continue to provide also the level of data and information that is desirable; and we certainly hope, given the role played by trade currently in supporting growth, that this will not be an obstacle to free trade contributing to better growth as we are seeing it now.

Questioner - Thank you very much. A question for Madam Lagarde if I could. Are the trade tensions being driven by anywhere else outside of the US?

Ms. Lagarde - By what?

Questioner - Are the trade tensions being driven by anyone else outside of the US?

Ms. Lagarde - From my vantage point, all countries are keen to promote, support, and encourage free trade. There are concerns from many corners about various things. One is the rise of protectionism that we have observed now for the last three years or so. If you look at WTO work and reports, it has gone up here and there, and we have seen many more protective measures taken around the globe than we had previously. So there is a constant, albeit low, rise of protectionist measures.

In addition to that, from many corners as well, there are concerns about, in a way, non-directly trade-related issues which impact on trade, and that have to do with the adequate protection of intellectual property, the level playing field of all operators involved in trade. And we all need to be cognizant of those issues. And my key concern as head of the IMF is to help in the process of resolving those issues before they escalate to a point where it would hamper growth stability.

Mr. Kganyago - I would like to add very quickly that the Committee did highlight the importance of trade to the global economy. I think that, importantly, the figures from the World Trade Organization have shown that growth in world trade has been accelerating since 2017, and in the course of this year, it is expected to accelerate further. And that is important to sustain the global recovery.

Let us remind ourselves that in 2009, you actually had a contraction of trade by some 12.6 percent, and that contraction of trade actually did dent the global economy significantly. Understandably, it was right at the height of the global financial crisis. And so the acceleration in trade growth that we had seen over the past few years is a welcome development, and it is what is actually helping to sustain the global economic recovery.

Questioner - Many countries see the U.S. actions on trade, whether it is NAFTA or on steel or on intellectual property in China, as bullying to get their own way; and if they succeed in their operations, that it might show that bullying works. Is that your sense of where we are on the trade negotiations at the moment?

Mr. Kganyago - Well, the IMFC was not a trade negotiating platform, but we did exchange views as the Governors in both the Fund and in the Bank. What is in no doubt, as I underscored, is that trade is important for the global economic recovery that we are experiencing and that in our interactions in trading, the global challenges that we face, that we should continue to use the multilateral system that we have that is also based on rules and that we should preserve that multilateralism in dealing with the global challenges that we face.

Questioner - Thank you. My question is about central banks in emerging and developing countries where it seems that monetary policy and interest rates have been dependent on the policy normalization in the United States and some other advanced economies. So it seems like we see an action here and then they react. Do you think that this dependence may play against emerging countries in the medium and long run? Thank you.

Mr. Kganyago - Well, I guess I am from an emerging market economy, so I must take this one. Let me state the obvious. Many emerging market economies are small, open economies, which then means that development in the advanced economies have an impact on the economic outlook in those countries, whether it is direct or indirect. And for us to understand that, we will have to take a step back; that when the advanced economies embarked on unconventional monetary policies, you experienced a surge in capital flows to the emerging market economies. And that did lead to some -- in some instances it led to an appreciation of exchange rates and which also meant that it contributed to improved inflation outlooks in many of those countries. As monetary policy begins to normalize, you have got to go back and ask yourself what are the channels through which monetary policy normalization in the advanced economies will have an impact on the emerging market economies? Emerging market economies differ. For most of these countries it is going to depend on whether they are within their inflation target or they are outside of their inflation target. For countries that are within their inflation target, a tightening of monetary policy in the advanced economies is not something that you would have to follow on a basis point by basis point. At the very least, the approach that we had taken in South Africa was that we would look at what is happening in the advanced economies. To the extent that it has got an impact on key variables, mainly it feeds itself through the exchange rate. We would look at that and say does it have immediate impact, and if it is just a one-off impact, we see through that. But if we think it would lead to second-round effects where inflation might start to go up, we react to that.

I think what we should be clear about is that you cannot make policy on the basis that this has happened in the advanced economies, and because this has happened with policy in the advanced economies, therefore I must do the following. It depends what each country, where they are at that particular point in time, and that is what sets the context for the reaction in their policy response.

Ms. Lagarde - Was that going to be the last question?

Mr. Rice - I think we have maybe two more.

Ms. Lagarde - Because I want to say something under embargo.

Mr. Rice - Okay. All right. Very interesting we will get there. Any other hands? Let me take the front row.

Questioner - I have a question for Madam Lagarde to follow-up on trade. At the same meeting, did you particularly discuss the U.S.-China trade tensions, and what are the members' general views on this issue, and what is your advice for the U.S. and China governments to address trade tensions? Thank you.

Ms. Lagarde - Again, I would borrow from Winston Churchill: better chat chat than war war, or something along those lines. So certainly continuing this dialogue and doing it in a peaceful, discreet manner, not necessarily in front of all of you, not necessarily with communiqués as you would expect, not necessarily with press statements or leaks, but to conduct that dialogue as much as possible and to work on the basis of free trade, rules-based, multilateral institutions working and helping.

Mr. Rice - So this will be the last question, and in honor of the Chairman, I want to turn to South Africa Broadcasting Corporation, please; and then we will hear from Madam Lagarde.

Questioner - Thank you, Gerry. I have a question for both of you. Governor, I will start with you as the Chairman today. Part of my question that I wanted to ask has been asked by my colleagues, but you know there is this African proverb that talks about elephants, when elephants fight, it is the grass that gets trampled. And I wonder if you used any African proverbs in your communications or conversations with Steve Mnuchin, given his firm rejection of really what the narrative has been from the IMFC as it regards protectionism.

And, Madam Lagarde, I am sure you are aware that South Africa is among the most unequal societies anywhere in the world, and part of addressing that inequity, the country is engaged now in the possibility of land expropriation without compensation. 72 percent of land is owned by the white minority in South Africa, and I wonder if the IMF has a position from an economic perspective on a policy of land expropriation without compensation? Thank you.

Mr. Kganyago - Thank you very much. I do not know what Mr. Mnuchin has said. The communique that we have, that we have sent, it talks about trade. It has been signed off by the entire membership. So when we say that there are rising trade tensions, it is the collective assessment of the committee.

African proverbs are always very nice, but it would be very difficult to explain an African proverb from here. I think what I need to state is, because you had talked about the elephants; but the bottom line here is that trade tensions are not to the benefit of anyone. They can never, if there is a trade conflict, there could never be winners. We could all only be losers. And it is within that context that it is important that as a global community we keep trade open; we ensure that we work within the multilateral system that we have to make sure that if there are disputes, those disputes are resolved. And I think that that is for me what is going to be crucial.

I guess on land, you directed that question to Madam Lagarde because you know what my answer is going to be.

Ms. Lagarde - As I do not know what the Governor's answer is going to be, I would simply say that we have mentioned times and over the respect for the rule of law, and I would suspect that South Africa, being a very civilized, sophisticated country when it comes to the law, the rule of law will also be binding on all. And I would just maybe use a proverb. I have no idea whether it is an African proverb or not, but my recollection is it goes something like trust grows at the speed of a coconut tree and falls at the speed of a coconut.

Mr. Kganyago - Quickly, you know that our constitution provides for expropriation of land. The clause in the constitution, which is Clause No. 25, spells it out very clearly, whether it is for land restitution or it is purely for land reform or it is just for public interest, for example, the building of a road. It is a clause that is justifiable. The courts in South Africa had pronounced on the clause, and the government had made it very clear that if there is any expropriation, it will take place within the constitution. And what has also become very clear, the constitution does provide for expropriation of land, by the way, without compensation provided that a particular test is met, and that test has been set out by our courts. South Africa is a constitutional democracy, and everything that takes place in South Africa takes place according to the constitution. We have got institutions that protect our democracy, and South Africans over the years have learned how to utilize those institutions to enforce their rights, but also, more importantly, to protect their own democracy.

Ms. Lagarde - The rule of law. My embargo. I was wondering why not everybody was packing up and going. I have to check with Gerry. Can I do something under embargo and trust that it will remain under embargo? No. You are going to be back in a room like that at the end of the Development Committee meeting; and provided that, which is why I want that to be under embargo, but provided that there is a capital increase taking place across the street at the World Bank, I would like to be one of the first to congratulate the World Bank and its management, its Board, and its staff, on behalf of the IMF. But keep it secret.

Mr. Rice - Thanks everybody. Thank you.

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