Transcript of IMF Press Briefing

May 17, 2018

MR. RICE: Good morning, everyone. And welcome to this press briefing on behalf of the International Monetary Fund. I'm Gerry Rice of the Communications Department.

And as usual this morning, our briefing will be embargoed until 10:30 a.m., that's Washington time.

Let me begin just a very few announcements, and then I'll come to your questions in the room and to our colleagues online, who I see already have some things there.

So, I can tell you that in terms of our Managing Director, Christine Lagarde, on May 24th to the 25th Madame Lagarde will participate in the Saint Petersburg International Economic Forum in Russia.

On the 24th, she will take part in the panel discussion on Russia with the Governor of the Russian Central Bank, Madam Nabiullina, with Minister of Economic Development, Oreshkin; and Finance Minister Siluanov.

The following day on the 25th, Madame Lagarde will be in a plenary session with the Russian President, Vladimir Putin; the French President Emmanuel Macron; and the Japanese Prime Minister, Shinzō Abe. So, that's on May 25th.

And just preceding the forum on May 23rd, our staff, IMF staff, will be concluding the Annual Article IV Consultation with Russia. So, in the usual way, we will have a staff concluding statement to share with you.

Also concerning Madame Lagarde, a bit later in the month, May 31 to June 2 nd, she will be in Vancouver, Canada, for the G-7 Finance Ministers Meeting. And our First Deputy Managing Director, David Lipton will also be there with Madame Lagarde.

And on May 24 to 25th, our Deputy Managing Director Tao Zhang, will be in Singapore, where he will be delivering a speech at the Asian Monetary Policy Forum and meeting in the usual way with the authorities.

We can give you more details on all of that, if you're interested after the briefing.

Okay. With that let me turn to any questions that you might have in the room. I'll begin with you?

QUESTIONER: Hi, Gerry. I was wondering if you could give us the latest state of play on the talks with Argentina. Specifically, can you clarify what is the vehicle that they're looking -- the type of program that they're seeking from the Fund? I believe it's being described as a high-access SBA. So, does that mean it's a precautionary high-access, stand-by arrangement? And also, do you have information on the size of the program at this point?

MR. RICE: Okay. I'm imagining -- and some colleagues have just joined as you spoke. I'm imagining there will be other questions on Argentina, so in addition his, are other questions? And then I can take them, and I'll come back for follow ups, if they are not satisfied. Good morning.

QUESTIONER: Good morning, Gerry. MR. RICE: Welcome.

QUESTIONER: Thank you for taking questions. Yesterday President Mauricio Macri said that the arrangement with the International Monetary Fund will include targets, but no specific measures that they -- the Argentine government was going to have a certain degree of freedom to decide how to reach the fiscal target. I was hoping if you could confirm that this is what the current state of negotiations is deciding if it is what Argentina should expect from a new program with the IMF?

And also, he said that Argentina should accelerate the reduction in the fiscal deficit. The Argentine government recently announced a new fiscal target for this year, of 2.7 percent of GDP. I was just curious about, if this is in line of what the IMF believes Argentine fiscal target should be in the new program that is currently under negotiation. Thanks.

MR. RICE: Good morning.

QUESTIONER: Good morning. Also on Argentina, and after Macri's comment yesterday, he said that the turbulence is over, that's the way he described the situation. Does the IMF think that the turbulence is really over, or it could be another episode? And also, does the IMF see some kind of spillover of the same, replicas in other countries in Southern America?

MR. RICE: Okay. All right, let me take one more, Argentina.

QUESTIONER: Also on Argentina.

MR. RICE: And I will then try to get some answers. Thank you. Good morning.

QUESTIONER: Good morning. I just wanted to know about this Board meeting tomorrow, scheduled for the IMF. I would like to know if Argentina's loan is going to be one of the issues, and if there is a proposal or a draft of the loan that is going to be discussed tomorrow, already.

MR. RICE: I didn’t quite catch the last part, sorry?

QUESTIONER: Oh. If there is a proposal or a draft of the loan that you are with Argentina that is going to be debated tomorrow at the Board's meeting, if anything is going to be presented already, tomorrow morning?

MR. RICE: Okay.

QUESTIONER: Yes, just to understand what is going on. What went wrong with Argentina? Why they are back to the IMF?

MR. RICE: Okay. So, let me try and respond to your questions, and set them in a bit of context, and I'm come back for a second round in the room. And just looking at what's online here, I think your questions are echoing some of the questions that we have online too.

So, again, let me set some of this in context. So, for those who haven't followed just as closely as you obviously have, last week, May 8 th, the Argentine authorities requested IMF financial assistance to help strengthen the Argentine government efforts to bolster the Argentine economy in light of the renewed and significant financial market volatility.

The Managing Director of the IMF issued a couple of statements actually, and I would just like to, a couple of points of emphasis that she made in those statements.

Number one, she emphasized that Argentina is a valued member of the IMF. And we've been working hand-in-hand with the Argentine authorities, our partners, in this initial phase of the talks, and our shared goal is to reach a rapid conclusion of these discussions. Madame Lagarde used the phrase that she hopes these would be completed in short order. So, we hope this can be done quickly.

Our ultimate goal, of course, is to, again, help support the authorities in their efforts to strengthen the Argentine economy and protect the living standards of the Argentine people, and particularly for the most vulnerable groups in Argentina.

In this context, I'd like to say that we strongly welcome President Macri's comments yesterday, or as was mentioned, he spoke at length on these issues. We think his comments show the government's recognition of the central challenges affecting the Argentine economy today, the government's ownership of the policies needed to address those challenges, and the determination to ensure balance and inclusive growth, job creation and, again, a commitment to protect the most vulnerable.

So we thought those -- again, we welcome very much those comments from President Macri yesterday, and I would refer you to them, actually, if you haven't seen them.

So that's the broad context. Let me turn to a number of your questions about: So, where are we? What's the status? So, since the request for the IMF's support, the talks with the authorities have been ongoing. The IMF team and our Argentine counterparts have continued to work closely together with very open channels of communication.

So tomorrow, the IMF Executive Board will hold an informal session to discuss the latest developments in Argentina, and more detail on the authorities' request for what we have described as a high-access stand-by arrangement, and we made a short statement on that earlier this week as well.

What I can tell you about the Board meeting tomorrow, of course, I would not in any way preempt that discussion tomorrow by our Executive Directors, but I can tell you, it's part of our usual process when we enter into a major program like this with a member country.

So we have this, what we call informal Executive Board meeting, where, as I said, it's an opportunity for the IMF staff to brief the Board on developments and give them the full picture, at least as we have it right now, as to what the situation is, and how the authorities see the issue as well.

Once that meeting is concluded, and that will be tomorrow, I would expect staff and the authorities will move to the next phase of talks and begin program discussions.

So, again, just for those of you who may not be familiar with the IMF processes, this informal meeting of the Board, will then be followed by, after a period of discussion and negotiation, will be followed by a formal Board Meeting, where the Board will make a decision on the program, and the program would then go forward. Okay?

So, it's kind of a two-step process with the Board. In terms of the timing of that, I don't have a date. We have a date for tomorrow. We know that's happening. I don't have a date for when the Board might meet again, that obviously depends on the Board's discussion tomorrow.

It depends on discussions with our Argentine counterparts but, again, the IMF can move quickly in these kinds of issues, and we intend to move quickly; and as Madame Lagarde said, in short order.

So, I think, as you'll understand, and turning to some of your specific questions, in terms of the details of what the program might be, the size, the exact type of the program, the exact type of the instrument, all of that is going to be part of the discussions, going forward, and the details that will be developed in the coming days.

What we've said is that we expect this to be a high-access stand-by arrangement. But again, in terms of the precise details of that, and what it means in terms of the disbursement or non-disbursement, and the sequencing of all that, that's something we have to wait for in terms of the details.

Likewise, in terms of the policies, and there were questions about fiscal policies, and targets, and so on, these are all issues that I put in the category of the detail of the program as it will emerge. And so, these are going to be topics for the discussion, so I hope you'll understand I don't have those details today, but we will be keeping you fully informed, as these discussions emerge.

What I would like to say on the issue of objectives and targets, is that we fully agree with what President Macri said yesterday, which is that this is going to be about Argentina's priorities, and this is a program owned by, owned fully by Argentina, and the IMF is in the role of supporting Argentina's priorities. And that will be the tenor of the discussion.

And Madame Lagarde has in her statement stressed that point as well -- I think there was a question about spillovers. And so far the financial spillovers from developments in Argentina to the rest of the region have been limited. For other Latin American currencies, the exchange rate movements, for example, have been broadly in line with global trends given the stronger U.S. dollar. And, as we noted in our REO, our Regional Economic Outlook, published just a few days ago, a downside risk to growth would include a sudden tightening of financial market conditions. For example, stemming from faster than expected tightening of U.S. monetary policy, which could have consequences, obviously, for long-term interest rates, capital flows, and overall financing conditions for the region. We don't see that situation at the moment, but it's a risk that we want to be aware of.

What else can I say before coming back to you. On the overall handling of the situation and someone asked, is the crisis over, the way I put it is that I think the Argentine authorities have deftly handled -- I would say deftly handled -- some of the issues that emerged just in recent days; for example, the rollover of central bank liabilities earlier this week. And we have confidence that they will manage the situation skillfully.

So, I have tried there to take on board the various questions. You had asked about what happened. I tried to give a sense of that. I mean, clearly there has been significant renewed financial volatility in recent days. And that has been the major external development that has taken place. And in a way, you know, the external environment has changed. And so Argentina has sought the IMF's assistance.

But let me come back to you in case there's a follow up, and them I'm going to try and move on from Argentina.

QUESTIONER: Thanks, Gerry. Now, I now you choose your words carefully, so when you said high-access standby arrangement, I just want to clarify. So at this point you're not saying that this is a high-access precautionary arrangement under the SBA envelope? And then my second question is specifically in the short-term, what is the Fund's position on best policy on handling of the exchange rate?

MR. RICE: On the nature of the instrument, I'm not ruling anything in or out. It could be a precautionary SBA. And as I said, the exact modalities of the instrument is something that's to be discussed, and then there will be a final decision on that. So I'm not ruling anything in or out on the nature of the instrument. I just don't want to get ahead of ourselves in the discussion.

And I really don't have a lot more to say on the exchange rate. The way that we do exchange rate assessments are based on the medium-term fundamentals. Those who follow the Fund, you know that. And so we don't comment on high-frequency movements in currencies in any country. We did clarify this week that the IMF has not discussed any specific target for the exchange rate in Argentina, and we would not attach conditionality to any particular level of the exchange rate as part of the program. We tried to clarify that point earlier this week.

Again, just for those who don't follow it so closely, Argentina has a free-floating exchange rate regime, and we believe the exchange rate should be determined by market forces.

QUESTIONER: Thank you. Another follow up. There seems to be clear indications that there will be a fiscal target as part of the program. Now, could you clarify if it is the common practice when the IMF arranges SBA programs with countries if the programs also include monetary policy targets?

MR. RICE: Again, I don't want to avoid your question, but I also do not want to preempt any discussion and the elements of the program. Clearly, we will be discussing with our Argentine counterparts what the major issues are that need to be addressed across the broad range of economic fundamentals. And the details of that I think I need to leave to the discussion, and what might be the major elements of the program.

I do want to stress again this issue of Argentina's priorities is what is very important to us and that we will be looking to support the priorities of the Argentine government and the Argentine people in this program.

There is one question online that I want to take on Argentina which hasn't been asked -- well, maybe a little bit -- hasn't been asked and I just want to take it, and then I'll try and move on from Argentina and take a few other things. But there is a question about what's new this time, what's different. And the IMF and Argentina have worked together before, and why will it be any different this time in the relationship? So I do want to take that question, which is also asking what can you tell the Argentine people that would help reassure them on this point.

So what I would say on that is a couple of things. Number one, we fully understand that these episodes of financial turbulence can trigger uncertainty and concern. And that's true in Argentina, and it's true for all countries that experience this. I think it is important to emphasize that the situation in Argentina today is vastly different from 15 or 20 years ago, where the exit from the convertibility system was an extraordinarily difficult episode for Argentina and the Argentine people. Today, as I mentioned, Argentina has a market determined exchange rate, economic institutions have been strengthened considerably under President Macri's government, and there is an inflation targeting framework. So I think the government policies, government institutions are very different, the situation is different from the last time the IMF worked on a program with Argentina.

And for the IMF, we've also changed, and we've been adapting to the changing needs of our members. Amongst other things -- those of you who follow the Fund know this -- there's much greater focus on social protection and in particular, protecting the most vulnerable from the costs of adjustment, which I mentioned earlier. We pay much greater attention today than certainly we did 15 or 20 years ago to issues of inequality, to issues of inclusive growth. And our toolkit is more flexible, is broader, is more responsive to members' needs, including the instruments that he was asking about.

And finally, I would say that the quota reform that was approved just a couple of years ago that relates to the governance of the IMF, as you know, placed emerging markets in a much stronger position in the IMF in terms of their voice and representation in the institution. That's very important. The BRIC countries, for example, are all now in the IMF's top ten shareholders. That was not the case 15 or 20 years ago. And I think this enables the IMF to be even more effective.

And, again, our goal here, the IMF's goal, I want to make it very clear, we are here to support the efforts of the Argentine government and people in whatever they determine to be most useful in strengthening the Argentine economy, protecting living standards, protecting the most vulnerable, et cetera.

I'm going to try and move on from Argentina if I can. Any other questions? Yes, good morning.

QUESTIONER: Good morning. So once again we see a chicken game among the institutions about Greece's debt. Many people fear that this lack of clarity over the debt relief will make more costly the comeback of Greece in the markets. Do you share this concern? And why must we always wait until the very last moment for reaching a decision?

MR. RICE: So we are running out of time, so you're right in that respect. And, in fact, the Director of our European Department, Poul Thomsen, gave an interview, made some comments earlier this week to that effect, that we're running out of time.

If we can reach agreement very soon and policies remain on track, we can bring a proposal to our Board to make IMF financing available to Greece. You recall that we have this approval in principle of a program, but it is contingent on policies where we've made very good progress. Still some details to be ironed out, but very good progress. And the second leg, debt relief. The IMF has put that issue squarely on the table in terms of what we think Greece needs in terms of additional debt relief.

So the debt relief part, as you said, is the issue that remains to be resolved. Discussions are ongoing, differences have narrowed, but there are some differences that remain that need to be resolved. And that would need to be done – again, as Poul indicated the day before yesterday, it really would now need to happen soon. Why? Because the European Stability Mechanism program, which is the program under which we're working right now, Greece is working, that ends in August of this year. So there's a very limited time window for the IMF to join that program with financial support.

Just in some way it's just a logistical thing in terms of our processes and procedures. It just takes us some time to -- we just talked about it here -- get to the Board, go to the Board, have the discussions that are needed. So time is running out.

And Poul had indicated that the meeting of the Eurogroup next week was very important. I believe it's May 24. So we continue to work hard with our Greek partners, with our European partners. We are still hoping that there can be a successful conclusion, particularly on the debt relief issue. And we will know more next week.

Just to add -- and again for those who don't follow the IMF so closely -- we have not had financing support for Greece since 2014. So for a number of years now, the IMF has not had a financing program in Greece. That doesn't mean that we don't support Greece, it doesn't mean we don't work with Greece -- you know that. We're involved in the discussions, the Greek government has welcomed that involvement of the IMF, the partners have welcomed that involvement. But we are awaiting what would be the implementation of this approval of a new program in principle, which is contingent on the debt relief.

I mean, in the event that there were to be no agreement, we would still be involved in Greece to an extent that would be what we call post-program monitoring. This is true for all countries where we've had a program. So, if you look at Ireland, Portugal, Cyprus, etc., you see that. And as I mentioned, even without the financing agreement over the last several years, we had still been involved in Greece.

So, we're looking to next week; we're continuing the discussions; and yes, there is an issue -- the time window is closing rapidly.

QUESTIONER: One thing that I don't understand is that why you want to join the program? What is the reason to join the program for one or two months? This is my first question; and my second question is that you repeatedly pointed out that ideally a relief plan for Greece should be based on realistic assumptions, and it should provide Greece with clear incentives to adhere to the reforms. Under what conditions the IMF will confirm that the Greek debt is sustainable? What are you asking from the Europeans; and why you don't satisfy with their proposals? That's how you see the proposals -- they are good for the debt relief.

MR. RICE: I won't get into the numbers or the details here, but clearly, our view is that there has been progress on debt relief for Greece over the years and even in the more recent discussions; but clearly, our position is that we don't feel it's yet sufficient. It's not enough by the IMF's standards, by our objective assessment. So, we think that more needs to be done on the debt relief front. I'm hoping for progress, but time is running out.

Why would the IMF involvement help, you asked. I think one of the important things is that if the IMF were to move forward with this approval of the program in principle, it would by definition mean that we think there's a good agreement on debt relief -- by definition, it would mean that. So, that would be important. And we think it would give a significant boost to Greece going forward, attract further investment; and we've said that we think the debt relief is a prerequisite for growth to be sustainable. And again, we think our involvement over the years has helped to have more growth friendly fiscal policy mix. I think our advice has helped with the structural reform, that agenda, and the growth agenda, more broadly.

Incentives -- in terms of where, you know, the differences remain -- I mean, one area is the whole issue of growth projections, which, of course, is tied to debt relief projections; but there's considerable discussion around that issue; and, I think, there's discussion of a mechanism for providing more debt relief in the case that growth is weaker than expected going forward. That's the essence of the French proposal -- the proposal that's been put forward by the French government, which we think is promising. We think that's a promising proposal.

And, again, these issues are being discussed, and we're working to narrow them as we go forward.

Are we on Greece?


MR. RICE: Okay. I’m going to make this the last one.

QUESTIONER: I was wondering if you could clarify a little more what will it mean for the Greek borrowing costs; the non-participation of the IMF in the program?

MR. RICE: I wouldn't speculate on borrowing costs, and I wouldn't speculate on the IMF not being involved. Again, I think, we're working hard; we're looking to next week as an important knitting of the Eurogroup. And Madam Lagarde once said in another context, the IMF never leaves the table. We always, we will always try and do what's best for our member country and try to respond to our member countries as effectively as we can.

Let me take a couple of questions online. I'll come back in the room if there's anything left. There's just a couple of things on -- there's one on Ukraine, where the IMF has a program with Ukraine, as you may know; and it's asking about a specific element of that which is the gas. He is asking, the IMF did not approve the proposal of NAFTA gas to change the price of gas to households with an increase of up to 65 percent. Could you confirm it, please? Do you have any updates regarding the Ukraine program?

Yes. On the Ukraine program -- again, for those who don't follow it -- we are still looking to complete the fourth review of the IMF's supported program for Ukraine, and as we've signaled before, we think more progress needs to be made on a number of fronts before we can conclude that fourth review; and issues include the energy sector -- I'll come back to that -- fiscal policy. An approval of the appropriate law setting up a strong and independent anti-corruption court; and on the latter, it's crucial. We feel that the necessary amendments are adopted to ensure that the final version of that law is fully consistent with program commitments and the recommendations of the Venice Commission of the Counsel of Europe.

On the gas question, his specific question -- gas prices for households in Ukraine have not been adjusted for two years. Despite international prices having gone up considerably, so this results in implicit subsidies, which are regressive, particularly in the sense that they benefit disproportionally the largest users. So, we believe that it's important to let the gas prices be determined by the market in line with the reforms that were implemented in 2016.

That said -- we also feel that it's very important that the low income and vulnerable households are fully protected from an increase in gas prices by the current household support system. And just to complete my answer, I do not have a date for the timing of the next review mission on that fourth review to Kiev. That has not yet been decided.

I want to take -- there's a question on Sri Lanka about -- it's actually also on the fuel pricing mechanism. Asking about that automatic pricing mechanism for fuel. So, we think that automatic fuel pricing mechanism marks a major step toward completing the energy pricing reforms that are underway in Sri Lanka, and minimizes the fiscal risks. If implemented properly, the formula based pricing would eliminate fuel subsidies that benefit the rich rather than the poor.

So, we think it would benefit Sri Lanka and the economy. And I can tell you our Board is scheduled to discuss Sri Lanka's completion of its fourth review on June 1.

Our colleague in New York has a number of questions. I can't take them all. I will take a question on Somalia where he’s asking about the central bank says it’s requested from the IMF, an assessment in order to issue a new currency. Please describe the process and status. To which I'd like to say as I've said before here, Somalia's debt relief is a priority for the IMF and over the past two years, the Fund has provided the Central Bank of Somalia with extensive technical assistance to support its currency reform project. The letter provides IMF staff assessment on the readiness of the central bank to issue a new currency under phase one, which will be limited to exchanging the counterfeit Somalia shilling notes currently in circulation with a new currency.

All -- to answer his question -- all proprietary measures agreed on between the authorities and IMF staff have been implemented and IMF staff views that the CBS, the Central Bank of Somalia, is ready to introduce the new national currency under phase one; and you can find that currency reform assessment letter posted on the IMF's website.

There are many other questions online, and I'm not going to get to them; but we will get back to people bilaterally. I will take one more online on Italy, asking for our reaction to the formation of a populous new government; and what's the IMF's reaction to the draft coalition agreement and policy proposals? Don't have a lot to say on that -- we, obviously, look forward to working with the new government once it's in place and in formulating policies to enhance growth and reduce vulnerabilities. We'll wait for that new government in Italy to be formed and then have a chance to discuss with them and understand their policy program and the details and specifics of that; and, including, we would then confirm with that new administration in Italy when our annual economic review would happen, that's the Article IV consultation.

You have a follow up?

QUESTIONER: It's not on Argentina, actually. On Indonesia, on the preparations for the Fund's Annual Meetings in Bali -- and there've been a few attacks recently throughout the country, including some ISIS-inspired terrorist attacks. I'm wondering how comfortable is the Fund with the level of security in preparation for the meetings?

MR. RICE: So, his question is related to our upcoming Annual Meetings in October to be held in Indonesia; and I think the first thing I want to say in responding to you is that the IMF, we extend our deepest sympathy and condolences to the families of the victims who've died under these terrible terrorist attacks in Indonesia.

As you can imagine, we are monitoring developments, working closely with our Indonesian partners to ensure the safety of all participants attending the 2018 Annual Meetings in Bali next October. We look forward to having a successful meeting, and the Indonesian authorities, I can tell you, are making extraordinary efforts to make sure that is the case, and we're working closely with them on that. The cooperation is excellent, and we're confident that we will have successful Annual Meetings in October. You get the last word.

QUESTIONER: The first one, is it true that we are asking for 100 billion euros for restructuring? That's the one question that I want to ask. I saw a piece in the German papers. Are you satisfied with the stress test for the Greek banks? We forgot to ask you.

MR. RICE: On the stress tests, we are still analyzing. We can get back to you maybe with a bit more after the briefing. We're still assessing it, looking at it; and I don't have a number, as I mentioned earlier on the debt relief. Let's let the discussions go forward, and we all hope for the best for Greece and for everyone else.

Thanks very much everybody.

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