Transcript of IMF Press Briefing

September 12, 2019

MR. RICE: Good morning, everyone, and welcome to this press briefing on behalf of the International Monetary Fund. I am Gerry Rice of the Communication Department here. And as usual this morning, our briefing will be embargoed until 10:30 a.m. and that’s Washington time.

Let me make a few announcements then I'll come to questions in the room and take a few online as well.

So the first thing I would like to say this morning is that as many of you may know, Madame Christine Lagarde, our Managing Director, her official resignation from the IMF takes effect today and she will be sending out a message a bit later today that you will see. September 12 is her official resignation date from the IMF.

As for selecting a new managing director, Madame Lagarde's successor, as many of you probably know the period for receiving nominations ended last Friday and Ms. Kristalina Georgieva who is the Chief Executive Officer of the World Bank has confirmed her willingness to be considered as a candidate and we did announce that via press release last Monday, Monday of this week.

The board, our executive board, who manages this entire process of selecting the managing director on behalf of the membership, is expected to meet with Madame Georgieva starting next week. And as I have -- as we have said before, we expect the process to be completed by October 4, at the latest. So that’s our outgoing managing director and the process for her successor.

I can also tell you that our acting Managing Director, David Lipton, will be in New York representing the IMF at the UN General Assembly. David will be in New York September 24 to 26 and doing a number of high visibility and open-to-the-public events including the high level dialogue on financing for development, including the Bloomberg Global Business Forum Roundtable.

And David will also be having a one-on-one conversation with Jeff Sachs at the Earth Institute in that period. We can give you all the details on those things, they are all public and we will be communicating with you in due course. David is our Acting Managing Director in this period.

And then finally, the Annual Meetings are coming into view October 14 to 20th, not too far away. This year's meetings will be in Washington and you all know I think the run of show. The press briefing on the WEO, the World Economic Outlook which I know many of you follow closely is going to be on Tuesday, October 15 and followed by the other what we call our flagship publications, the Global Financial Stability Report, the Fiscal Monitor and so on.

And, you know, we will be communicating all of that to you in some detail, and of course we expect to have a new managing director with us for the annual meetings in October, so we can all look forward to that. Thanks very much for your patience on those announcements. Let me take your questions in the room. Good morning.

QUESTIONER: Good morning, Gerry. I would like to know if Mr. Lipton is going to meet President Macri in New York and the, perhaps somebody from the IMF, I don’t know if Mr. Lipton or Mr. Werner or Mr. Cardarelli is going to meet with Argentinian Minister Hernan Lacunza at the end of the month here in Washington, D.C.

MR. RICE: Yeah, I don't have anything on the New York schedule for David Lipton. We will try and have something for you a bit closer to the time so I don't have anything of that.

I can confirm that Minister Lacunza and the team will be visiting Washington in late September for continuation of our ongoing discussions with the Argentine authorities on the program there. And again I don’t have the specific schedule of the various individuals that the minister and his team would be meeting with.

I would fully expect that of course he would be meeting with Alejandro Werner, who is the director of our Western Hemisphere Department, and his team but we will try and get you a bit more granular information closer to the date. But, yes, confirming we are expecting a visit of Minister Lacunza later this month.

QUESTIONER: Morning, Gerry. And can you tell us anything about the fifth revision of the agreement?

MR. RICE: As I said, Minister Lacunza and the team will be visiting Washington later this month so that will be an opportunity to continue the discussions on the authority's crisis response measures, the overall macro-economic framework and to take stock of where we stand and next steps. Of course, we all recognize the complex market conditions and policy uncertainty going forward make the situation difficult. But again, we remain fully engaged and our discussions are ongoing.

QUESTIONER: I take from your response that the fifth revision is still not occurring. A follow up on that one if I may, one of the criteria that Argentina has to comply with to qualify for exceptional access is that, and I quote, that “staff judges that the policy program provides a reasonable strong prospect of success and that the country has both the institutional and political capacity to deliver on the adjustment of the program”. Now as you know, there have been a lot of critics of the program, specially from the leading candidate, the favorite in the presidential election, Alberto Fernandez, who has accused the IMF of violating the rules, allowing the central bank to intervene in the foreign exchange market, and also saying that the IMF is responsible the social catastrophe in Argentina. So, could all these jeopardize the pending disbursement of 5.4 billion and the following one of one billion?

MR. RICE: So again, the minister and his team will be visiting later this month and this will be part of the discussions at that time.

Let me take your questions, but before I do, let me just step back a little bit with some of the context. It's been a few weeks since we have had a press briefing and, there has been a lot of commentaries, so maybe just a little bit of context stepping back. What the IMF does is we are the lender of last resort for the membership and we try to help smooth a countries adjustment in times of crisis. We help protect the broader economy and help protect the most vulnerable groups in many of our programs, these are the priorities. And the purpose is to try and prevent even greater disruption than would be the case were the IMF not to be involved. So, I just want to say that as sort of a general statement of what we do in crisis situations.

In the case of Argentina, the authorities approached the fund last summer. They had experienced the very destabilizing economic shock that was triggered by the severe drought and the difficult financial conditions including a significant currency volatility.

So, with the support of the IMF, the authorities embarked on the economic stabilization program and managed to reduce the current account and the fiscal deficit, which were two important vulnerabilities at the source of the crisis that Argentina was facing at that time.

And yet, the situation, as we said here many times, discussed it with you, remained very challenging with stubbornly high inflation, which contributed to a pickup in poverty rates, subdued economic activity and important downside risks, which we discussed and indeed documented in our various reports including policy discontinuity and political uncertainty and so on.

So that’s the backdrop for those who haven’t been following it just so closely as I know that you do. So where are we now, coming to your questions. So, since mid-August, Argentina experienced a renewed confidence shock that severely affected macroeconomic stability. The authorities responded to the situation by announcing a number of measures with the aim of safeguarding reserves, stabilizing the exchange rate and protecting deposits.

As I said in terms of the Fund's relationship with Argentina, discussions with the authorities, their crisis response measures and overall macroeconomic framework, those discussions continue. And as I said, the complex market conditions and policy uncertainty going forward, make the situation even more difficult. So, again that will be the main topic of discussion when the Minister comes here later this month. So, our engagement remains strong with Argentina.

In terms of the questions that you had asked, I think that provides some of the context. But, you know, you asked a question about breaking rules or violating rules and so on. I can say definitively that is not the case and that the IMF's objective has been to try and help the authorities stabilize the challenging situation and allow for a return of confidence that would pave the way for growth going forward. That's been our focus and that's our priority and we continue to work with the Argentine authorities to help stabilize the economy.

QUESTIONER: Also, from Argentina, question. Besides the meeting that they scheduled with Minister Lacunza, do you plan to hold new conversations with the presidential candidate Roberto Fernandez and his economic team?

MR. RICE: So, you know, first things first. The Minister will come here in late September and we'll have those discussions and then decide on next steps and future discussions. But just by way of context and just to remind again, those that don't follow it so closely. The last time that the IMF team was in Buenos Aires we did have a series of discussions with the authorities and indeed, with Mr. Fernandez and the opposition team and indeed with other stakeholders. So, we have had those discussions. In terms of future discussions, I think we need to have the meetings in late September first and then we'll take it from there.

QUESTIONER: Good morning, Gerry, thank you very much. I would like to ask you still on Argentina whether the Fund, the comments you just made attribute the current situation to market conditions and the strategy of the authorities. But I wanted to ask, does the Fund take any responsibility for what it -- first, does the Fund see what's going on in Argentina as a failure because their goals have not been achieved by now. And does the Fund take any responsibility for the outcome? Do the criticism from some sectors in Argentina and somewhere else have any merit or not?

MR. RICE: You know, I hope what I said is helpful and perhaps I can give some context to your question. Look, again what we do is we try to help the membership in crisis situations. So, we come into very difficult situations and we try to help the country smooth the process of adjustment, make that process a bit smoother than it would be without the Fund's involvement. And get the country back on the path of economic growth and stability and economic growth.

When we do those things, when we try and help countries in crisis situations, it's not without risks. I think everybody recognizes that. And we're often called upon in situations where there are great risks and where the situation is already very fragile. And that was the case in Argentina as I described when we were requested to help about a year ago. The authorities approached the Fund in the midst of an already very difficult situation and we, you know, we have tried to help. So, I've kind of summarized that. We continue to try and help. We continue to be fully engaged. so that's the Fund's role.

In terms of how we evaluate risks, you know, we try to be transparent about this. We try to document these things. And I think if you look at the staff reports that we published, we do talk about the risks and, you know, there are a number of those risks were documented including external and domestic factors. And again, I would refer you to those. Including our most recent staff report which stressed that the risks of the program could be potentially exacerbated by adverse market reactions and by political uncertainties as well. And, you know, that's the situation we're facing now.

QUESTIONER: I just wanted to ask you about the global economy and the global trade situation. I don't know if you touched on this before.


QUESTIONER: You know, in the past, you've said that the global trade does seem to be shrinking. We've now had additional tariffs take affect starting both in China and the United States. Have you done an additional sort of reassessment given the different tariff levels that were, you know, you forecast had said if these tariffs that were promised at 25 percent come in. The Trump administration has now said they will do somewhat shy of 25 percent plus more than 25 percent in other cases. Have you reassessed that at all and looked at the forecast for the overall economy and what kind of percentage of GDP that will affect?

MR. RICE: On the overall economy, we will be coming with some new numbers quite soon in the context of the new World Economic Outlook. I talked about that a little bit just at the beginning to the meeting. So, that will be in October, not very far away.

What I can say today and what we've said recently is that the pace of global economic activity remains subdued. And indeed, that the rising trade and geopolitical tensions, of course, have increased uncertainty taking a toll on business confidence, investment and global trade.

We have said and maybe trying to answer your question a bit more directly, we have said in the past that trade tensions are a threat. I think what we are saying today is that they are not only a threat but are actually now beginning to weigh down the dynamism in the global economy. And again, we'll have new numbers, revisions to the global outlook coming a bit later. But you may have seen recent statements in the last week or so even by our chief economist Gita Gopinath who has addressed, talked about these issues.

Our latest estimate is that on regarding the U.S. China tariffs, including those implemented and announced, could potentially reduce the level of global GDP by 0.8 percent in 2020 with additional losses in future years. And again, Gita, when she spoke, you know, went into this in a bit more detail. And again, we will have further analysis on this in the World Economic Outlook.

You may also have seen this week, we published a trade index which was a measurement of the level of uncertainty in global trade. If you haven't seen that it's worth taking a look.

QUESTIONER: Yeah. Just to follow up on that.

MR. RICE: Sure.

QUESTIONER: So, the 0.8 percent change is tariffs that are already in place or those that are also threatened. Is it both?

MR. RICE: Those implemented and announced.


QUESTIONER: I wanted to ask about Zimbabwe. A friend has sent me an email that said, we have no currency in circulation, we have no water, we have no electricity. You have a staff monitored program. The arrears you've talked about in the past will be taken care of. They’ve made some fiscal progress with the Finance Minister, but I'd like to ask you what does the government there have to do to get on track and open the door to an IMF Program?

MR. RICE: Thank you for that question. A couple of things I can tell you about Zimbabwe. One, as you said, we have what's call a Staff-Monitored Program, which means that we are engaging fully with Zimbabwe on policies and advise, and discussion but without financing at this point, and I'll come back to that in a little bit.

So, what are we advising the Government to do in terms of the reforms and how to address some of these issues that you've raised? It's of course with the IMF; first and foremost restore macro and financial stability, so we think that will require a fiscal adjustment, adoption of reforms to allow the effective functioning of market-based foreign exchange and debt markets, structural reforms, including to reform and privatize state-owned enterprises, enhance governance including in procurement, and revenue administration, and generally improve the business environment.

We also are advising important safeguards to protect the country's most vulnerable people which, you know, was a big part of your question. So, we have an IMF Team actually in Harare, as of September 5, we think they’ll be there until around the 17th, and that will be the first review of this SMP, the Staff-Monitored Program.

So what would Zimbabwe need to do to, you know, get financing from the IMF and others? Zimbabwe is in good standing with the IMF, okay, I've said that before here. They have cleared their arrears with the IMF, but for financing to be forthcoming from the Fund, they would need to clear their arrears also to other international financial institutions.

We would need some financing assurances as we always do in our programs from other official bilateral creditors, and what I just said and what you asked, agreeing on a coherent set of economic policies that we think would put the country back on the path of macro stability and lay the foundation for growth.

So that's the discussion that's going to be at the heart of this staff visit that's ongoing right now. And we're trying to be supportive, we want to be supportive and we're pushing in that direction.

QUESTIONER: Just a brief addendum, does the Parliament have to pass a human rights law that's been proposed but not acted upon, and likewise something that assures democratic participation of other parties in government?

MR. RICE: I don't have anything on that. As you know, the Fund is focused on the economics so, you know, it might a question addressed to some of the bilateral creditors, I just don't have anything on that.

QUESTIONER: I have a question regarding Ukraine.

MR. RICE: Yes.

QUESTIONER: Last Friday, Fitch upgraded Ukraine's debt. I was wondering if you can tell us where we are with Ukraine, and do you have any recent contact with the government. Fitch was referring a possible new request for a new program. Could you say something or clarify where we are in terms of funding to Ukraine?

MR. RICE: Yes. Thank you. So, again, just for those who don't follow it, the Board approved a standby arrangement for Ukraine about 4 billion, 3.9 billion, and about 1.4 billion of that has already been disbursed. There was then the election, the change of government, happened.

So, the IMF Mission is currently actually in Kiev, there's an IMF Team, in Kiev right now, for the Article IV Consultation discussions and to take stock of the new government's policy intentions, and we expect that to conclude around the 26th, or so, of this month. And we'll be communicating about the results of that mission when it concludes. So, we're fully engaged with the Ukrainians, and the new Ukrainian Government.

Perhaps just to add, you know, one important element of the discussions we've been having with Ukraine, certainly in recent times, has been the importance of creating an effective anti-corruption framework, that's been a critical element of our engagement with Ukraine for the last few years. And, you know, that will continue to be obviously and important element of the ongoing discussions as well.

QUESTIONER: I just wanted to know Board date for the approval of the new MD.

MR. RICE: A short answer to your question which I announced at the top of the meeting, is that we expect the Board to meet with Kristalina Georgieva, on September the 24th.

So, I said that at the beginning of the meeting. I also said that, I mean you’ve all been following the process we've been trying to communicate that fairly openly and frequently, that we announced on Monday that Kristalina Georgieva was the candidate that had been forward by the membership. And she will begin a series interviews with Executive Directors next week. There will be a series of those interviews.

And as I said, then we expect Madam Georgieva to meet with the entire Board on September the 24th. And we've said is that we expect the Board to complete its selection by October 4th, at the latest.

QUESTIONER: Are you going to accept some questions for the success story of Greece? Gerry, do you have any evaluation of the economic program of the Greek Government, or you're going to wait for your mission to go to Greece? And can you tell us when the mission is going to Greece?

MR. RICE: The team will be in Athens from September 23rd, and that's the Article IV Consultation, there may be some -- you may see some technical staff there a few days earlier, but the Article IV Consultation will begin the 23rd. Everybody knows we don't have a financial program with Greece; okay, just to be clear on that.

And, you know, on the Government's initiatives, we will be taking a close look in the context of those discussions.

QUESTIONER: I have thought Madam Lagarde said lately that previous 8.5 percent primary surplus target is excessive, and puts -- as she said, "too much pressure on the recovery of the big economy." This is an acceptance of a mistake by the IMF?

MR. RICE: Michael, as I think you know, I hope you know, we have always argued that the 3.5 percent primary surplus target was ambitious, we have consistently said that that high fiscal primary balance targets have acted as a drag on Greece's recovery, and we had argued in the past, and you must know this, for a lower primary fiscal balance.

So, you know, I think the record is clear on the IMF position. But let me just add, what is part of the discussions for the Article IV but what is most important for Greece is implementing credible policies consistent with achieving higher, more inclusive growth, so we will be in those discussions with the government and taking a close look at their initiatives in that context.

QUESTIONER: I know that there was some discussion on the sidelines in the Spring about the risks and dangers of a recession in the global economy.

Are you able to say anything at this point in anticipation of the fall meetings and given the increasing signs that we’ve seen in large, important economies like Germany? How great are the risks?

MR. RICE: So, um, you know --

QUESTIONER: And I apologize if you did this in the beginning.

MR. RICE: No, that’s okay. Good -- no, you’re welcome. What we’ve said, to repeat this again is the pace of global economic activity is subdued.

We’ve used words like -- it’s very precarious, very fragile, delicate.

We’ve used all those descriptors and you know, we have seen a weakening in manufacturing activity. In particular, to levels not seen since the global financial crisis actually.

We talked about trade earlier and I gave you a comment on that.

It’s taking -- it’s now taking a toll; it’s not just a threat. It’s like we see it taking a toll.

We have said in the past that -- and again, Gita Gopinath, chief economist, has said in recent times that recession is not in our baseline.

That’s not our baseline. But again, we are looking at all the new data that I’ve just described and you know, we’ll be coming up with some new revisions and forecasts in the -- shortly in a few weeks’ time in the context of the World Economic Outlook.

QUESTIONER: I am sorry, I really do need to follow up then. Are you suggesting -- can you rule out that you will include recession in your baseline?

MR. RICE: You know what I am saying is it is not in our baseline right now and what I am saying is that let’s not get ahead of ourselves, let’s wait and see and the World Economic Outlook will give us a new assessment but let me just also be clear, since you’ve pushed me, I am not predicting or hinting or trying to give you a subliminal message about -- that we are going to announce the recession. I am not saying that, okay?


MR. RICE: Just to be clear. Let me take a couple of other things online. We are running out of time and I won’t get to everything but there was a question on India and its growth rate and it’s been there for a while and I want to take it.

Recently, the latest GDP figures reflect a slow growth rate for India.

What’s the IMF’s assessment? Again, we’ll have a fresh set of numbers coming up but the recent economic growth in India is much weaker than expected, mainly due to corporate and environmental regulatory uncertainty and lingering weakness in some non-Bank financial companies and risks to the outlook are tilted to the downside, as we like to say.

And, you know, we’ll be monitoring that, as I said. We will update that assessment in the upcoming World Economic Outlook.

There’s a question on Ukraine. We’ve covered Ukraine. There’s a question on Pakistan. Can Pakistan be advised of cutting subsidies and development spending to keep the primary deficit in line?

And to that, I would say that one of the key elements of the program that the IMF is supporting in Pakistan, Pakistan’s program, is the need to mobilize domestic tax revenue to fund much needed social and development spending while placing debt on a firm downward trend. And this was actually something that our acting Managing Director, David Lipton emphasized in his recent meeting a short time back with Prime Minister Imran Khan. Let me add that we expect an IMF team to be in Pakistan in the next few days, including our Director for that area, Jihad Azur will be there.

Just trying to rush through these. Question on Zimbabwe. We already took that. And a question on Bahamas.

The Bahamas has been badly affected by the hurricane Dorian. What is your assessment of the situation that the authorities request the IMF’s support? The authorities have not yet requested IMF’s support.

We stand ready to help with other member countries and of course we are -- Bahamas and the people of Bahamas are very much in our minds, and what they’ve gone through with this terrible hurricane. And again, we stand ready to help.

QUESTIONER: Coming back to Argentina, could you give us a forecast when they knew disbursement would be done and if given the current schedule, it could be delayed until elections passed away?

MR. RICE: Look, I can only repeat that all of this is going to be part of the discussion when the minister and the team arrive in late September and you know, we will communicate as much as we can at that time but that’s about it in terms of what I have for you right now.

MR. RICE: Okay. Look, I want to thank you all for coming. We’ll see you in a few weeks’ time and we’ll get ready for the annual meetings and it should be a very interesting set of meetings this year. Thank you very much.

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