Transcript

Transcript of October 2019 G-24 Annual Meetings Press Conference

October 17, 2019

Mr. Vilkas - Good afternoon and welcome to 2019 IMF, World Bank Annual Meetings. I am Gediminas Vilkas with the IMF Communications Department. This is a Press Conference of the G-24 group, and I am delighted to introduce the speakers today. First of all, the second to my right, the Chair of G-24 Group, Mr. Julio Velarde. He is also Governor of the Central Reserve Bank of Peru. To his right is the First Vice-Chair, Mr. Kenneth Ofori-Atta, Minister of Finance of Ghana; and to his right is Mr. Jafar Mojarrad, Executive Director at the International Monetary Fund representing Iran; and last but not least, to my right, Ms. Marilou Uy; she is Director of G-24 Secretariat. The Chair will make opening remarks, and then we will have a time for questions.

Mr. Velarde - Thank you very much. I will be very brief. We had a meeting 1-1/2 hours ago with my Director and President of the World Bank. It was the first meeting together, and I believe it was a very constructive engagement with people from three continents, Asia, Africa, and Latin America. There was a lot of discussion that went into it, but part of that is in the communiqué that you have in your hands, so don't hesitate to ask any type of questions regarding this communiqué or some of the issues of the G-24.

Mr. Vilkas - So now we have a time for questions. Please introduce yourself, your name, and the media you are representing. Let's start with the gentleman in the first row here.

Question - My question is to the Minister of Finance in Ghana. Minister, we note that the economy of Ghana has continued to expand. At least at the World Bank level and at the IMF, they have continued to receive good indicators; but the gender gap in Ghana has continued to expand at the same time. What is Ghana doing to reduce the gender gap and to finally boost the Ghanaian economy beyond the level it is at the moment? Thank you.

Mr. Ofori-Atta - Thank you very much, indeed. I actually did not expect a question on Ghana. This is G-24. But true, I think as you have seen since we came into government in 2017, sort of all the indicators have moved in a positive way. I know we have increased resources to SchoolFeed, and the girl ratio has improved. The LEAP program has also increased by maybe some 40,000 people. That is mostly women. So the clarity for us is really sort of eliminating poverty and making sure that social services, especially of school and health, are expanded, and I think we have been successful with that. And the Ministry of Gender is also facilitating. I think even also stunted growth has gone down since we came in. We continue to push with the limited resources, but I think the issues of sort of general education for everybody, for access, health for all, and the really deprived, being able to intervene, that is also being done, so I think there is general progress all along. Sustaining the growth is what we are looking for, especially in an election year coming. We have to continue with the fiscal discipline and make sure we manage our expenditures whilst finding ways to increase the domestic revenue. Thank you.

Mr. Vilkas - Thank you, Minister. There is a question in the second row, please.

Question - Good evening. Just as we talk now, the Finance Minister of the G7 group are discussing a report on global stablecoins or cryptocurrencies, not to name the Libra. They are considering this initiative with suspicion, I would say. I would like to know what is your take on Libra specifically, or stablecoins? Could it be an interesting alternative to dollar, an interesting way to boost international payments?  Thank you for sharing your comments.

Mr. Velarde - Thank you very much for the question. Actually we in the central banks do not call them cryptocurrencies, but cryptoassets. They have a lot of volatility. As a means of payment, they have not gone beyond investment as a sort of security facet. Libra may be a little different, but as you have seen recently, many of the major supporters are holding back.

And, second, probably the initial idea of Libra of having a currency based on a basket is a very bad idea. I don't believe a French in Paris is concerned of having a payment in a basket of currencies. He wants to pay in euros. An American here wants to pay in dollars. He does not want to be converting this currency Libra into dollars or this currency Libra into euros.

We have problems that cross-currency payments have been too expensive, but a lot of initiatives are taking place. As you probably have noticed, even some fintech now are being a sort of Netflix; that is you pay once a month something like 8- or $9, and you can make 100, 150 transactions. And we are working at that in the ECBU and the G-24; but the Pacific Alliance, Colombia, Chile, Mexico, and Peru, we are working with the BIS to try to improve these cross payments. We are working with the inovation center in Singapore, which was started by the BIS, and we are trying to see how they are -- they are using some of the ideas that have been put forward in India. So we have also a means of extending payments domestically but also trying to work mostly cross-border where they are too expensive to do these transactions. I will continue, but it is not the main theme. They are cryptoassets first. As the BIS said last year, not this year, they are extremely expensive in energy. They are not a currency at all. They are not friendly for the environment. If you continue increasing at this level, for example, or some other cryptocurrencies -- I will not name them -- you will need more energy than the one is used by Switzerland, which is particularly ridiculous in terms of environment.

But just to finish, almost every central bank now is working in these digital payments, not a central bank currency, which is different. The World Bank is supporting that, but digital payments. And it is probably hard to say now what will be the situation ten years from now, and I believe nobody knows. Thank you.

Mr. Vilkas - Thank you very much. Are there any more questions? Yes, gentlemen in the third row.

Question - One of the main themes here has been about trade, and I was just wondering if you could comment on sort of the effects that you are seeing from the US-China trade war on your economies, the practical impacts. Is it getting worse now that these supply chains are shifting, and what is that doing to your economies, and what is your message to Donald Trump and President Xi to get this resolved?

Mr. Velarde - You have to face one is the trade distortion, the tariffs, which are negative by themselves, but probably the biggest problem is uncertainty. The situation is even worse than if you knew that that 20 percent tariff is going to be applied, but probably you do not know when it is going to be applied, if it is going to be applied, what products are going to be affected. Even in Europe, you can see how the car industry is afraid that there will be tariffs on cars coming from Germany, et cetera, et cetera. So this uncertainty is affecting investment not only in China and the USA, but around the world. We have a more uncertain scenario, and that is affecting investment, affecting growth; and what is being called by the IMF now synchronized slowdown in part has to do with these concerns about trade. The Managing Director gave us a number of how much they believe it is affecting the world economy. She said 0.4 of GDP in the meeting we had two hours ago, but it is very hard to estimate because it is such a supply shock, and the effects are not immediate. You are not investing because the future is not so clear. You can even have a negative rate of interest, but you have still to return the capital that you receive. If this flow of income is more uncertain because of this situation, even the amount of credit flow, et cetera, et cetera, so, of course, it is affecting. It is affecting that. It is a sort of flow trade shock that is affecting almost all the countries in the world. We talked about global value chains, et cetera, et cetera. I believe I have said enough. Thanks.

Mr. Vilkas - Thank you very much.

Question - Thank you. My question to you guys is during the UN General Assembly last month, the World Health Organization promotes universal health coverage globally, and I am curious to hear your view about that, especially on developing economies. I am curious to hear your view, especially Ghana, in regards to West Africa.

Mr. Ofori-Atta - Well, health is such an integral part of -- something, an access that we all should have. We did meet a national health system that needed much more support, and I think since we came, we have actually been able to increase the number of people on the national health insurance scheme by close to maybe 200- or 300,000. We have also made access to it much easier by people being able to pay their premiums through the telephone system so that most people now have their cards, and they can participate in that. It is expensive, but without health, you do not have the productivity that you require, so we continue to support that.

Mr. Vilkas - Thank you, Minister. We have time for one more question.

Question - Thank you. My question for you is that the G20 is discussing today and tomorrow the OECD BEPS 2.0 proposal to address the tax challenges in an increasingly digitalized economy. The proposal seems so far to bring little additional tax revenues to developing countries, and I wanted to know if you see this as problematic?

Mr. Velarde - In the communiqué we have something about that, but in April we had a discussion between some of the countries of how to address that, and it is not so easy. We want to work in a sort of agreement where the developing countries have a say in how much they will receive according to the business that has been generated, but that is still an issue of discussion. It is pretty hard. As you know, France has put forward a tax which is not accepted by states, but that is only France. For example, in many countries you have an imputed profit from some of the things that are coming. Attaining some sort of agreement across the world probably will be the standard. It does not have to be accepted by every country, but, of course, a standard probably will be introduced at a certain time. Every country is fiscally independent in the end, so short of a standard that many countries will follow with some distinctions, but it is very hard to introduce an exact standard for every country.

Mr. Ofori-Atta - I think really beyond how it is going to be apportioned is really the fact that the OECD has seen it fit to challenge a system that has been in operation since 1920, which essentially states that the physical presence leads to the appropriate taxes. And so I believe whereas in the G-24, it really opens the window to begin to question the sort of global architecture in all sorts of ways because things have changed so much. Clearly we have to find a formula for sharing brand presence and IT company presence without them being in country, but it also leads to the whole issue of infrastructure financing, how we are going to do it; why is infrastructure not an asset class for pension funds; the commodity trading, why is the pricing the way it is? All of those now should become questions that we ask because the arrangements should be different if we want to increase global prosperity and also see that we meet the 2030 SDG goals to bring more resources to the G-24-type countries. So for me, it is an exciting period, and we have opened the window to really relook at all of these things that we have taken for granted as standard.

Ms. Uy - In our communiqué, we have also said that the OECD published a unified approach, which essentially is a broad brush of what might constitute a framework going forward, but there is a whole lot of details that still have to be spelled out and perhaps negotiated and the options defined. And so our view is that the views of developing countries have got to be heard, but in addition, in order to inform the debate, it is really important to get more information about the options, you know, what the impact would be, so that we would be in a sound position to make an argument about say how profits are distributed and how taxes eventually would be distributed. Our goal is to have a system that is fair and equitable at the end of the day and knowing that the details still have to be spelled out.

Mr. Vilkas - Thank you very much. I think we are going to conclude the press conference here. Thank you very much for coming. Thank you for speakers sharing their thoughts and ideas, and have a remaining successful 2019 Annual Meetings. Thank you.