Transcript of IMF Press Briefing

June 24, 2021

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 briefing will be embargoed until 10:30 a.m. That's Washington time. I want to wish everyone my best and hope everyone is staying safe and well. Let me begin with a few announcements and then I'll turn to your questions online and on video here, seeing a number of colleagues already joining us. Good morning to them.

So a busy period upcoming here at the International Monetary Fund. The Managing Director of the IMF, Kristalina Georgieva, will be participating at the International Financial Congress organized by the Bank of Russia on June 30. Then, on July 1, the Managing Director will be chairing a press briefing on the Article IV Consultation with the United States.

And the following day, on July 2, Kristalina will be participating with the President of the European Bank for Reconstruction and Development, President Odile Renaud-Basso, on the occasion of the 30th anniversary of the EBRD. And that's another public event.

On July 6, the Managing Director will participate in a U.N. High-Level Political Forum. On July 8, she will attend the Three Seas Initiative, where she will give the keynote speech focusing on the green digital transition and issues related to that. And then on July 9-10, Kristalina Georgieva will attend the G20 Finance Ministers and Central Bank Governors meeting being held under the chairmanship of Italy. And then on the following day, the Managing Director - so this is July 11 - the Managing Director will attend the Venice Climate Conference. So quite a lot going on there. All public events to which you will have access. So please be in touch with Media Relations here at the IMF if you need any further detail.

I will mention one other item which relates to our Deputy Managing Director, Tao Zhang, who on July 1, will be speaking at a roundtable on the Financial Choices for Africa in the Face of Climate Change organized by the Banque de France and several other partners.

With those remarks, I'm going to turn to questions to colleagues who have joined us via WebEx.

QUESTIONER: Good morning to you, too. My question is regarding the inflation situation in the United States. So far, the Fed has already said that there is a risk that inflation could be more serious and more persistent than expected. So I wonder, what is the evaluation from the IMF on the inflation situation in the US, for example, what might be the worst case scenario? And what might be its impact on other global economies? Thank you.

Mr. RICE: Just taking the global perspective first, our view is that the spike in inflationary pressures that we have seen reflects transitory supply demand mismatches, temporary input shortages and largely one-off shifts, including commodity price increases coming off the very low base of last year.

However, that said, there are risks that inflation will prove to be higher, more persistent, and those risks should not be taken lightly, given the impact that they could have on financial conditions and activity in the US and globally. Our managing director, Kristalina Georgieva, has said, we need to be watchful—is the word that that she has used. And I would use that too. More specifically on the US and your questions - the actions taken by the Federal Reserve, we believe, will help support the US economy and more firmly anchor inflation expectations. The Fed's continued clear communication and its commitment to an orderly, methodical, transparent messaging of its policy intentions will help mitigate potential risks arising from policy normalization.

QUESTIONER: Good morning, everyone. I have two questions. The first one, I would like to know if you can confirm that tomorrow the board will examine the $650 billion proposal on the SDR. And the second question is related to the proposal by the G-7, the Build Back Better World. Do you have any comment on this project? And could you let us know to what extent the IMF could be involved in that project?

Mr. RICE: Let me take your second question first, if I may. The Build Back Better World that you mentioned is indeed a G-7 initiative. And I have not seen the details of that yet. Separately from that, I can tell you, of course, that the IMF has a robust work agenda on climate, digital, inclusive growth that will help its membership build forward better from the pandemic crisis. We've actually been talking quite a bit about these issues and how we can support our membership to address them so that indeed again, Kristalina Georgieva likes to say 'build forward better' after the pandemic.

On your first question, about SDRs, yes, I can confirm that tomorrow the IMF Executive Board will discuss a proposal for a new SDR allocation of $650 billion, and that will be based on the Managing Director's assessment, the staff's assessment of long-term global reserve needs.

Perhaps I could just take this this opportunity to just explain the process a little bit for those who may not follow it? So there will be, as I said, an Executive Board discussion tomorrow. And after that, as the next step, the Managing Director will prepare a report to the Board of Governors with a proposal for the general allocation of the SDRs for approval by the Executive Board. So that report to the Board of Governors would need to be approved by the Executive Board, and we expect that somewhere around mid-July. If the board concurs, approves, then the Managing Director would indeed send that report onto our Board of Governors and the Board of Governors would be asked to vote on that report. So if all of this is approved, including that final Board of Governors approval, the allocation would become effective toward the end of August, late August is what we've been saying for some time. I know that's a little bit complicated to follow. I hope I've explained it clearly, but that's the process we are following on the SDRs.

Let me turn to colleagues from Argentina. And I'm seeing a few questions online. And I'll take any questions that are there on WebEx, I'm seeing quite a few online. Asking Economy Minister Martín Maximiliano Guzmán announced that Argentina would pay only $430 million in two installments. One in July, the other in February 22. Instead of $2.4 billion payment. Is it possible that the IMF accept only part of the total amount of the obligations that Argentina has to pay this year, as the Paris Club did?

There is a question about Argentina, how do you see the partial payment Argentina made with the Paris Club? Does it change anything in the talks with the country? How are the talks going? And another - what's your opinion on the agreement between Argentina and the Paris Club? Is the IMF planning to have a meeting? With Minister Guzmán in the G20 summit in Italy to move forward with the negotiations for a new agreement, thank you very much. I don't know if there's any further question online on screen. I mean, on Argentina.

QUESTIONER: Hi, good morning. I was wondering also if there will be, in the agreement with the Paris Club, Minister Guzmán said they would change the date of March 2022. I was wondering if that gives a sort of deadline also for reaching an agreement with the IMF. What's the IMF take on those dates?

And regarding the SDR allocation, if there is going to be some sort of reduced rate redistribution, as Minister Guzmán and other countries requested to benefit also middle-income countries?

Mr. RICE: Thank you very much for those questions. So there's a clutch of questions around Argentina, essentially revolving around the same issues. But let me let me try and be as specific as I can.

Number one, we welcome Argentina's progress toward addressing its debt owed to Paris Club creditors. As I've said here in the past, this is an issue for Argentina and the Paris Club creditors, but we certainly welcome the progress that has been made there and reported. In terms of the question about payments to the IMF, Argentina has indicated its commitment to meeting its obligations to the Fund and to this end, we're working closely with the government toward a new program. As I've said here before, which does sort of bring me to the status of those discussions, we continue to be engaged, looking to help Argentina and the people of Argentina as much as we can facing the challenges of the pandemic and the social economic challenges they face.

I can say in response to the question that IMF staff is indeed expected, we do expect to meet with the minister, Minister Guzmán, and his team on the sidelines of those G20 meetings I mentioned at the top of the brief. So that's scheduled for early July. That would be in Italy, as I mentioned. And again, that planned engagement very much part of the continuation of our close working relationship with Argentina.

How are those talks going? Again, I would characterize them as constructive, productive. I do not have a date for the timing of a new program. But again, we remain very closely engaged with the Argentine authorities with the goal of supporting the country's return to sustainable and inclusive growth. I think that covers most of the questions on Argentina. If there is a follow up, I'll take it.

Mr. RICE: Another question on Argentina: I understand that we've probably asked in several different ways about the timing in 2022. Can you comment at all on the extension of the negotiations, of the negotiating window into 2022 and whether that guides IMF expectations in any way?

Mr. RICE: I really don't have any timeline for you on the discussions or when we might reach agreement on the new program. All I can tell you is that we're working as hard as we can. We are engaged as closely as we can be with the Argentine authorities. I think we share the same objective in the sense of returning the country to an inclusive and sustainable growth as fast as possible. That's definitely an objective.

But in terms of any specific timing on the discussions and the program, no, I don't have anything there. Let me turn to the second question which took us back to SDRs. And asked about a comment Mr. Guzmán had made, and many others have made, about the potential reallocation - channeling, we have called it - of SDRs from this new allocation to more vulnerable countries. And Kristalina Georgieva has been one of those commenting on this fairly publicly and talking about it.

And so where we are, as I mentioned just previously, not to get too far ahead of ourselves. There's an Executive Board meeting tomorrow. And then I talked about the process that would follow. We are focused right now on gaining approval of the new SDR allocation of $650 billion. That's the focus right now, but as I said, we are exploring a number of proposals for voluntary channeling of SDRs that, as I mentioned, various stakeholders have put forward. And we plan to discuss a menu of options with our Executive Board this summer.

One leading option just to try and answer your question, is for members that have strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries via the IMF's Poverty Reduction and Growth Trust. This is the PRGT that many of you will be familiar with. This is concessional support through the project. This is for interest-free loans to low income countries. In fact, in the past year, there has been some channeling of existing SDRs to the PRGT and through the PRGT to low income countries at the level of some $15 billion, that's in the past year. So that's one option of how the new SDR allocation could potentially be reallocated. And, you know, of course, the options will depend on that discussion with our Executive Board. Our discussion with the membership depends on their priorities.

We could also be looking at how we can channel resources to support greener recoveries, the climate issues and other structural transformation issues that I mentioned earlier. Kristalina Georgieva actually talked about this in the context of the recent G7 meeting, and she spoke about it again actually just yesterday in a speech that she gave on Africa. But what she said was, again, we're working toward magnifying the impact of this historic SDR allocation of $650 billion by again encouraging a voluntary channeling of some of the SDRs and or budget loans to reach a total global ambition of $100 billion for the poorest and most vulnerable countries.

Now, some of you may recall that $100 billion was a number indicated by the G7. Kristalina talked about that again yesterday, and we're exploring options with our membership, how we can get this done through the project, through the Poverty Reduction and Growth Trust and possibly a new Sustainability and Resilience Trust. And again, Kristalina, the Managing Director has talked about this, it's something that we would be discussing with our Executive Board in the period ahead. So, again, just to try and explain where we are on the SDR process and on this issue of channeling.

QUESTIONER: Thanks a lot. And thanks for taking the question. I'm going to ask again about this Bitcoin and El Salvador thing and something on Cameroon. Since we last spoke, which I guess was two weeks ago, the president of El Salvador said that they'd like outside support, but they can go forward without it. And they said they're proponents of cryptocurrency sort of said that institutions like the IMF maybe are being negative because they want to stay relevant. So I just want to give you an opportunity to sort of explain more your concerns and to see where things stand with El Salvador.

And on Cameroon, there are these calls to more specifically condition the IMF program on anti-corruption, not just have an audit, but particular levels of accountability, maybe human rights issues. And I wanted to know what exactly are the sort of specifics of what the IMF is going to do to make sure that this missing $335 million don't just disappear. Thanks a lot.

Mr. RICE: On El Salvador. I don't have a great deal more to tell you beyond what I said the last time, which is that adoption of Bitcoin as legal tender raises, in our view, a number of macroeconomic, financial and legal issues that require careful analysis. We are following up developments and our consultations with the authorities continue as we speak. The discussions between our staff and the authorities in El Salvador on potential support from the IMF, those discussions are continuing, and we'll have a bit more to say once they conclude. But essentially, I'm giving you the same position on the Bitcoin issue. I'm giving you the same position that I stated a couple of weeks ago.

On Cameron, the IMF was certainly aware of the recent investigation the Cameroonian authorities have launched on the use of the two emergency loans disbursements. Sorry, the two emergency disbursements that our board approved last year for Cameron to help them as we helped, you know, 80 some other countries address the Covid-19 pandemic.

And we've been saying consistently that countries should spend to fight the pandemic, but keep the receipts and in fact, check the receipts. So, it's very important for us that accountability and transparency are upfront in this process, they don't take the back seat and we have agreed on specific measures to strengthen governance and reduce vulnerabilities to corruption.

And these include, including in the case of Cameron, the publication of the results of public procurement and beneficial ownership of companies receiving procurement contracts, the issuance of a report on Covid-19 spending. And an independent audit of the spending and the publication of its results, so we're engaged with the Cameroonian authorities and indeed other stakeholders on how best to support their efforts. And, you know, the whole objective, of course, is to save lives and livelihoods in Cameroon and elsewhere.

Just another point. Since you mentioned it, we received the letter from the women leaders in Cameroon and we have responded by reiterating some of these measures that we have in place that are aimed at strengthening governance and reducing vulnerability to corruption. And furthermore, we're looking to meet with representatives of those women leaders. Just as we often do here at the IMF, in our visits to countries with civil society and other stakeholders in the country, so we look forward to that meeting with the women leaders. It's certainly something we take seriously.

Mr. RICE: I want to take a question on Pakistan: what's the status of the sixth review of Pakistan's reform program that's being supported by the IMF. And what concerns do we have regarding budget announcements made by the government?

What I can tell you is that we welcome the open, constructive discussions we're having with the Pakistani authorities. We stand ready to continue to support Pakistan as to achieving its objectives of debt sustainability and strong and sustainable growth. This will require continued discussion on the sustainable fiscal path, structural reforms, particularly on the tax and energy sectors, and social spending enhancements envisaged in the authorities’ reform program that's supported by the IMF resources.

As the recovery gains strength, it will be important to accelerate the implementation of policies and reforms needed to address some of the long standing challenges facing the Pakistani economy and while the recent mission could not complete these discussions, we remain fully engaged with the authorities aiming to resume the discussions in the period ahead. That's what I have on Pakistan. I'm turning back to colleagues on video if there are any further questions.

QUESTIONER: Good morning, sir, and thank you for taking my question. I'm sorry to join a bit late. I know that you are now in the final process of finalizing the revisions for the World Economic Outlook. And I'm wondering, we are now seeing this Delta variant emerge with huge fury in many places. To what extent is that playing a significant role in any provisions that you may be planning?

And then just separately on the common framework, for months now, the IMF and other international financial institutions have been encouraging countries to seek debt treatment if they're starting to be in trouble. And we've really only had the three. Are you seeing any signs that additional countries may be joining, you know, maybe going to look for some help there in on debt treatment?

Mr. RICE: So thanks very much for those two questions on the virus and variants and where we stand, I think you know that the IMF has been very forthright in recent times and coming forward with this proposal, a very specific proposal on what we think is required essentially to end the pandemic in 2022, I won't repeat all the details of that. I know you know, Andrea, what that proposal is all about.

This is the $50 billion proposal that IMF staff have put forward to vaccinate 40 percent of people in all countries by the end of this year -2021 and 60 percent of people in all countries by the middle of 2022, we lay out the details of that. You can find it easily on how we propose that should be done. And we continue to push on all of those fronts on what needs to be done to arrest the pandemic, further boosting, dose sharing, closing financing gaps for low and middle income countries, removing barriers to export of raw materials and vaccine and. boosting production and boosting distribution capacity, so on all of those things, we are pushing very hard.

I think you know, that the WHO, the WTO, the World Bank, joined the IMF in support of this proposal, and Kristalina Georgieva has described the war room, the war room task force that has been formed by these organizations to push forward on this proposal to get it done. Essentially, so that's in progress, that's happening. And you know, Kristalina talked about it yesterday, again in that speech I mentioned on Africa, and she was ringing the alarm bell in many ways, particularly on Africa, and watching out for a potential third wave hitting Africa and reminding that the very low level of vaccination rates in sub-Saharan Africa and low income nations in general have received less than one percent of vaccine so far. So, you know, she talked about all of that yesterday.

So there's a real sense of urgency around this. And as you mentioned, the World Economic Outlook Update will be coming in a few weeks’ time. And it will be showing how we are taking into account the status of vaccination, the status of variants and their impact on the economies of of major countries and the global economy. So stay tuned for that. Coming up soon that we'll update will be led by Gita Gopinath, our Economic Counsellor and Research Director, in the coming weeks.

On debt, your second question, again, Kristalina talked about this yesterday. I'm sure you saw her speech was essentially about debt and Africa and low-income countries. Debt levels in Africa have increased sharply. She talked about that the debt service initiative, the G20 DSSI has been helpful. It has provided some breathing space. For low income countries, we have the common framework in place. Three countries, as you indicated, have requested assistance under the common framework, that's Chad, Ethiopia, Zambia.

We are encouraged that Chad recently received financing assurances from its G20 bilateral creditors. We made a statement on that and now we seek ass you say speedy commitments on comparable terms, including by private sector creditors and other official bilateral creditors.

Now is the time to make the Common Framework fully operational. And we are pushing very hard for that.

Just to just to note, not related to your question, but just to note that thanks to the joint efforts of our member countries, there have been two historic milestones on the debt front for low income countries recently. And again, Kristalina talked about that yesterday. Somalia has received debt relief under the enhanced HIPC decision point and is now benefiting from IMF financing.

And we made a statement yesterday actually about Sudan. Very important being on the same path, and we will have more to say about Sudan next week when our Executive Board meets to discuss the decision point on Sudan next week.

But again, successful implementation of the Common Framework in these first cases under consideration is crucial for other countries with unsustainable levels. And again, we're pushing very hard on that.

QUESTIONER: Gerry, if I could just follow up real quickly, so is your sense that other countries may be waiting to see what happens here and whether the private sector actually steps up before they come and seek assistance? Are you in any discussions, early preliminary discussions with any other countries that may be considering going to the common framework?

Mr. RICE: You know, I won't get into naming other countries, as you might expect. But, you know, just to repeat that, we think the common framework is a very viable option for countries with unsustainable debt burdens. We encourage countries to seek early action for debt resolution, not to wait.

To answer your question, we are encouraged that there's been progress in the case of Chad. And now, as I said, we are calling for speedy commitments on comparable terms by private creditors and other official bilateral creditors, and we are urging other countries to seek early action on the challenges they face on the debt front.

I am going to leave it there for today.

QUESTIONER: Sorry. Very quickly, a question for you on Pakistan, just for clarity. An opposition lawmaker had said that recently caused a bit of confusion by saying that the IMF had stopped its disbursement on the $6 billion program. Can you clarify where that program stands and whether disbursement continues or is suspended? Just a quick follow up on the earlier question.

Mr. RICE: Where we are with Pakistan is that we are in discussions on the next review. Those discussions are ongoing, they are open, I would characterize them as constructive, and that's where we are.

I am going to leave it there for the time being, I want to thank you all on screen today. It's great to see you and thanks to those online for the number of questions that came in that way. I look forward to seeing you in a few weeks’ time. Until then, everyone, please, on behalf of everybody here at the IMF, stay safe and stay well.

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