Transcript of IMF Press Briefing

December 16, 2021

MR. RICE: Good morning, everyone and welcome to this press conference on behalf of the International Monetary Fund. I am Gerry Rice of the Communication Department. And as usual, our briefing this morning will be embargoed until 10:30 a.m. That's Washington time. I hope everyone is safe and well as we approach the ends of this challenging year for all of us. And look forward a bit to the holiday season, wishing everyone well as that comes toward us.

This will be the last news conference of the year, and we'll pick up again in January. I don't have much by way of announcements given we are coming close to the end of the year. Just one date for your calendars for January, and I know of great interest to many of you is the update on our World Economic Outlook. The WEO update will be coming on January the 19, 2022.

The WEO update will be presented by Gita Gopinath. Gita is our chief economist as most of you know. This will be Gita's last WEO release in her current capacity before she takes on the role of First Deputy Managing Director at the IMF later that month, just after the WEO release, actually. And, of course, Gita's appointment was announced recently.

We'll have more information for you on the World Economic Outlook update that's coming in January. If you can be in touch with media relations when we come back in January, we'll give you more details on that. Never such interest, I think, in the global economy, the outlook and the forecasts and where the world is heading in these challenging times.

So, again, I want to thank all of you for joining today on behalf of my department and behalf of the Fund, thanks for all the work and the collaboration in the past year. And with that, I will turn to your questions. Good to see so many colleagues on screen today.

QUESTIONER: (Inaudible)

MR. RICE: Well, thank you. Thank you. And let me just take the question also from, let's just see here. I know I saw another question on Argentina. There was a question from -- I don't see it on my screen now. I know there was a question from (phonetic) that had just come in. I'll ask my team to put that up, but I will combine that question with your question.

So, on Argentina, let me just uh, step back a bit because there have been some developments in recent days. And let me just set those in context. So, staff team from the IMF led by Julie Kozack. Julie is our deputy director in the Western Hemisphere Department and also with Louis Cubeddu (phonetic), who is our mission chief for Argentina. They met last week.

So, just some days ago with a technical delegation from the Government, from the Ministry of Economy and the Central Bank in -- and they met in Washington. Okay. So, they met in person. The teams advanced the technical work as part of their discussions for an IMF supported program. And we did issue a press statement after those meetings concluded.

That press statement, I'm sure you saw it Liliana that press statement contained quite a bit of information. And it pointed out the areas in which the teams reached general understandings. That ‘general understandings’ was the phrase used in the statement and that's where the discussions are focused at this stage.

So, there were general understandings on the need to gradually and sustainably improve public finances while allowing for much needed infrastructure, technology, and targeted social spending. General understandings around the need to tackle persistent high inflation requiring multi-pronged approach involving a reduction of monetary financing of the fiscal deficit appropriate monetary policy with positive real interest rates and wage price coordination, which also needs to be supported by policies to build international reserves, including by encouraging FDI, Foreign Direct Investment and Exports, which grew a very robust day this year, especially in value added sectors. Progress was also made on steps to develop the domestic capital market, strengthen the effectiveness of public spending, and improve monetary policy operations.

The team also agreed that broad support both domestically in Argentina and within the international community would also be critical to the overall success of the economic program once that would be agreed. So, where are we while further discussions are needed and indeed further discussions are ongoing? We remain fully committed to continue working with the authorities on a framework and policies for an IMF supported program.

And, of course, we share the same objective with the Argentine authorities, which is to help Argentina and its people set the basis for more sustainable and inclusive growth. I -- Martin was asking for essentially details of what is being discussed. I don't have more beyond what I've just said, which is I think a fair bit of information and Liliana, I don't have timing on the next mission.

Discussions are continuing, I would characterize them as productive as I just said, the team's advanced technical work just in recent days, just in the last week or so, general understandings have been reached in a number of important areas. I just described those and we continue working towards a commonality of views that would lead to agreement on a new program. I don't have a timeline on that, but again, the discussions are ongoing in a very engaged and so far, constructive manner. Is there anyone else on Argentina? Liliana, is that okay for you?

QUESTIONER: (Inaudible)

MR. RICE: I had seen your question on the screen. Anything further on Argentina, then we can move on.

QUESTIONER: (Inaudible)

MR. RICE: Okay.

QUESTIONER: (Inaudible)

MR. RICE: Thanks. Indeed, the IMF Executive Board met last Monday to discuss what we call the adequacy of precautionary balances. That's a key element of the Funds multi-layered framework to mitigate financial risks on our balance sheet. And these are regularly reviewed by the Board. So, that happened on Monday.

As part of this interim review, the Board also discussed the role of surcharges as part of the Fund's risk management framework and the merits of conducting a review of the surcharge policy. Further discussions may take place at an appropriate time, which would also allow for a more holistic review of the policy. I don't have a timing on that. but I can tell you Patricia, that there will be forthcoming soon a press release on the Board meeting that happened on Monday and we'll issue the staff paper that was discussed as well.

And that's certainly going to happen very soon, certainly within the coming days, that press release on what happened on Monday. Okay, on the surcharges issue. Didyou want to come in?

QUESTIONER: Yeah, if you don't mind. I put it in the surcharges.

MR. RICE: Go ahead.

QUESTIONER: Can you listen to me?

MR. RICE: Yes. I can hear you Martin, please go ahead.

QUESTIONER: Given the high payment that the country has in the next two years, if there's not an agreement until March, the next March of 2000, is it possible for the IMF to accept a standstill with the country, with the Government for the next two years?

MR. RICE: Thanks. I really don't have, you know, I had seen you a question earlier. I really don't have much beyond what I've said. And, you know, I think the statement the other day had quite a bit of information in it that we've advanced the technical work, the discussions and continue -- we've reached some general understandings and we are working towards that commonality of views. But I don't have anything on your particular question, nor on timeline as I said. Thanks, Martin. Good to see you.

I am going to move on from Argentina and take your questions onlineDo you want to come in?

QUESTIONER: Sure. Thanks a lot. And I appreciate it. I have two questions. I think the second of which you're going to probably get a follow up on. Maybe we will.

The first is, I've asked you a number of times about cryptocurrency in El Salvador. You've given, you know, the answers that you've given. I saw that the chief economist said, at least to me, something that seems slightly different saying developing economies should regulate it, rather than try to ban cryptocurrency. I just wanted to ask you, maybe is there a new position on this? Is there something -- can you say a little bit more particularly how it might apply to what's been said thus far about El Salvador.

And also on -- I just -- I'm sure everyone has seen the spat between Brazil and the IMF. Where does that stand? Is it, I guess, is the current status that the IMF is going to leave the country in June of next year? And what more can you say about it in response? Thanks a lot.

MR. RICE: Thank you. So on crypto currencies, El Salvador, and so on, your first question, your quite right. We did issue a blog actually last week from our monetary and financial counselor, Tobias Adrian (phonetic) and colleagues. And you're quite right to characterize it the way you did, Matthew, which was a call a strong call for regulation in the realm of cryptocurrency. So, so that's quite right.

On El Salvador specifically, our view has not changed. We support the authority's efforts to boost financial inclusion and raise growth, but the risks arising from using bitcoin as legal tender need to be addressed. Crypto technologies and digital payment systems have the potential to make payments more efficient, but given bitcoin's high price volatility, its use as legal tender entails significant risks to consumer protection, financial integrity, and financial stability.

And it’s used also gives rise to fiscal contingent liabilities. So, our view on what we've said about El Salvador and bitcoin specifically, being used as legal tender, our views there have not changed. I'm essentially, as you know, probably repeating, reiterating what I've said here before.

On your question about Brazil, the IMF agreed with the Brazilian authorities to close the IMF representative's office in Brasilia by June 30, 2022, which is what you were saying. And that's when the term of the current IMF representative expires. So, like with many other member countries, the office in Brazil was opened during the time when we had a significant financial arrangement with Brazil. That was its initial purpose. And while that IMF arrangement with Brazil finished, the office was kept open to facilitate dialogue between Fund staff and the authorities, this has happened.

This has been the case also with a number of other countries in the past. You know, we would open an office particularly at the time of crisis, at a time when there's a financial arrangement. And then over time we close the office. So, this has happened in the past. I would want to emphasize that we expect the high quality of the Fund's engagement with the Brazilian authorities to continue as we work closely to support Brazil in strengthening its economic policy and institutional settings. So, that would be my comment on Brazil. Thank you very much, Matthew.

I am looking for other questions on online. If anyone would like to raise their hand and come in, please do so. Hey, Eric, nice to see you. Eric Martin, Bloomberg. Eric, we can't hear you.

QUESTIONER: Sorry about that, Gerry. Can you hear me now?

MR. RICE: Loud and clear. Go Ahead.

QUESTIONER: Okay, perfect. Thank you so much. I wanted to ask a follow up question on El Salvador which is just basically, you know, the reason that the DES has not yet been announced and how likely is it for an EFS to happen this year, versus going into next year, and whether the decision to adopt bitcoin as legal tender is the main hurdle there.

Are there other things that are raising red flags or concerns for the Fund as far as moving forward with El Salvador. And then on Lebanon, the Government has, well, I wanted to ask whether the Government had prevented its economic recovery program to the IMF and are you satisfied with the approach that they are taking to directing the losses in their financial system. And what was the IMF view on the recent Central Bank circular that allowed people to withdraw U.S. dollars the much more favorable rate, but 8,000 pounds per dollar which led to a weakening of the exchange rate on the black market to the nearly 28,000 pounds per dollar?

MR. RICE: Thanks very much. Nice to see you. Let me take my -- let me take your two questions as you asked them. On El Salvador, where we are, you were asking about the status of that. The authorities in El Salvador and the IMF staff conducted discussions needed to complete the 2021 Article IV consultation that happened at the end of November. We published the Staff Concluding Statement. I'm sure you saw that at the time. And so we are now finalizing the Article IV report for the Board discussions, so our standard procedure, those of you who follow the fund are very familiar with this, and I can tell you that's scheduled for the end of January, that discussion with the Board on the Article IV.

The report will include staff's recommended policies to support inclusive growth and restore fiscal sustainability and preserve financial stability, and of course, the authorities' views on those policies as well. And in the usual way, we will communicate at the end of that board meeting, so toward the end of January you can look out for that. We will publish the entire report which will include any issues that we have identified and that we feel need to be addressed going forward. I don't have anything further specific there, Eric, but you will see the full report in about a month's time. And, you know, in the meantime our dialogue with the authorities in El Salvador continues.

You were asking also about Lebanon. Where are we on Lebanon. A delegation from the IMF went to Beirut that included our Deputy Director for the Middle East and Central Asia Department, and the outgoing Mission Chief, and the incoming Mission Chief, Ernesto Ramirez-Rico. And they were in Lebanon last week, actually, and had discussions with the authorities on the formulation of a comprehensive reform strategy that can help address Lebanon's deep economic challenges. The visit gave the IMF staff team an opportunity to learn more about the authorities' views on reforms ahead and the status of technical work.

As you know, the Lebanese authorities have -- we have received a letter from them, I think I've talked about this before, expressing their interest in a Fund-supported program and that was the backdrop to these preparatory technical discussions that I just described. So we are engaged with the authorities. The discussions are ongoing looking to lay the groundwork for what might be a Fund-supported program.

On your specific questions, Eric, and I know that others have asked about this question too. So you're touching on something of interest which is the losses question. And on that, I'd say there's been considerable progress in identifying financial sector losses, and work will continue in the coming period, including with support from the audits conducted by international auditing firms.

We are now assessing the government's announced figures and will continue our discussions with the authorities in the context of the engagement I just described. Any strategy for dealing with these losses needs to come together, of course, with the implementation of comprehensive reforms to restore confidence, strengthen incentives for investment, enhance governance and transparency, all critical to boost employment, sustainable growth, and reduce poverty over the years ahead. So those discussions are ongoing. I don't have anything more specific, Eric, including on the last question you asked regarding exchange rates, and so these will all be part of the ongoing discussions.

QUESTIONER: Hey, Gerry. Thank you. I've got just a brief follow-up on Lebanon. I'm just wondering, you know, the government has announced sort of a figure for the losses in the financial sector of about $69 billion. Is that a figure that the IMF agrees with? Is it adequate? You mentioned that you were going to be looking at their figures they've come up with. And just wondering, you know, I mean, do you also feel that the government is serious about reaching this -- getting over this hurdle to get to a program?

And then secondly, a question on the Fed's action yesterday. You know, the IMF has been -- it's making sort of increasingly concerned noises about inflation. Earlier this week there was kind of a warning to the UK bank authorities to avoid an inaction bias. Basically to not let inflation get away from things. I'm just wondering if you feel like the Fed's action yesterday to accelerate the taper is a step in the right direction. Is this something that can sort of avoid, you know, a more abrupt tightening of monetary policy if we start to get on with the task of normalizing (inaudible)?

MR. RICE: Hey, thanks. Nice to see you. On the Fed, let me take that one. The Federal Reserve has announced a well-calibrated, proportionate response to rising wage and price pressures by accelerating the reduction in its asset purchases and signaling a more front-loaded path for the federal funds rate. Continuing to set policy in such a data-dependent way will help keep inflation expectations anchored. However, this faster pace of Fed normalization does increase the risks faced by countries relying on dollar funding, especially emerging and developing economies. That would be my comment on the Fed, David, and as you said, we did issue quite an extensive piece on inflation just some days ago. I would refer people to that who want a bit more.

On Lebanon, I don't have a great deal to add. You asked about the financial losses number, and what I have said in response to Eric was that we are now assessing. The government's announced figures, and so we will be coming back on that at some point and continuing our discussions with the authorities. And I had also said, you know, we are characterizing the engagement with the authorities as of now as considerable progress being made, including in identifying these financial sector losses, and work will continue in the coming period. Again, everything I said to Eric, but we are assessing those numbers essentially now.

Let me take any other question. There are a couple of questions online, both asking about the UK and actually, Matei's question is about green finance and the UK and actually, (inaudible) answered that question exactly on Tuesday at the press conference on the Article IV, so I'm going to refer you to that. And similarly, the next question from Veronique Dupont, AFP is about impact of Brexit on trade and again, exactly the same question was asked on Tuesday and we did answer it, so I'm going to refer to the transcript thereof, which we have published.

Is there another question? If not -- yes, please, come in.

QUESTIONER: Hi, Mr. Rice. I have many questions, if possible. First, you were talking about the progress regarding the losses. So, do you think that at this time that an investigation would be able to come up with a common figure of loss, as first question. And the second question, and it shows at which level the discussion through the IMF and the government is, so is there any progress being made by the Lebanese government, and where is the government lacking exactly? And the second question is about the MOU paper. Is that true that Lebanon was given until April 2022 to sign the MOU paper and instead of the agreement would be postponed to November 2022 if he doesn't sign, if he wasn't able to sign it?

MR. RICE: Hey, thanks. Nice to see you, and thanks for these questions. I'm not going to say anything further on the losses issue. I think, you know, we've covered that. You're asking about the Memorandum of Understanding, the MOU, and as you probably know, those who follow the Fund, this requires extensive discussions on all aspects of policies and reforms intended by the government. So, you know, as I mentioned earlier, those discussions are ongoing. So we're not there yet, Laura, in terms of, you know, signing and again to the MOU. Extensive work is needed still in the period ahead.

I'm trying to give you some information. I told you we're closely engaged on a number of challenges facing the authorities on the macro and financial situation, on the fiscal situation. I can tell you there have been technical assistance meetings on revenue and tax administration as well as on cash management. But again, I don't want to preempt the discussions which are ongoing. We will keep you posted as they proceed. That's about all I have further on Lebanon, Laura. Thanks for those questions.

I may take one more if there is one. Eric, I don't know if you had another question, or someone who hasn't had a chance to ask a question.

QUESTIONER: Yes. Is it possible to ask a question?

MR. RICE: Yes, please do.

QUESTIONER: My question is not related to the losses but is related to what's happening within the deliberation with the IMF team. In 2020, the IMF had very -- the team had criticized the capital control bill that had been submitted or proposed by some members of the Parliament. Recently, the Parliament had suggested a new proposal of capital control, which some described as a transaction control rather than capital control. Does the IMF team have any comment about the annuity proposed capital control bill? And does the IMF view that any capital control bill is useful without a larger plan being presented by the government?

MR. RICE: Thanks very much. Again, I've spoken quite a bit about Lebanon this morning. I don't really have much more to add, and on your losses question I'm just going to refer you back to what I said to Eric and David and Laura on that issue.

On the capital control bill, we -- I can tell you we did provide comments and views to the government on previous drafts of the bill. I don't really have anything further on that. And again, just to say that the discussions continue. And maybe one more thing I can tell you, Adam, if it's helpful, IMF staff plan to visit Beirut again in early 2022, early next year, to continue our discussions and we will be remaining closely engaged in the coming weeks, as I had indicated earlier. So another staff visit in early new year is anticipated.

There is a question about India's economic performance generally, last year, this year. I'm actually just going to refer you to -- there's an abundance of commentary from us this morning on India from our Chief Economist Gita Gopinath, who is in India, and just before coming to the press briefing, I was looking at the very extensive coverage of that. So, I'm going to refer you to that. If you need anything further, be in touch after the briefing and we'll give you that. And of course, with India and other -- as is the case with India and other countries, we will be updating our macroeconomic projections in the January World Economic Outlook update that I mentioned at the top of the meeting.

So with that, I am going to come to closure. Wishing you all well. Thanking you all again for joining today and for your work with us, your working with us in the past year. Looking forward to 2022. Stay safe and well, everyone, and enjoy the holiday season if you possibly can, and see you in 2022. Bye-bye.

IMF Communications Department


Phone: +1 202 623-7100Email: