Transcript of IMF Press Briefing — June 8, 2023
IMF News, June 8, 2023
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- Published: June 8, 2023
Management travel and upcoming IMF events
- Managing Director visit schedule and engagements:
- June 6 until June 9: Managing Director in Astana, Kazakhstan (visit includes bilateral meetings, participation in Astana International Forum Plenary Session, event with Kazakh students, and a keynote speech on growth, inclusion, and the green transition).
- Tomorrow (relative to briefing): MD to head to Almaty for opening ceremony of the IMF’s Technical Assistance Center.
- June 13–15: Global conference on the G-20 Data Gaps Initiative (IMF-organized, in collaboration with the Interagency Group on Economic and Financial Statistics and the Financial Stability Board Secretariat). MD to deliver opening remarks on June 13 (panel on climate change). Deputy Managing Director Bo Li to deliver introductory remarks on June 14.
- June 15: MD in Luxembourg for Euro Area Article IV concluding meeting; June 16: MD in Brussels for bilateral meetings.
- June 17–21: MD visit to Morocco (meetings with authorities; high-level policy roundtable on Central Bank digital currencies in Rabat; site visit for 2023 Annual Meetings in Marrakesh; meetings with students).
- June 22–23: MD and Deputy MD Bo Li to attend Summit for a New Global Financing Pact in Paris.
- June 26: First Deputy Managing Director Gita Gopinath to deliver a speech in Central Portugal as part of the ECB forum on central banking.
- June 8–11: Deputy Managing Director Antoinette Sayeh in Egypt (meetings with authorities; participation in panel on strengthening fiscal risk management in the Middle East and North Africa).
- Announcements on publications and meetings:
- WEO update to be released on Tuesday, July 25th, with a press conference at IMF headquarters in Washington.
- 2023 Annual Meetings to be held from October 9th through 15th in Marrakesh, Morocco. Registration opens on June 16th.
Argentina — negotiations, program status, and domestic debt swap
- Context and recent disbursement:
- IMF Executive Board completed the fourth review of the EFF Program on March 25th (March 31st), allowing a disbursement of 5.4 billion U.S. dollars.
- Ongoing fifth review:
- Staff and Argentine authorities are engaged in frequent, constructive discussions focused on alternatives to strengthen the authorities' program, recognizing the impact of a historic drought.
- Key policy discussion areas: safeguard stability, enhance fiscal sustainability, and strengthen reserves to reduce inflation and protect the most vulnerable.
- No timeline or closing date provided; in-person meetings are expected at some point and could take place in Washington.
- Domestic debt exchange / swap:
- IMF welcomes authorities' efforts to reduce rollover risks associated with domestic debt, while stressing operations should protect debt sustainability and not add vulnerabilities.
- External proposals:
- IMF is reviewing the CLAAF proposal for an emerging markets fund; IMF notes it has adapted responses over recent crises (examples cited: $300 billion of financing approved for members; SDR allocation in August of 2021; Resilience and Sustainability Trust; food shock window).
Ukraine — EFF review, disbursement, and dam destruction
- First review under four-year EFF arrangement:
- On May 30th, IMF staff and Ukrainian authorities reached staff-level agreement on updated policies for the first review.
- All quantitative performance criteria for end April and structural benchmarks through end May were met.
- Executive Board consideration is tentatively scheduled for the end of June and would enable a disbursement of about 900 million U.S. dollars.
- IMF noted the Ukrainian economy was showing remarkable resilience and recent developments before the latest tragedy pointed to a gradual recovery in 2023.
- Destruction of the dam:
- IMF expressed concern about social, economic, and environmental impacts; too early to assess economic damage fully. IMF team is closely monitoring and will provide a full assessment in due course.
- Broader note:
- Managing Director’s view reiterated: ending the war as soon as possible is the best way to improve global growth prospects and reduce risks to food security and environmental damage.
Global economic outlook (WEO) and policy priorities
- Timing:
- WEO update scheduled for Tuesday, July 25th.
- IMF assessment and policy advice (as of April/June statements):
- Global economy expected to slow this year; medium-term outlook weak (around 3 percent over the next five years — described as weakest medium-term growth forecast since 1990).
- Near-term priority: fight inflation via monetary tightening.
- Recommendation: central banks should "stay the course" on monetary tightening to decisively reduce inflation; fiscal policy should support inflation fight while protecting the most vulnerable.
- Medium-term: pursue transformative reforms to boost growth and avoid prolonged low-growth environment.
Surcharges, IMF precautionary balances review, and governance
- December 12, 2022: Executive Board completed regular review of IMF’s precautionary balances; board discussed role of surcharges and potential changes.
- April 2023: Surcharges raised again in executive board discussion of Fund’s income; views continue to diverge, including on temporary relief.
- Decision mechanics:
- Changes to surcharge policy require a broad consensus and approval by 70 percent majority of voting power in the Executive Board.
- Dialogue on surcharges to continue with aim of greater convergence of views.
Global Sovereign Debt Roundtable (GSDR) — progress and timetable
- Launch and objectives:
- GSDR launched in February to bring together key stakeholders to address shortcomings in debt restructuring.
- Progress reported (April 12th meeting):
- Tangible progress on information sharing, MDB provision of net positive flows of concessional finance, and further work on comparability of treatment.
- Next steps and timetable:
- June 9th: First meeting of a technical group (scheduled).
- June 15th: Workshop on comparability of treatment (co-hosted by G20 India presidency, France as Paris Club chair, IFF, IIF, and possibly China).
- June 30th: Deputies’ meeting (expected to become regular every few months).
- October: Next principals meeting expected at Annual Meetings in Marrakesh.
- Scope:
- Work focuses on processes and procedures, not individual country cases; technical discussions may take time but aim for tangible progress to accelerate debt restructurings.
Sovereign debt restructuring, contractual approach, and CACs
- IMF position:
- Endorses contractual approach relying on collective action clauses (CACs) in sovereign bond contracts.
- Market adoption: more than 95 percent of outstanding international sovereign bond contracts have some form of CACs; 70 percent include enhanced CACs that better bind minority dissenting creditors.
- IMF committed to continuing efforts to improve and strengthen this contractual approach.
- Consideration of statutory tools:
- IMF has examined statutory approaches and highlighted principles for any legislation:
- Legislation should be carefully designed and consult stakeholders.
- Support timeliness and predictability of restructuring.
- Address potential adverse impacts on cost and access to finance for sovereign borrowers and on creditor rights.
- Note: some observers have raised questions whether draft New York law is consistent with these principles.
Country-specific updates and program statuses
- Lebanon:
- June 1st: Executive Board concluded Article IV consultation with Lebanon.
- Economic outlook highly uncertain; urgent action needed to implement a comprehensive economic reform program agreed with IMF staff in April of 2022.
- IMF remains engaged and willing to support; Lebanon requires broad political support and strong international financial support.
- Jihad Azour (Director, Middle East and Central Asia) has temporarily relinquished responsibilities and is on leave to avoid perception of conflict of interest.
- Zambia:
- August 31st, 2022: Executive Board approved a 1.3 billion dollar ECF arrangement.
- April 6, 2023: Staff-level agreement reached on completing the first review; Zambia met all structural benchmarks and quantitative performance criteria for the first review.
- Main hurdle: authorities must reach agreement with official creditor committee on debt treatment that aligns with program parameters and July 2022 financing assurances.
- Official creditor committee met on May 25th; meetings are ongoing. IMF encouraged by constructive discussions and hopes for quick agreement to allow Executive Board consideration.
- Ethiopia:
- Country faces multiple shocks (six consecutive years of drought, pandemic, domestic conflict, impact of Russia’s war in Ukraine).
- IMF received request for financial assistance; discussions ongoing on policies and reforms for potential IMF-supported program.
- New program would require clear commitment from development partners and financing assurances from creditors under G20 common framework.
- Tunisia:
- IMF remains a strong partner; engagement continues and IMF stands ready to support Tunisia’s economic reform efforts.
- Senegal:
- Debt reached "more than 70 percent" (as stated in question context); IMF debt sustainability analysis finds debt sustainable but with limited space to absorb shocks.
- Authorities committed to fiscal consolidation and enhanced debt management.
- IMF monitoring of political developments; encourages peaceful resolution of conflicts.
- Spain:
- Growth in first quarter was stronger than expected; IMF will reassess Spain’s outlook in WEO update in July.
- Egypt:
- December 2022: Executive Board approved an EFF program in the amount of 3 billion dollars to preserve macroeconomic stability, restore buffers, and pave the way for inclusive private sector-led growth.
- IMF engagement ongoing to pave the way for completion of the first review (divestment strategy implementation, competitive neutrality, slowing large national investment projects, move toward a flexible exchange rate).
- Discussions ongoing; no firm date announced for first review (originally expected March).
- United States (monetary policy comment):
- IMF noted U.S. economy resilience and strength in labor market; inflation momentum slowed but remains a pressing concern.
- IMF advice: Fed should "stay the course" on monetary policy to ensure a durable reduction in inflation; if inflation proves more persistent, rates may need to be higher for longer.
- Reference in briefing to policy rate range: "5.25 to 5.50" (as mentioned in concluding statement context).
Procedural and governance matters
- 16th General Review of Quotas:
- IMF is conducting the 16th General Review of Quotas; successful completion by December 15, 2023 is a priority.
- Membership guidance: revisit adequacy of quotas, continue governance reform (including a new formula as a guide), and ensure primary role of quotas in IMF resources.
Transcript of IMF Press Briefing — June 8, 2023, IMF Communications Department