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Transcript of IMF Press Briefing, December 19, 2024
December 19, 2024
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IMF Communications Department
MEDIA RELATIONS
PRESS OFFICER: Kwabena Akuamoah-Boateng
Phone: +1 202 623-7100Email: MEDIA@IMF.org
December 19, 2024
PRESS OFFICER: Kwabena Akuamoah-Boateng
Phone: +1 202 623-7100Email: MEDIA@IMF.org
SPEAKER: Ms. Julie Kozack, Director of the Communications Department, IMF
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MS. KOZACK: Good morning, everyone. Great to see you all here in person, online, and online and welcome to this IMF Press Briefing. I'm Julie Kozack, Director of the Communications Department.
As usual, this briefing is embargoed until 11 a.m. Eastern Time in the U.S. I will start with just one announcement and then I will be happy to take your questions in person, on WebEx and via the Press Center.
The World Economic Outlook Update will be released in mid-January. This is our standard January update of our flagship global forecast. Our Media and Social Outreach Team will let you know once we have more details on the exact date of the release.
And with that, I will now open the floor for your questions. For those connecting virtually, please do turn on both your camera and microphone when speaking.
QUESTIONER: So, a couple questions. First on Syria, just wondering, kind of, what engagement the Fund may have had with the authorities there and what kind of conditions the Fund will need to see to begin to talk about a program and reengage. It's been years since there has been engagement. There's also arrears, I believe, that Syria has with the World Bank. Do those need to be cleared before the Fund -- the Fund can start to talk program to Syria? And then secondly, we've got questions about President Trump's plans for a -- or President-Elect Trump's plans for a strategic Bitcoin reserve for the United States. This kind of goes against what the Fund's advice has been to many countries about exposing public sector to risks from crypto. You know, there were some conditions put in the new El Salvador program. So I'm just wondering if you can say if the Fund's view on this is evolving or if you still think it's not a great idea. MS. KOZACK: Maybe before I take those, do we have any other questions on Syria? Okay.
QUESTIONER: I will also ask about Syria's reconstruction process. After 13 years of war and economic hardship, and now the country's reconstruction is on the agenda. And what are your projections regarding the economic cost of the war and the country's reconstruction efforts?
MS. KOZACK: Any other questions on Syria in the room? Anyone online have a question on Syria? Okay, I'm not seeing anything on Syria.
So, turning to Syria, we are monitoring the situation in Syria closely. The Syrian people have suffered for far too long. We hope that the country can now begin to address its deep humanitarian, social, and economic challenges and to begin the rehabilitation of the Syrian economy.
The Fund has not had any meaningful engagement with Syria since 2009, which was when the last Article IV consultation took place. In terms of the assessment, right now, the situation on the ground is indeed fluid. It's too early to make an economic assessment. We are closely monitoring the situation, and we stand ready to support the international community's efforts to assist Syria's reconstruction as needed and when conditions allow.
And then, on your second question, it is too early, of course, to -- well, we are not going to speculate on potential policies. What we will do is when specific policies are put in place, we will make a full assessment of the policies at that time.
QUESTIONER: My question is on the monetary policy of Federal Reserve and Bank of Japan. Yesterday the Federal Reserve cut its rate but indicated clearly to slow down its easing pace. And what is your view on that point? Is it appropriate to stop or skip its rate cut? And on top of that, today Bank of Japan skipped a rate hike. And what is your view on that point? Could BoJ stick to its tightening cycle? What is your view on that point? MS. KOZACK: Okay, before I answer, does anyone else have a question on Fed or BOJ?
QUESTIONER: Yeah, just one quick question related to the Fed. So, the officials announced that there might be just two cut rates during the next year. Production and inflation are a bit higher than expected as well. What might be the effect on the global economy and, more specifically, perhaps on the countries that are relying on dollar loans all over the world? Thank you.
QUESTIONER: Morning, thank you. So going back to the forecast for next year, Fed Chair Powell yesterday said some Fed officials tried judging how Trump's policies would affect monetary policy next year when it comes to keeping interest rates a little bit higher from our inflation. So, is that weighing at all on the IMF's own outlook as we sort of like look into the WEO coming next month? MS. KOZACK: And did anyone online want to come in on this topic? I don't see anyone.
So, for the U.S. and Fed Policy, the performance of the U.S. Economy, as we have been saying for quite some time, has been remarkably strong over the past few years, especially as the disinflation process has, you know, proven less costly than many feared. Inflation has declined in response to the Fed's actions, and we do see inflation on a path to the 2 percent target. We expect core PCE inflation to end this year at just under 3 percent.
Data from the last few months shows that the labor market continues to cool at the same time that inflation has been somewhat higher than expected, but still trending down toward the toward the target. So, with this background, we see the Fed's action as appropriate. At the same time, the Fed will need to continue to calibrate the pace and the extent of the rate cuts with incoming economic data as uncertainty remains high.
With respect to how this will affect the outlook for the U.S. economy, we will have our new forecast for the U.S. in January at the time of the WEO.
And with respect to impact on the rest of the world, what we firmly believe is that appropriate policy in the U.S., including policy by the Fed and a strong U.S. economy, given that the U.S. is the world's largest economy, is good for the rest of the world.
QUESTIONER: Thanks, Julie.
MS. KOZACK: Oh, hold on, I forgot to ask the BoJ question. Let me get to that one. I apologize. Shu. So, on the Bank of Japan's policy measure, we also see the actions of the Bank of Japan as appropriate. And the Bank of Japan, we also recommend that they continue a data dependent monetary policy as they seek to both policy normalization and ensuring that inflation durably returns to target.
QUESTIONER: Question on Argentina. There was a team from the Ministry of Economy here in Washington a few weeks ago. They met with IMF Officials. The Ministry of Economy in Argentina said that they had informal talks. I was hoping you could tell us a little bit about what was discussed, if a decision has been made on the two pending reviews on the current program, and if the Argentine government has officially requested to open negotiations on a new program. MS. KOZACK: Okay, thanks. Any other questions on Argentina?
QUESTIONER: I would like to know: Minister Caputo said he expected an agreement to take place in the first quarter of the year if it is possible to reach such an agreement. And President Milei also remarked that he expected fresh funding. Is that a possibility as well?
QUESTIONER: Hi, Julie, and thank you for taking my question. Following the other questions, there's eventually -- President Milei also said that Trump could help to achieve the agreement with the IMF, eventually. What could this aid consist of? And also, following the question of Rafael -- has already Argentina formally request a new agreement? Thank you.
QUESTIONER: So, my question is that it is virtually confirmed that Argentina will not have a budget in 2025. Maybe because the sessions in the Congress have already ended. Is this a concern for the IMF? Speaking from an economic and also an institutional point of view? QUESTIONER: Yes, I would like to know how the program reserves goals ended at the end of the year, if there will be a waiver, and if you agree with the government's intention to reduce the crawling peg from 2 percent monthly to 1 percent monthly.
MS. KOZACK: I don't think I have anyone else on Argentina. If anyone else has a question, please let me know.
So, on Argentina. So, over the last year since taking office, the Argentine authorities, you know, have continued to implement their economic stabilization program and it has achieved impressive results. These include a sizable reduction in inflation, fiscal surpluses, and improved international reserve coverage. A recovery in activity and real wages is now firmly underway, with growth turning positive in the third quarter of this year. Our team is continuing to engage constructively with the Argentine authorities to build on the gains made so far and to address remaining challenges.
The authorities have formally expressed interest in moving to a new program, and negotiations are now underway. And in this context, I want to clarify that the current EFF is set to expire at the end of this year. It is not uncommon for authorities to let an existing arrangement expire without completing all of the reviews while they are considering moving to a new Fund-supported program, and we will provide details and information on the process and next steps in due course.
And I will take the question just briefly on -- I know there was a question on the budget. And just to say on this one, you know, I don't want to, and I'm not going to comment on the ongoing negotiations within the Congress, but as I said, and I'd like to step back to highlight that the authorities do continue to implement their fiscal program with determination and effectiveness. And the recent data through end November suggests that they're now running a primary surplus of about 2 percent of GDP.
And with respect to other questions on policies and [the] potential size of the program, these, of course, are all part of the discussions that are underway, and we will provide more details in due course.
QUESTIONER: Given the Central Bank of Russia's recent interest rate hike to 21 percent in October and the anticipated increase to 23 percent tomorrow to combat rising inflation, how does the IMF assess the effectiveness of these measures in stabilizing the Russian economy?
And if I may on Ukraine. As the Ukrainian lawmakers are preparing to legalize cryptocurrency soon officially. Could you elaborate on the IMF's involvement in assisting Ukraine with the development of its cryptocurrency legislation, and has any specific guidance been provided to ensure financial stability in this regard? Thank you.
MS. KOZACK: Any other questions on Russia or Ukraine?
QUESTIONER: As for Ukraine, how much funding is left for Ukraine, and which part of it shall be distributed in 2024 and in 2025, respectfully? And after the EFF is over, are there any plans or any arrangements to extend this program or to arrange another one?
And as for Russia, frankly speaking, I wonder if there have been any communications between the IMF Managing Director and the new Executive Director from Russia, Ksenia Yudaeva, since she had been appointed on November the 1st. I mean, virtually, of course. And does the IMF feel that there are any shortfalls as Yudaeva cannot be in person in Washington due to current situation, fluid situation, with her visa? Maybe you could also share any progress [on the] visa, if you could.
MS. KOZACK: Anyone online with questions on Ukraine or Russia? All right, let me go ahead.
So, first, to say that the Russian economy -- taking a step back and just giving you a sense of how we see the economy. The Russian economy has been overheating through most of 2024. Growth has been driven by strong private consumption, supported by a very tight labor market, fast-growing wages, and buoyant credit. It has also been -- growth has also been supported by strong corporate investment.
Fiscal spending has played a role in driving growth. While defense and security spending in the budget has increased strongly, overall, spending has grown more modestly. In this context, both fiscal and monetary policy have an important role to play in economic policy management. And of course, we will provide an update of our Russian forecast in the context of the January WEO.
With respect to the other questions on Russia, as you know, Ms. Yudaeva was elected to the IMF's Executive Board by Russia and Syria, and she took her position on November 1st. She is fully discharging her functions as Executive Director, including participating virtually in Executive Board discussions. And I would just say that for questions related to visa status, I would refer you to the U.S. State Department.
And then on Ukraine, so stepping back and just giving you a sense of where we are with Ukraine. On November 18th, the IMF and the Ukrainian authorities, IMF staff, and the Ukrainian authorities reached a Staff-Level Agreement on the Sixth Review of the 4-year EFF arrangement, subject to approval of our Executive Board, who will meet tomorrow December 20th. Ukraine would have access to about $1.1 billion in disbursements, and that would bring total disbursements under the program to about $9.8 billion. Program performance in Ukraine remains strong. The authorities met all in September quantitative performance criteria, structural benchmarks, and prior actions for the Sixth Review.
With respect to the question about how much funding may be left under the program. So just to sort of give the full picture, so the program was approved in March of 2023 for about $15.6 billion. It cannot -- the current program cannot be extended further because it's already at the maximum feasible duration for a Fund program, a Fund EFF program which is 48 months.
As I just noted, subject to Executive Board approval tomorrow, total disbursements under the program would be $9.8 billion. And next year in 2025, again, subject to performance under the program and subject to approval by our Executive Board, disbursements could -- the remaining disbursements would be $2.7 billion.
And with respect to future engagements, I mean, right now the focus is on the current program and implementations of the current program, and we would provide updates in due course.
QUESTIONER: I have a few. I was going to ask about Egypt and Kenya and then something on U.S. Do you have a preference on where to start?
MS. KOZACK: Why don't you give us all three and we'll see if others have questions on Egypt or Kenya.
QUESTIONER: On the first few are fairly straightforward on Egypt. What is the status of the review, and when do we expect a conclusion on that? And what is -- what are the discussions at the moment on Kenya? Are you guys expecting to send a team to Nairobi next month, and would those talks include anything on a new program when the current one expires in March? And then to the U.S., it's a bit recent given the stuff from overnight. I just want to know if the IMF has any commentary on what looks to be a bit of a logjam in the U.S. Congress on funding the government and now a demand by the President-Elect to ditch the debt ceiling. I'm just curious if the IMF has any comments on how this is playing out and what impacts, as you mentioned earlier, given the size of the U.S. economy, what that might mean. Thanks.
MS. KOZACK: Let's go around to see if there's other questions on Egypt, Kenya. We covered the U.S. already, but if there's any follow-ups on the U.S. Starting with Egypt, does anyone have questions on Egypt? Anyone online on Egypt? I do see a question that came in through the Press Center.
There are two questions. I will read them. The Egyptian Prime Minister said a week ago that the Fourth Review could be completed within days. Has agreement been reached on modifying the program, and should we expect a sooner announcement about the completion of the review?
The second question is how does the IMF assess the decline that occurred in the Egyptian pound against the dollar?
And there's also, a question on Egypt. the question is, could you please update us on the ongoing discussions related to completion of the Fourth Review of the EFF program for Egypt?
So let me take Egypt, and then we'll come back to Kenya and the -- and the U.S. So, on Egypt, what I can say right now is that discussions of the Fourth Review are ongoing virtually with a view to finalizing agreement on the policies and reforms that could support completion of the Fourth Review, and we will provide more information and an update once those discussions conclude.
Let me turn now to Kenya and just ask if anyone has any -- if anyone else has questions on Kenya before I respond. With respect to -- let me again just step back to say that on October 30th, the IMF's Executive Board concluded the Seventh and Eighth Review of the ECF / EFF arrangement and the RSF. That allowed a disbursement of about $606 million, and it brought total disbursements to about $3.1 billion under the -- under the program.
I can also share, and as you know, of course, that our Deputy Managing Director, Nigel Clarke, recently visited Nairobi, December 6th through 10th to listen and to learn firsthand about Kenya's economic challenges, and as well as how the IMF can continue to support policies for the program. That is the latest update that I do have. And we'll come back to you, if we have more that we can share.
With respect to the question on the United States, what I can say is that, you know, we do look forward to a compromise being found to ensure that the federal government remains fully funded.
QUESTIONER: I was just wondering if I could just follow up on the debt ceiling. In the past, the IMF has recommended that the U.S. change that law to avoid the brinksmanship that typically occurs whenever a debt ceiling needs to be renewed. And so, you know, do you think it's a good idea now for the U.S. to change that law?
MS. KOZACK: I think on the question of the debt ceiling, you know, our position hasn't changed. So, we do think that it's important for the U.S. to have an arrangement that allows, you know, the federal government to be fully funded in a way that is agreeable to both parties.
Okay, let's go online. I have a question on El Salvador.
QUESTIONER: I was actually going to ask something else, but I did want to ask, it was announced on El Salvador that they’ll no longer require private businesses to take Bitcoin. This was part of the announcement of the program. I just wanted to, get your comments on [what] the role of these Bitcoin provisions. Also, the government will have a sort of less role in Bitcoin. The president has been speaking very positively about it. But so, if you could speak on that.
And I also wanted to ask about Ghana. I'm sorry, that was actually my main. There’s obviously a new, once again, president, as in the United States, and he said that there's going to be some tweaks to the IMF program. So, I wanted you to -- what is the -- what is the opportunity for tweaks and programs there? And I see a colleague on Sri Lanka. I'm sure he has the same question there as to -- as to that. So, thank you very much for taking the question.
MS. KOZACK: So, any other questions on El Salvador.
QUESTIONER: Just a follow-up. The deal announced was contingent not just on the Board approval, but also on some actions from the government. And I want to know if there's a timeline for those actions to be taken, like winding down their Chivo wallet, and those bills likely have to be passed there. Is this effectively taking away the legal tender status of Bitcoin there? Because the government this morning said it wasn't, but if they can't pay taxes in Bitcoin and the private sector, as Matthew said, can just decide to do it or not, it doesn't look like a legal tender.
And the other thing is, does Yemen still believe that countries need to limit their exposure of the public sector to Bitcoin? Is what's good for El Salvador also good for developed economies as well?
MS. KOZACK: So let me take El Salvador and then we'll go to Ghana, and I'll come back to see if others have questions on Ghana.
So on El Salvador, as we announced yesterday, our Staff and the El Salvadorian authorities reached a Staff-Level Agreement on a new arrangement under an Extended Fund Facility, an EFF. The arrangement is for $1.4 billion to support the government's reform agenda, and of course, this agreement is subject to approval by the IMF's Executive Board. The program aims to strengthen fiscal and external sustainability through implementation of ambitious and growth-friendly fiscal consolidation as well as actions to enhance the country's reserve buffers. Early efforts to improve governance, transparency, and resilience will be essential to boost confidence and the country's growth potential against the backdrop of very strong improvements in insecurity in the country.
Now, with respect to the questions around Bitcoin, the agreement seeks to strike a balance and to ensure that the potential risks of the Bitcoin project will be diminished in line with IMF policies, and the legal reforms will make acceptance of Bitcoin by the private sector voluntary. We are very supportive of the authorities' efforts to boost financial inclusion as well as their efforts to increase growth.
And then maybe since there was sort of a general question and a couple of general questions on Bitcoin and crypto assets more generally, maybe it's good to just step back and say a few things on this -- on this issue.
We see crypto assets as presenting both risks and opportunities. There are potential risks to financial stability, consumer protection, and financial integrity. And therefore, it's important for countries to have a policy framework around crypto assets to address these risks.
At the same time, there are opportunities. It's important to acknowledge that the underlying technology, distributed ledger technology, is already being deployed by financial institutions for various applications, including payment systems, security clearance, and back office operations. And it's also important to recognize that investor appetite for crypto assets has been very strong, reflecting the assessment by some that crypto assets can generate diversification benefits in asset allocation.
QUESTIONER: About the legal status of Bitcoin in El Salvador.
MS. KOZACK: Yes.
QUESTIONER: Does this effectively remove it?
MS. KOZACK: So, as I said, the use of Bitcoin is voluntary. So that's what the agreement entails, ensuring that the use is voluntary.
Let me turn now to Ghana. Are there any other questions on Ghana? So, on Ghana, on December 2nd, the IMF's Executive Board completed the Third Review of the program. This gave Ghana access to $360 million, bringing total disbursements under the program to $1.9 billion. Performance under the program has been generally satisfactory and there's been remarkable progress on debt restructuring, economic growth is recovering rapidly, inflation has importantly declined, although at a slower pace, and the fiscal position and the external position have continued to improve.
With respect to the question about -- the further questions on the program, of course, the primary focus of the program doesn't change. Right? It is to support Ghana in restoring macroeconomic stability, ensuring debt sustainability, fostering long-lasting and inclusive growth. And in terms of the possibility of making adjustments to the program, our programs are developed always in collaboration with the authorities in the country, and they are aimed at achieving the economic objectives that I just discussed. We do have regular reviews under the program to assess progress and ensure that the program is aligned with its intended goals.
QUESTIONER: Thank you for taking my question. My question is on Sri Lanka. Firstly, when can we expect the IMF Executive Board to take up Sri Lanka's review for the next tranche of the Extended Fund Facility? And secondly, just over 24 hours ago, Sri Lanka's president announced that there will be several revisions to the tax income of the government and other provisions of revenue. Can the IMF elaborate further on those measures? MS. KOZACK: Any other questions on Sri Lanka? So, on Sri Lanka, on November 23rd, IMF staff and the Sri Lankan authorities reached Staff-Level Agreement on the Third Review under the EFF arrangement. Once the review is completed or approved by our Executive Board, Sri Lanka will have access to $333 million.
With respect to what comes next, the Executive Board meeting is expected to take place in the coming months following the implementation by the authorities of the prior actions.
And on the specific question on the measures that were just announced, I don't have a full assessment for you at this time, but we will come back to you. And of course, the staff will include a full assessment of these measures in the staff report that will be published following approval by the Executive Board of the -- of the program.
QUESTIONER: I've got a question on Mozambique. Could you give us an update of the status of Mozambique's program with the IMF and, in particular, what the economic impact could be of the election-related unrest that we've been seeing in the country. Also, just following on from that, when can we expect a staff-level agreement and a disbursement? And what do the delays that we've already seen mean for the program generally, given that it's already fallen a bit behind track?
MS. KOZACK: Any other questions on Mozambique? So first I do want to just extend my condolences to the people of Mozambique for the lives lost during the recent post-election unrest and also the cyclone and the natural disaster. And despite this difficult environment, Mozambique has shown resilience to a series of shocks. The country is going through a political transition. Social conditions remain fragile. There are recurring natural disasters that are affecting the country. It also is facing a number of economic challenges, including debt vulnerabilities, and it has governance weaknesses.
On July 8th, the IMF Executive Board completed the Fourth Review under the EFF and the 2024 Article IV Consultation. There was a virtual staff visit that took place between November 11th and December 2nd on the program, and further discussions are going to take place once the political transition has been completed.
And finally, maybe just to conclude on Mozambique, we do continue to evaluate developments, and we do stand ready to support Mozambique in maintaining economic stability and pursuing sustainable growth.
QUESTIONER: So maybe the last question from my side. In September, there were expected new consultations with the IMF and Russian authorities on the Russian economy, but they were postponed as the IMF needed to gather additional information and make additional analysis. What is the current status of this process, and shall we expect that these consultations will happen in 2025?
MS. KOZACK: I don't have an update for you on the timeline, but we will of course provide once we have it.
Okay, and if that is it, I will bring this Press Briefing to a close.
Thank you all for your participation today. As a reminder, the Briefing is embargoed until 11:00 a.m. Eastern Time in the United States. A transcript, as always, will be made available later on our website, IMF.org. In case of clarifications or additional queries, please do reach out to my colleagues at media@imf.org.
And this does conclude our final Press Briefing of the year. The IMF's first day of business after the break will be Thursday, January 2, 2025.
I do wish everyone a safe and joyful holiday season, and I'll look forward to seeing you all in the New Year. Thank you.
