Transcript of a Press Briefing with Gerry Rice, Director, Communications Department
IMF News, May 19, 2016
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- Published: May 19, 2016
Logistics, announcements, and upcoming events
- Briefing date and location: May 19, 2016 — Washington, D.C.
- Webcast: briefing was on the record and under embargo until 10:30 a.m. Washington Time.
- IMF communications contacts provided: Media Relations E-mail: media@imf.org; Phone: 202-623-7100.
- Senior staff engagements announced:
- Managing Director Christine Lagarde: attending G7 Finance Ministers and Central Bank Governors meeting in Sendai, Japan (officially May 20 and over the weekend), then G7 Leaders Summit on May 27; visit to Kazakhstan between meetings.
- First Deputy Managing Director David Lipton: delivering the Peterson Institute Annual Niarchos Lecture on Tuesday, May 24.
- Deputy Managing Director Min Zhu: speaking at the Third Annual Asian Policy Forum on May 27 in Singapore; keynote at the Bank of Korea International Conference on May 30–31 in Seoul.
- New IMF briefing room announced (more expanded media room).
IMF engagements, missions, and procedures
- Article IV and program review timing: IMF staff will conduct Article IV mission to Portugal in June 2016.
- Mozambique: staff visit to Maputo planned for June 2016 (mission originally scheduled for April and May was delayed because of disclosure of previously undisclosed borrowing).
- Angola: IMF received a formal request to initiate discussions on a three-year extended arrangement; IMF team preparing to visit Luanda in the near future.
- Ukraine: staff-level agreement reached on the review; Board consideration expected in July 2016; the next IMF disbursement is for one tranche (not bundled), with the amount believed to be around $1.7 billion (to be verified by IMF team).
- IMF Board: decisions on participation in programs would be taken by the Executive Board; the Board is being kept regularly informed.
Country-specific updates and policy notes
- Portugal
- Article IV mission scheduled in June 2016 to address budget and repayment questions.
- Mozambique
- Context: authorities confirmed undisclosed borrowing during the Spring Meetings.
- IMF stance: undisclosed debt-related transactions must be reported transparently and publicly.
- Next steps: mission to Maputo in June 2016 to gather facts, conduct due diligence, and assess macroeconomic implications; decisions on program support or conditionality to follow mission assessment.
- On the question of a bailout: contingent on PSI review and mission discussions.
- Angola
- Formal request received for discussions on a three-year extended arrangement; initial discussions held during Spring Meetings; mission to Luanda planned.
- Iraq
- A standby agreement announced (amount cited by questioner as $5.4 billion); IMF had no detailed additional information beyond the public communication at the time of the briefing.
- Brazil
- IMF view: announcements by Finance Minister Meirelles were viewed positively.
- Policy advice emphasized: strengthen the macroeconomic framework (inflation targeting, exchange rate flexibility, fiscal responsibility); stabilize debt trajectory; preserve social security through reforms ensuring long-run financial sustainability.
- Spain
- Economic outlook and challenges highlighted:
- Growth reached 3.2 percent in 2015.
- Growth projected at 2.6 percent in 2016.
- Concerns: constrained growth potential, sizable public and private debt overhang, weak productivity growth, high structural unemployment.
- IMF readiness: ready to work with any government emerging from elections.
- Ukraine
- IMF statement: Ukraine has made considerable progress restoring macroeconomic stability; continued need for steadfast implementation of structural and institutional reforms, enhanced transparency and rule of law, and reform of large state-owned enterprises.
- Board consideration of the review expected in July 2016.
- Tranche: staff indicated the Board consideration involves one tranche.
- Estimated amount mentioned for IMF disbursement: around $1.7 billion (team to verify).
- Italy
- IMF noted the EC decision to grant flexibility under the Stability and Growth Pact; IMF view that flexibility should be used as warranted.
- 2016 Article IV mission on the ground in Rome; press conference scheduled for Monday afternoon in Rome.
- Suriname
- Authorities requested IMF assistance for a comprehensive stabilization and recovery program.
- IMF supports gradual elimination of electricity subsidies to allow better-targeted social spending and improve the fiscal situation.
- Board consideration of Surinamese request expected in the coming weeks.
- Malawi
- IMF team visited Lilongwe in March 2016 in the context of the seventh and eighth reviews under an Extended Credit Facility (ECF).
- Program performance: concerted effort to get the program back on track; domestic financing and asset issues addressed; financial-sector reforms and public financial management improvements (including bank reconciliations) progressing but need to be sustained.
- IMF Board approved an extension of Malawi's arrangement under the ECF until June 30, 2016 to allow more time for structural measures.
Greece — status of discussions, IMF position, and next steps
- Context:
- Discussions ongoing among Greece, its European partners, and the IMF in the context of the first review of Greece's ESM program.
- Greece is not currently under an IMF program, but the IMF is fully engaged in discussions.
- No proposal has been submitted to the IMF Executive Board at the time of the briefing.
- Recent Eurogroup meeting occurred on May 9; next Eurogroup meeting scheduled for May 24.
- Core IMF position and requirements for IMF financial participation:
- Program must "walk on two legs": (1) credible, strong policies underpinning realistic targets; and (2) comprehensive debt relief.
- Both credible policies and substantial debt relief are essential for Greece to achieve sustainable public finances and growth.
- The IMF put the debt relief issue on the table almost a year prior; welcomes the start of discussions on debt relief.
- Debt relief and DSA (debt sustainability analysis):
- IMF has not finalized its DSA.
- IMF exchanged preliminary views with partners on general principles regarding debt relief objectives and modalities.
- IMF view: restoring debt sustainability may be possible without upfront haircuts by providing very concessional loan terms (including long grace and maturity periods and very low interest rates).
- IMF highlighted the potential role of exchanging more expensive/expansive debt for less expansive debt to increase concessionality of official financing.
- IMF not aware of specific discussions on ESM buying out IMF debt or IMF buying Greek debt; not aware of discussions on IMF taking a purely monitoring/advisory role without financial participation.
- Fiscal targets and reforms:
- IMF view: achieving a 3.5 percent primary surplus by 2018 is very ambitious and unlikely to be sustainable for decades; such a level would imply excessive austerity and risks falling disproportionately on the poor and vulnerable.
- To make ambitious ESM fiscal targets credible, IMF sees need for fundamental reforms to:
- Pensions (addressing very generous benefits).
- Income taxes (addressing large exemptions that are exceptional by European standards).
- Timing and process:
- IMF invited to Eurogroup discussions; Poul Thomsen expected to lead IMF participation in the May 24 meeting.
- IMF staff indicated readiness to present a program for the Board once the program includes necessary policies and debt relief that make the program realistic and add up.
- No decision on IMF participation until a program that meets IMF objectives and principles is presented and considered by the Executive Board.
- Specific numeric and timing references in the Greece discussion:
- Target primary surplus cited in IMF commentary: 3.5 percent by 2018 (described as ambitious).
- Historical reference to alternative target: 1.5 percent of GDP mentioned in questions; IMF reiterated view without endorsing sticking to that number for decades.
- Possible long grace and maturity periods discussed in general terms; a 2040 date was raised by questioners as an example but IMF did not endorse specific dates.
- Equity and institutional considerations:
- IMF emphasized uniformity of treatment among member states and the importance of credible reforms and credible financing for program integrity across the IMF’s 189 members.
Key numeric values and dates cited in the briefing (preserved exactly)
- Briefing date: May 19, 2016.
- Embargo lift time: 10:30 a.m. Washington Time.
- Senior staff events:
- David Lipton lecture: May 24.
- Min Zhu speaking: May 27; Bank of Korea keynote: May 30, 31.
- Spain growth figures:
- 3.2 percent in 2015.
- Projected at 2.6 percent in 2016.
- Greece fiscal target cited:
- 3.5 percent primary surplus by 2018.
- Ukraine IMF tranche estimate:
- around $1.7 billion.
- Iraq standby agreement amount referenced by questioner:
- $5.4 billion.
- Malawi ECF arrangement extension:
- until June 30, 2016.
Source: Transcript of a Press Briefing with Gerry Rice, Director, Communications Department, May 19, 2016.