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Transcript of a Press Briefing by David Hawley, Senior Advisor, External Relations Department, International Monetary Fund
May 22, 2008
| Webcast of the press briefing |
MR. HAWLEY: Good morning. I'm David Hawley, Senior Advisor in the IMF's External Relations Department, and welcome to this, another of our regular briefings for the media. Welcome in particular to those joining us via the online Media Briefing Center.
The message to all of you is that the briefing, as usual, is embargoed until 10:30 Washington time. That's 14:30 GMT.
Let me start by mentioning an upgrade to the online Media Briefing Center. As from today, journalists can get access to more statistical information on the briefing center through the Fund's statistical database. The links you'll find there give you access to the IMF's international financial statistics, balance of payments and direction of trade databases. I hope you'll find them useful and, if you care to do so, please give us feedback on them.
Let me mention a couple of other items before taking a question.
Yesterday, the Executive Board, approved the first case of increased access to IMF resources as a result of the high food and energy prices. The Kyrgyz Republic, which has a PRGF arrangement, will see that arrangement augmented from almost 9 million SDR [14.4 million U.S. dollars] to about 18 million SDR [28.8 million U.S. dollars]. We'll be putting out a press release on that shortly.
Later today, we'll also publish a public information notice and related board papers on the Fund's work in Technical Assistance. The PIN will give you a summary of the Board discussion on the reforms in this area of the Fund's work. So you'll see that later.
On the management's travel schedule, I could highlight the following: The Managing Director, Mr. Strauss-Kahn, will participate in the U.N. high level meeting on the food crisis, which will be held at FAO headquarters in Rome on June 2 and 3.
John Lipsky, the First Deputy Managing Director, will be traveling to Europe next week. He will first be attending the ECB's and the European System of Central Banks' 10th Anniversary ceremony in Frankfurt on June 2. I believe there will be a possibility of press availability during the ESCB visit.
He will then travel to Paris for an OECD Ministerial Council meeting, which is scheduled on June 3 and 4, and we'll advise on press availability and all that if it comes to pass.
After Paris, Mr. Lipsky will attend the 12th St. Petersburg International Economic Forum in Russia on June 5 to 7. He will be moderating a panel discussion on the current global food crisis, and he has other engagements connected to that event.
Finally, Deputy Managing Director Kato will be attending the Tokyo International Conference on African Development on May 28 and 29.
With that, I'll be happy to take your questions.
QUESTIONER: David, as you know, oil prices went up much higher yesterday, $3 I believe, to over $134. Is this higher than what the Fund has projected in all its forecasts and does that change anything in those forecasts?
The other question is what sort of advice do you give countries to deal with these high prices as far as policy?
MR. HAWLEY: Okay. Well, let me start by saying that, despite the increase in high oil prices, the broad contours of the Fund's assessment of the global outlook remain unchanged at this stage, but we will be updating, as I'm sure you're aware, our WEO forecast in July. Significantly higher oil and commodity prices could have a dampening effect on growth if prices remain at prevailing, elevated, levels.
Against this, developments in credit markets —I'll move on to that aspect of the impact—including, notably, banks' ability to raise capital, have been reassuring, although protracted adjustments in financial sector balance sheets are still likely.
The second part of your question is on the impact of high oil prices.
QUESTIONER: Yes, the policy issues. I mean obviously it differs from developing to advanced and very poor countries.
MR. HAWLEY: Okay. Perhaps I can, in context of low income countries, link this with high food prices as well. The focus of our interaction with the membership in addressing this issue is that, first of all, we're very concerned about the impact of food and fuel prices especially on the poor, and the inflation impact of food price increases is of particular concern in emerging and developing countries where spending on these goods is high.
On the food side, as I've indicated, the Fund is focusing its efforts on provision of financial assistance and policy advice to countries that are negatively affected. We're in active discussion with 10 to 15 low income member countries regarding possible balance of payments financing.
I'd mentioned to you that the Kyrgyz Republic yesterday saw an augmentation of its PRGF program in the Board. Perhaps I could mention where we stand on a couple of others.
The authorities of Mali are requesting a new three-year PRGF arrangement with total access of almost 28 million SDRs which is 30 percent of Mali's quota, which would help to finance additional costs arising from higher food and oil imports. The Board is likely to consider this request by the end of May.
In Madagascar, we're talking to the authorities to help them address the ongoing economic challenges resulting from the external shocks arising from the food and fuel prices. An augmentation of Madagascar's access to the PRGF is being considered in the light of these price pressures and, in addition to the food and fuel prices, of the post-cyclone reconstruction.
QUESTIONER: Just about the first answer you gave and just repeating and asking if you can rearticulate the second part of the answer. But the first part was that despite the increase, you're not changing your outlook for now? On the other hand, you're going to update it in July? Is it correct?
MR. HAWLEY: Yes. What I said is that the broad contours of our assessment on the outlook remain unchanged at this stage, but we will be updating our WEO forecast and publishing that in July.
QUESTIONER: And as concerns the financial market?
MR. HAWLEY: Developments in credit markets including, notably, bank's ability to raise capital have been reassuring although protracted adjustments in financial sector balance sheets are still likely.
QUESTIONER: David, is there a feeling that the increase in oil prices is coming from speculation, the dollar or supply?
Yesterday, it looked like it was being pushed up by a U.S. report on a surprise drop in crude stockpiles. What is the IMF's feeling on this?
MR. HAWLEY: Well, we see a mixture of demand and supply causes. Demand for oil has remained robust on account of strong growth in emerging markets led notably by China and India, and emerging economies as a group have accounted for all of the increase in the growth of global oil demand over the past two years. This continuing strong growth has been partly the result of policies in some countries of not allowing forecasts through of international prices to domestic inducer prices.
But on the supply side, at the same time, the response to rising prices has been sluggish especially in non-OPEC or oil producers. The lack of meaningful supply response has reflected cyclical factors, geological and technological constraints, as well as concern about the policy frameworks in some oil-producing countries.
The resulting high oil prices reflect the market's view that sustained high prices will be needed to induce the investment required to satisfy demand going forward. Moreover, as spare capacity and inventories have dwindled, the oil market has become highly sensitive to news of supply and disruption and geopolitical events.
QUESTIONER: Could I come to the U.S.? Yesterday, the Federal Reserve slashed its growth forecast for 2008, and it also signaled mounting concerns on inflation. The question is, at this stage, does the Fund think that a pause in monetary policy is the right way or whether it's maybe time, not only for the U.S. but also Europe, to start raising rates, considering the threat from inflation?
MR. HAWLEY: On the U.S., let me say that we supported the aggressive easing of U.S. monetary policy, but let me leave it there for the moment.
On the euro area, we have a mission in the field right now, and they will be concluding their work in the next few days. And so, until that point, I'd prefer not to offer a view on the euro area.
QUESTIONER: Who's leading that and where it is happening? Can you give more details, please?
MR. HAWLEY: I believe the Mission Chief is Alessandro Leipold, but I will come back to you on details.
QUESTIONER: Are they in Brussels?
MR. HAWLEY: Brussels and Frankfurt.
QUESTIONER: So it's a euro area-wide assessment.
MR. HAWLEY: Yes.
QUESTIONER: On another issue, David, can you give us any update on what's going on with the buyout and what the MD is thinking on rearranging of staff?
There is some concern out there that almost half the top section of the Fund is leaving. We know who's leaving, and it's not, but the question is the MD hasn't said anything yet about how he plans to rearrange this and how quickly.
MR. HAWLEY: Okay. Well, perhaps I should share with you remarks that the Managing Director made to staff earlier this week as the downsizing reached closure with decisions made on the volunteers.
The exercise has achieved its objectives in two important ways. It has resulted in changing the profile of the composition of staff with a smaller number of relatively senior staff and a smaller number of relatively junior staff and preserving a large cohort in the middle. It has also been accomplished, with only very limited recourse to mandatory departures.
Summing up the exercise, the Managing Director told staff that the coming months will be a challenging period ahead, but he believes that we should feel greatly encouraged by the fact that we have come to closure on the separation process, that we have done it quickly, and the way that it was done was least painful to staff as possible. And, we've made a very strong start, he concluded, in our efforts to build the Fund for the 21st Century.
I haven't, at this stage, further information on reorganization of the Fund. The Managing Director, as you know, announced one or two senior appointments a couple of weeks ago, and you should expect to hear of further such announcements in the weeks ahead as the director level positions are filled.
QUESTIONER: You mentioned that Alessandro Leipold is heading the mission in Europe. So is he the head of the IMF mission for Europe now because before I think he was focusing specifically on Italy?
MR. HAWLEY: I'll get Media Relations to come back to you bilaterally on that because I don't know the details on the top of my head. [Clarification following the press briefing: Alessandro Leipold and Joerg Decressin are co-heads of the euro area mission.]
QUESTIONER: We can talk about Lebanon. I don't know if you've any update on Lebanon. I know there were some discussions. Well, the political situation, I gather, has changed everything. So I was just wondering if you have any update on whether Lebanon is going to continue under the Fund or whether that's just been put on hold. I believe that the Lebanese program finished the end of last year, and they were in discussions with the Fund on continuing that. Since the political situation has changed over the last few weeks, I'm just trying to figure if there was an update in any way. I mean if you don't, that's fine.
MR. HAWLEY: Look, the Fund supported the medium-term debt reduction strategy —that was Paris III. Implementation of the strategy is held hostage, if that's the right word, by the ongoing political stalemate. The authorities successfully implemented their 2007 program, supported by the EPCA, achieving a much better than expected primary surplus. A follow-up arrangement for 2008 is under preparation. That's all I have at the moment.
QUESTIONER: Then I have a follow-up one, Myanmar. There's U.N., or the World Bank and the ASEAN group are leading international efforts on aid.
What is the Fund's role in this at all, looking at assessments and economic damage, and could you also let us know if Myanmar owes the Fund any money like it does the World Bank?
MR. HAWLEY: We're following developments closely, and we're in close contact with other international organizations. But at the moment, as you can imagine, it's difficult to ascertain the full macroeconomic picture.
I don't have information about Myanmar's financial position with the Fund, but Media Relations can get back to you on that.[Clarification following the press briefing: Myanmar has no loans outstanding with the IMF.]
QUESTIONER: Yes. I ask the question because you know there have been some. Liberia and Haiti and some have gotten loans from the Fund and the Bank even though they were in arrears. So there have been some exceptions made. That kind of thing, I'd be interested in hearing from you if you get anything.
MR. HAWLEY: Okay. I haven't got anything at this stage. Thank you.
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