Transcript of IMF Press Briefing

February 1, 2018

MR. MURRAY: Hi, good day. I’m William Murray from the communications department here at the International Monetary Fund in Washington. This is one of our regular press briefings.

As usual, we’re embargoed until 10:30 a.m. Washington time.

So, before I take questions from the journalists here in the room and those of you that are online, I’m going to just run through some management engagements, and then we’ll get to the Q&A.

Okay, Management Director Christine Lagarde will be visiting the Persian Gulf region in about 10 days. On February 10th, she’ll be in Dubai to deliver keynote remarks at the Arab Fiscal Forum. Later that same day, February 10th, the Managing Director will meet with women leaders in Dubai.

Then on February 11th, she will attend the World Government Summit in the Emirate. They’ll be some press-related activity during that summit.

Ms. Lagarde will then complete her visit to the region on February 12 th in Qatar, where she’ll have a series of meetings with the Qatari authorities.

On February 15th, Ms. Lagarde will be in Paris for the Banque De France Conference, where she will have a one-on-one conversation with Finance Minister Bruno Le Maire. The conference, as I understand it is, is by invitation only. However, this conversation with Finance Minister Le Maire will be webcast, so it will be available to the general public and to the media.

On February 16th, the Managing Director will attend the Munich Security Conference in Germany. And that will be the sum total of her travel events between now and our next press briefing, which we’ll hold on February 15th.

Deputy Managing Director Mitsuhiro Furusawa will be in New York City on February 7th to take part in the Japan Securities Summit. And then on January 15th and 16th, Deputy Managing Director Furusawa will visit Mauritania for meetings with the authorities there.

On February 12th through 16th, Deputy Managing Director Tao Zhang will be on a mission to Albania, Kosovo, and the former Yugoslav Republic of Macedonia for meetings with the authorities. And I expect they’ll be various outreach events during this visit to the Balkans. Media Relations will advise you on more details.

Mr. Zhang will also be attending a conference in the former Yugoslav Republic of Macedonia sponsored by the Reinventing Bretton Woods organization.

So, those are the main management engagements between now and mid-February. And let me turn the floor over the journalists here in the room, and then I’ll go to those online.

We’ll start in the back here. Please identify yourself for the audience. Thanks.

Questioner: Your thoughts on India’s budget and the economic survey released on Monday?

Okay. Thanks for that question. So, on Monday, the government came out with its 2018 economic survey. I’ll comment on it in a second. And today, the prime minister unveiled the budget for this year and into next year.

So, let’s start with the budget first. Because it was just unveiled this morning, overnight, we really haven’t had a chance to fully assess it. But that said, we welcome the fiscal 2019 budget targets, which has a fiscal deficit of 3.3 percent of GDP, which in our view returns the budget to a path of gradual fiscal consolidation while keeping in mind the need to provide support to India’s nascent economic recovery.

Let me just remind you, because we had the WEO update last week in Davos. Our forecasts currently are 7.4 percent real GDP growth in India in 2018 and 7.8 percent in 2019.

Getting to your question about the economic survey that was released on Monday, we think it’s an interesting and informative report that provides a comprehensive assessment of the state of the Indian economy. We were also impressed by the range of important economic issues it covered and the depth of the analysis in the survey.

We broadly share the overall assessment of the state of the economy, in particular, the economic survey’s outlook of 6.7 percent in fiscal 2017/2018 and 7 to 7.5 percent in fiscal 2018/2019 is well aligned with our forecast.

We think that the report strikes a good balance with realistic forecasts and at the same time, remains cognizant of the economic risks that India faces.

Last point here, we take note of considerable progress made on both the pace and composition reforms being implemented in India in recent years. And in line with our recommendations, these major reforms include, and a good example is, the implementation of the goods and services tax, the implementation of the insolvency and bankruptcy code, the ongoing recapitalization of public sector banks, and further liberalization of foreign-direct investment in India.

That’s all I have for you on India this morning.

We’ll come to you. We’ll go to the gentleman in the back, and then I’ll come to you.

QUESTIONER: About Greece, IMF has made the statement in December I think that on January 22nd, that IMF would evaluate the situation and decide what happens next. My question is when is this expecting to happen with the Executive Board -- is there any deadline?

MR. MURRAY: Okay. Let me just give you a state of play on the program, and we have another, I assume, additional questions on Greece.

The conditions for activating the IMF program have not changed. Remember, we have an agreement in principle on a program, which is not yet activated.

In this regard, we have continued to work on what we’ve called the two legs of the program, which are the economic policies that are necessary to support an IMF program and debt relief, debt sustainability by Greece. So, we continue to work on those things.

Bbeyond that, not much more to offer you. I mean, the Eurogroup you mentioned to some degree, the general Eurogroup statement has accelerated technical work and discussions on debt relief, which had been underway since 2015.

We are working with our partners to arrive at a positive outcome that will credibly alleviate Greece’s debt burden so that Greece can embark on a sustained recovery.

As far as the review itself, when we would activate or have a Board thing, we don’t have a date for when we might next convene on Greece.

QUESTIONER: So, there’s no deadline.

MR. MURRAY: I have no expressed deadline at this stage.

QUESTIONER: Are you waiting for the government to form before you make a decision?

MR. MURRAY: That’s not relevant. What’s relevant is our European partners need to engage and complete a debt relief accord with the Greeks. That’s the important.

QUESTIONER: And will Madam Lagarde inform the Executive Board about the latest developments?

MR. MURRAY: Oh, I’m sure, I’m sure she would. Yeah, I’m sure. I’m not aware of any formal. But she has ongoing contacts with the Executive Board regarding country developments. But there’s nothing formal underway at this moment between management and the Executive Board.

QUESTIONER: Thank you. Madam Lagarde said recently that the IMF was vastly misunderstood on Greece’s situation. Can you clarify on that, please?

MR. MURRAY: I don’t really have anything on that. I mean, no I don’t really have anything to offer on that other than the fact that we’ve published reams of information about our views on Greece pensions in our staff reports. So, I refer you to that. But I don’t have anything to elaborate.

Should I take one more -- a couple more Greek questions? Do you have a Greek question? Okay, let’s focus on Greece, and then we’ll onto -- we have a lot of questions online.

QUESTIONER: If I just may ask, the European banking authority just confirmed some more substance for the stress test that will be happening in the Greek case. And I’m wondering how the IMF’s sees its assumptions, the fact that the GDP projections in particular, but also, other indicators there, are considered quite benign for Greek standards, not necessarily for European standards, but the way that the Greek banks have been dealt with? It seems like it’s more normalizing closer to the Eurozone assumptions. And do you accept that, do you welcome that, or are you concerned about that?

MR. MURRAY: We view stress testing as an important step in assessing the adequacy of the current strategy for dealing with Greece's exceptionally high level of non-performing loans and assuring the soundness of the banking system. Beyond that, it's a stress test that is done by the European authorities, not by us. I'll leave it at that.

QUESTIONER: Bank Commissioner of said Greece will remain under significant foreign supervision for several years and we need to continue economic reforms for another ten years. I would like to ask you if you agree and I would like to clarify on the record, how does the IMF plan to supervise Greece when it has completed the program.

MR. MURRAY: I don't have a remark specific to that, what you framed there. I don't think we've formed a view ten years down the road in that sense. But don't forget, Greece is a member of the International Monetary Fund and all member countries, whether they're in financing arrangements or not, any country has ongoing surveillance. That is part of the multilateralization of the IMF is we do annual reviews of our member countries, by enlarge, annual or biannual. So, Greece and the IMF will be, as far as I'm aware, will maintain normal engagement for as long as you can think. I can't speculate about what ten years is going to -- but there will be normal relations with Greece and there are normal relations with any other country.

QUESTIONER: And what about you? What is the procedure? How can you supervise Greece?

MR. MURRAY: Well, it's not a supervisory role, it's an analytical.

QUESTIONER: Can you explain us how?

MR. MURRAY: Well, we have economists that go into countries, I call it looking under the hood as an automobile analogy. You look at the engine of the economy and make sure all the parts are working. If they are not working, you try to explain why and you try to just say, do some of these parts have to be replaced so that the economic engine is running as efficiently as possible. So, we do that with all of our member countries, all 189 member countries have that kind of analytics. That's what the economic staff of the IMF does on a day-to-day basis. So, that's what the IMF does. That is one of our key responsibilities.

QUESTIONER: One question on the Fed and then one on Tunisia. On the Fed, it was Janet Yellen's last FOMC yesterday, where they're transitioning to the Jerome Powell era. What is the IMF's latest view on the Feds stance on monetary policy and how it should position itself going forward?

MR. MURRAY: We have very good relationships with all of our central banks, including the Federal Reserve. Governor Yellen and the Fund have had long established relations, and I assume a similar relationship will continue under Chairman Powell. I really don't have anything fresh to offer you on our viewpoints of where monetary policy in the United States should go. Our general take remains on change which is, we see a course of gradual monetary tightening underway. and we expect that to continue for the foreseeable future.

QUESTIONER: And then on Tunisia, what is the Fund's latest position on what is going on there? I believe the Prime Minister said today, he made some comments about the economy and the plans that he has to have the economy turn the corner. I think that he says he hopes it is going to start turning the corner in 2020. Any thoughts on those comments or no?

MR. MURRAY: I don't have any specific guidance on those remarks other than the fact that the Managing Director has had meetings with Tunisian officials in the past week. We also just wrapped up a two-day regional conference that was held in Morocco. We expressed our strong support for the efforts of the Tunisian authorities on all fronts. We understand that there is a lot of frustration in Tunisia about the pace of economic growth and recovery and job creation. These are all the kind of things that we share, concerns that we share with the authorities and with the people of Tunisia.

Okay let me go online, I'll come back to the room in a bit but let me go online. We have a bunch of questions here. I'm going to start off here. On Sierra Leone, please specify the status of IMF's payments under the $224 million program to the government as it relates to the upcoming elections and conditions such as cutting subsidies on rice and fuel.

Thanks for that question. For those of you here in the room and online, earlier today our resident representative in Sierra Leone issued a statement publicly. It is posted on our website on the res reps website. I'm going to just borrow from that briefly and just repeat it. This is about a review that was expected to be completed in December and has not. First review of Sierra Leone's extended credit facility. So, let me just read an excerpt from our resident representative's statement earlier today to address his question.

The completion of the review, which would have enabled the disbursement of the second tranche of program financing, has been delayed relative to the anticipated timetable of December 2017. The key reason for this delay is due to a weak budget revenue outlook where measures that were to be taken under the program to increase revenue did not yield those revenues. The IMF is currently working with the government to identify appropriate corrective measures that could be taken, and let me elaborate, and when those corrective measures can be taken. Beyond that, I don’t have anything further to add today on Sierra Leone.

Sticking in the region, I have a question on Mozambique. Mozambique's public prosecutor this week said it wanted those behind the "hidden debts" to be held "financially accountable." In response, the IMF said it is still waiting for "information gaps to be filled." Does the IMF want people to be held accountable or just the information gaps to be filled?

Thanks for that question on Mozambique. Let me give you a quick take on that. Remember just as background, the Mozambican prosecutor on January 26 filed a complaint to an administrative tribunal regarding the state owned enterprises involved in some audits that we had asked for. The IMF sees this decision by the prosecutor as an encouraging step toward ensuring accountability. However, more generally, and this gets to the point of the question, more generally, the IMF reiterates the need to fill the information gaps in the audit report of Ematum Proindicus and MAMcompanies. So, the point here is we want accountability for the public accountability. In terms of prosecution, that is up to the prosecutor, we don't get involved in public prosecution.

I've got a whole series of questions on Ukraine. Let me take those online, and then I'll get back to the room. I've got two questions from him, two questions from him and a question from him. So, I'm going to read these out. His questions first. Yesterday, in a number of Ukrainian media blogs, appeared publications saying that the IMF's softened its position on the anti-corruption court and that Christine Lagarde didn't know about sending a tough letter to the authorities on that. Can you comment on that. Secondly, there are rumors circulating about laying off World Bank and IMF representatives in Ukraine because of leaking of a joint letter to the authorities on the Anti-Corruption Court. The letter is said to be inconsistent with head office's position on that matter.

Can you once again clarify the IMF's position?

First of all, let me -- one reason I want to read these out is there's no truth to the contentions -- in terms of these softening positions and rumors circulating about layoffs. There is absolutely no credibility to any of those rumors. So let me make that point right off the bat.

And then let me give you where we stand right now on Ukraine. Again, Managing Director Lagarde met with the Ukraine President in Davos. They issued a public statement that's on our website. It's very straight forward and clear, but let me underscore.

As the Managing Director said in her statement, the discussion with the president focused on recent economic developments and prospects for Ukraine, as well as implementation measures that will pave the way for completion of the pending review under the IMF program with Ukraine.

As far as the law in the Anti-Corruption Court, we look forward to working together with the authorities and international partners to address concerns regarding the current draft law on the Anti-Corruption Court and bring it fully in line with Ukraine's commitments under the IMF program and the recommendations of the Venice Commission. As we have noted previously, the establishment of the Anti-Corruption Court consistent with the Venice Commission's recommendations is an essential component of the IMF supported program with Ukraine.

Let's see, I have another question on Ukraine. I'll take that and come back to the room if there's any more questions. This is his question.

Chairman of the National Bank of Ukraine Council announced that the mission of the IMF can arrive in Ukraine in mid-February. Earlier Ukranian President Petro Poroshenko noted that the IMF mission will arrive in Ukraine till April. Could you please confirm?

Thanks for the question. I don't have any details on timing of a review mission in any way, shape, or form. The timing of a review mission has not yet been decided. Thanks for that question.

Any more questions here in the room? I can come to it and then I'll go back to screen. Yeah.

QUESTIONER: Yes, there is a view among lenders that it would be better for Greece if IMF, ECB and European Commission produce a common debt sustainability analysis in order to send the right messages to the markets before the end of the Greek program. How do you see this possibility?

MR. MURRAY: Thanks for the question. Debt sustainability analysis is part of every IMF program in any country. And that's why we have as one of the key conditions for our activation of our program with Greece is a debt-relief accord with the European partners.

That debt sustainability will obviously -- the Fund does, once we get to the part where we're going to activate our program, that will be factored in there. So there is a debt sustainability component to everything we do. And we'll do that when the time comes to activate a Fund program.

QUESTIONER: A common debt?

MR. MURRAY: We do our own debt sustainability analysis. Obviously, the European authorities and all authorities when our Executive Board, which represents all of our member countries, they all see it. Certainly, European authorities will see our debt sustainability analysis, but we don't hide it from them.

QUESTIONER: There would be a debt sustainability analysis only in the case that you are ready to activate the program?

MR. MURRAY: Well, yeah. If we're going to take a -- this is true of any country. Remember, any IMF program has to assume that it is sustainable, so you have to do a debt sustainability analysis. It would be true for any country. So yes, there will be a DSA -- we call them DSAs. There will be a DSA for Greece when we come to the point of activating the program.

But in terms of where it stands on paper, or on a spreadsheet at this time, I don't have any guidance for you on that. We'll come back to you when we have more substance, but there's really nothing more to say on DSA at this stage.

QUESTIONER: But there will be a DSA?

MR. MURRAY: We hope not. I mean, the whole point of --

QUESTIONER: But there will be a DSA either way, right?

MR. MURRAY: Yu're asking me to speculate, but from a practical standpoint, we're saying that economic policies are one leg of the critical feature of our relationship with Greece. And debt relief, so that they're on a sustainable debt path once our program is activated, is critical. So that's really where it comes into play.

We have to have a sustainable debt situation in Greece for us to activate our program. So we'll do the analysis andit's going on. It's an ongoing process, but in terms of when we publish it or when it actually becomes public and stuff, that's all to be determined.

Okay. I think I've covered that, thanks. Let me get back to the screen. And this is a question on Zimbabwe.

Please specify the IMF's advice for clearing foreign debt. Is it as reported -- cuts to public sector wages, reducing farm subsidies, improving transparency in the mining sector, and reaching an agreement on compensating farmers?

Let me see what I can offer you there. Our relationship with Zimbabwe has been evolving in a very positive way and for some months now. They have normalized their debt with -- we've normalized our relationship in terms of their arrears to the IMF, but they still have a significant debt overhang problem with other international financial institutions and other official creditors. So it's an issue that has to be addressed, and we've said that before in terms of, we've been asked when will we have a program within Zimbabwe. Well, there has to be an arrears clearance process and a clear strategy for clearing those arrears with other creditors and that also has to be factored in to their ability, their sustainability over time.

But let me also make a couple points on Zimbabwe. Again, the Managing Director met with the President in Davos and it was an opportunity for them to update each other on where things stood. As we noted, and we have been noting, the Zimbabwean economy faces severe challenges. An unsustainable fiscal deficit has led to severe liquidity shortages, created inflationary pressures, and threaten the viability of the financial sector and Zimbabwe's exchange rate regime.

Restoring growth will require concerted efforts to tackle the fiscal deficit including through rationalizing and better targeting the expense of agricultural support programs. These efforts should be complemented by structural reforms to strengthen the role of the private sector by improving the business climate and reducing policy uncertainty.

The authorities are cognizant of these challenges that they face and the economy is facing and they've expressed their determination to address them. The 2018 budget which they presented on December 7th, so about a month ago, stresses the government's intentions to reimpose budget discipline, reform and open the economy, and engage with the broader international community, which is ongoing and important in terms of arrears clearance.

The IMF stands ready to support the authorities and their efforts to address these challenges. But as we noted, in addition to a strong coherent reform program, a concerted international effort will be required to revive and reintegrate the Zimbabwean economy. An IMF financial arrangement, for example, would only be possible after progress in resolving Zimbabwe's arrears to the other IFIs and to the other creditors.

With that, that's what I have. I think we're done with online. I'll turn to the floor. If not, I think we're done for today. Again, we're embargoed until 10:30 a.m. Washington time. Thank you all for coming, and we hope to see you again on February 15th. Thank you.

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