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Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet
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Transcript of a Press Briefing by Thomas C. Dawson|
Director, External Relations Department
International Monetary Fund
Thursday, January 16, 2003
View this press briefing using Media Player
MR. DAWSON: Good morning, everyone. I am Tom Dawson, Director of External Relations at the IMF, and Happy New Year. This is another of our regular press briefings.
Before I take questions, I would like to flag a couple of events that are on the home page of our external website: the Sovereign Debt Restructuring Mechanism Conference on January 22nd and the Global Linkages Conference on January 30th and 31st. Both will be held here at Fund headquarters.
The SDRM Conference, which is part of our ongoing consultations with a range of experts on the subject, is not open to the press, but I do expect we will circulate some of the remarks issued during the event, both on the part of Fund staff but as well on the part of the outside participants. We will have more information on that nearer to the event. Press, though, are welcome to attend an Economic Forum being held at 5:30 on January 22nd. It is sort of a wrap-up of the conference, and First Deputy Managing Director Anne Krueger will chair the forum.
As noted on the Web, the forum is entitled "The New Approach to Sovereign Debt Restructuring Mechanism" and will be a panel discussion that includes Mexico's Deputy Finance Minister Augustin Carstens and Ann Pettifor of "Drop the Debt", among other participants.
The "Global Linkages" conference on January 30th to 31st is hosted by the Fund's Research Department. It will explore how economic linkages across countries have changed in recent years and discuss implications for public policy. If you are interested in attending, send an e-mail to Media at imf.org. Access is on a first-come, first-served basis, and I gather that it is rather tight at this point. But it is worth trying, and we will see if we can get additional people in if you are interested.
Now I will be happy to take any questions you may have.
QUESTIONER: Ms. Krueger is in Turkey now, and at the time when Turkey failed to meet last year's target for primary surplus, are you concerned over the recent level of public—government spending? And are you also concerned about government plans to amend an IMF-backed state bidding law? And in more general terms, how would you define the situation of the Turkish economy at this point? Thanks.
MR. DAWSON: Well, as you noted in the preface to your question, the First Deputy Managing Director is in Turkey today. She will be shortly making a brief statement to the press, so I do not think it is really quite appropriate for me to steal her thunder.
On the other hand, I do think it is important that Turkey consolidate the gains that have been achieved under the program where very substantial progress was made, and this certainly involves the need to maintain a high primary surplus as well as pursue the areas in restructuring. So I think in that sense it is important to focus on the need, as I said, to preserve the gains, but I believe the First Deputy Managing Director will be making a statement later.
There also was a story yesterday—and there is a story actually this morning out of Ankara—correcting what had been a false report that the discussions that Ms. Krueger had had with the authorities had included the idea of an augmentation or change in the size of the program. There have been no such discussions.
I do believe that in her comments later today she will talk in some detail on the state of the program, which is, I think, what your question really was.
QUESTIONER: There have been suggestions in Brazil that the cost of financing the zero hunger program could be calculated as a social investment and not as an expense on the budget. Would that be possible?
MR. DAWSON: I am aware of those reports, but I do not have any basis on my part to respond. We do have a review scheduled coming up in a few weeks, and we will be discussing the state of the program. And I think the Minister Palocci has been quite clear on the need to have a program that is both supportive of the very important social needs within Brazil, but also of the need to demonstrate the commitment to a sustainable fiscal position. And I think the authorities have shown quite a bit of determination and success in the early days in terms of being able to balance those needs. But in terms of that specific idea, as I said, I am aware of the discussion that has appeared in some parts of the press, but it is not an issue that at this point we are engaged on. As I indicated, we will be having the review mission going down in the next few weeks.
QUESTIONER: Argentina did not pay yesterday to the IDB. I would like to know if this is an additional problem to reach an agreement with the IMF. And, also, Minister Lavagna said yesterday that there have been some problems at the monetary level in order to reach an agreement. I would like to know what exactly is the problem.
MR. DAWSON: With regard to the payments to the other institutions, in the factual level you certainly should direct your questions to those institutions. In terms of the impact of those developments on our negotiations, there is, in fact, no impact. We are working quite diligently in an attempt to finalize what we have described as an interim program. We are close. We are hopeful that in the near future—I think near future should be hopefully in terms of the next day, day and a half, meaning by the end of tomorrow, we hopefully will have something to announce.
I think it is fair to say that we have been making steady progress. It is not at all unusual that issues come up and go back, and, again, in terms of those people go through the details of the actual letters of intent, memorandum of economic policy and so on.
I did have the opportunity this morning to review actually a transcript of Minister Lavagna's statements yesterday, and I did not find them quite as newsworthy—I guess I could say that—as perhaps some of the stories were. This is a normal process of trying to reach—to finalize an agreement, and as I say, I think we are on track. And this is essentially the timeline that we have planned since we announced the idea of the interim agreement, which was, I guess, December 20th, I believe. So as far as we are concerned, we are operating on the basis that we were expecting to then.
QUESTIONER: So that announcement that you expect at the end of tomorrow would be for...
MR. DAWSON: We are hoping to be soon finalizing the interim agreement that we are talking about, and if things go well, we should be in a position in the next 36 hours or so of announcing something. We are not there yet. There still is at least one unresolved issue, and we are working to resolve that as soon as we can. I cannot promise it, but this is sort of what our hope is.
QUESTIONER: IMF sources have said, but not on the record—and I was hoping you could say on the record—that this deal is expected purely to roll over payments coming due to you through June. Would that be...
MR. DAWSON: It is an interim arrangement that would, in a fashion, maintain exposure. So if you want to use the word "rollover," that's fair. I do not think I would necessarily focus on the word "June," because I am not quite sure in my mind at this point of the precise tenor. But, clearly, the intent is to provide a degree of breathing room so that the Fund-Argentina relationship can go forward. We can await the new election and see how with the new authorities we can work on an agreement that is of a more medium-term nature.
QUESTIONER: You referred to one point that was unresolved. Which point would that be?
MR. DAWSON: No, no. I think I actually said "at least one point, but I am aware of one point", but these are not issues where there is a draft and there is seven items and then steadily you go one, two, three, four, five, six, seven to resolve them all. Things do go back and forth. It is a naturally fluid process. I am aware of one particular item. It may well be that there is another item that has come up, as—this can work in both directions as people look at language and they see something they might not have seen before. This is a perfectly normal process. There is nothing unusual happening in the last two weeks in this regard. It is completely normal, and as I indicated, we are on the same timeline that we anticipated almost a month ago, almost four weeks ago.
QUESTIONER: How do you respond to criticism that Argentina is blackmailing you by not paying the other organizations?
MR. DAWSON: I think I have answered that question. We are precisely on the timeline that we planned from the beginning, the pace of work and the nature of the discussions from before.
QUESTIONER: And also some critics says that you are lending this money to Argentina to save yourselves. What do you think...
MR. DAWSON: We are a cooperative institution. We exist to serve our members, and we are trying to assist our members. That is our purpose.
QUESTIONER: Anne Krueger sat in this very room just a couple of months ago when your annual report came out and said—
MR. DAWSON: Time does fly. It was more than a couple of months ago.
QUESTIONER: ...and said that she would not be bothered if Argentina did have to default with you. And she repeatedly, as did then Treasury Secretary Paul O'Neill say that the IMF was not going to loan money to countries that had not undertaken the correct reforms. A number of commentators have suggested that Argentina have not undertaken these reforms, and I wonder if you could specify exactly what has changed that has made the IMF—
MR. DAWSON: I do not think anything has changed at all. Last fall we were talking about more of a medium-term program. We are now talking about a transition program.
Secondly, I would suggest that you take a look at the program when it is made public in the spirit of our transparency of what the program actually contains, and I think you will indeed say measures in the fiscal and monetary area as well as in some other areas as well. So I would think that—I do not think there is any contradiction, although, of course, there has been a passage of time, and in my rough calculation, it is closer to four months than two months.
QUESTIONER: A brief follow-up. It has been said that as part of the agreement, Argentina will have to really pay the arrears to the World Bank and the IDB—is this true?—before it is signed.
MR. DAWSON: Before it is signed? I am not quite sure what "signed" means. Look, we are on progress. I do not think that question is relevant. We are going ahead, and I do not think there is anything stopping us from concluding our negotiations at this point. That is the issue that we are hoping to resolve, as I said in the next 36 hours or so.
In terms of going forward, certainly as the institutions—in this sense, we are talking about three institutions—go forward, each of them do have their own policies in terms of arrears and so on, and I think when one actually gets to the point of disbursements, that will have to be addressed at the time. But I believe it will be addressed consistently with what the institution's policies are. But it is—sometimes when we say it is a hypothetical question, we mean it will be coming up in three months. It is not quite the same hypothetical question because it is a question coming up in the next week or so. But I think it will be addressed.
QUESTIONER: The amount of money being printed in Argentina and the possibility of running high levels of inflation, could that be one of the sticking points?
MR. DAWSON: Certainly the monetary anchor and the monetary program over time has been a concern of ours. It is, as I indicated, one of the two specific elements of the program that I indicated today and I have indicated previously. I would not necessarily steer you in the direction that this is an outstanding issue is, no.
QUESTIONER: In order to sign this interim agreement, has Argentina fulfilled whatever you wanted in the fiscal and monetary and banking system reforms? Has Argentina done those reforms?
MR. DAWSON: Well, there are two elements of what a program is. There is an element in terms of where we are, which could or could not necessarily imply prior conditions, prior actions. Then there is also the question of agreeing on a program going forward. I think we are more in the context of agreeing on a program going forward with particular measures, targets, and so on. So I think one can assume that when—if and when an agreement is signed, submitted to the Board, for example, —that it will be an agreement that has been fulfilled up to that point in time. So it is sort of a circular question you are asking.
QUESTIONER: In the Japanese Government, the ruling party called for introducing inflation target to fight inflation growing. Does the IMF support this idea?
MR. DAWSON: I was not up-to-date on that particular recommendation. Certainly we have been quite clear—and Ken Rogoff, the Economic Counselor and Director of Research, has been very clear on our view that there is need to be an aggressive monetary program in Japan, accompanied by financial sector restructuring. So I think we will need to get back to you in terms of the specific commentary, but anything that goes in the direction of a more aggressive monetary policy I think would certainly meet with Mr. Rogoff's approval—along with financial sector restructuring, let me make clear.
QUESTIONER: On another country, in Latin America, Ecuador, an IMF mission is arriving in Quito this weekend, and two questions. Do you have an updated information about the mission? And the second one is: There were some [inaudible] saying that the new government is requesting twice the amount initially asked to the IMF. It would be around $500 million.
MR. DAWSON: I have no information regarding the latter part in terms of size of a program. It would be a little premature on that.
You are correct, as you indicated, a mission is going to Quito this weekend to conclude the Article IV discussions, and also to continue negotiations on a possible new stand-by. We have been discussing with the incoming administration—although it is no longer an incoming administration, since it was inaugurated yesterday—their new program over the last few weeks. The discussions have been going well, and we would hope that this mission can reach agreement ad referendum on a program that could be supported by a new stand-by. But to repeat, I do not have anything with regard to that issue on size of program, increase in the size of the program.
QUESTIONER: I just want to know why now you are ready to get in agreement with Argentina. What exactly has changed? And why it actually does not have anything to do with Argentina going in default with you, as Wall Street suggested.
MR. DAWSON: Well, I do not know what Wall Street is suggesting. Wall Street is a market, and there are lots of views on Wall Street and not necessarily always consistent views or accurate or uniform views.
In terms of where we are on Argentina, it has been a very difficult process. It has been a very difficult time for Argentina and the Argentine people, and, as I said earlier, we exist to serve our members, to try to find ways to assist them. Given the present state of the Argentine political process at this point, this sort of an approach for this sort of an interim agreement seems the practical way of being of the most assistance to Argentina at this point in time, this being, as indicated, a transition interim arrangement to hopefully be able to work with the new government that comes in the spring to have a more medium-term program.
QUESTIONER: [inaudible] going on default. I mean, is it or is it not?
MR. DAWSON: We are not unaware of forthcoming obligations, but we operate to assist our members, and this seems a quite reasonable, pragmatic way to go forward.
As I indicated, wait for when the agreement is concluded, as I said, hopefully in the next 36 hours, take a look at what is in there, and you will see it is an agreement that attempts to maintain the progress that has been made over the last year. I mean, there has clearly been an element of stabilization in the Argentine economy when it comes to the bottoming out of the recession, some indications of scattered areas of recovery, certainly stabilization of the exchange rate, and in many senses a better inflation performance than —had perhaps been expected.
So I think it is the best that we can do at this point in time, and I think that is what our purpose is. Our purpose is to help—to help our members in these difficult times.
QUESTIONER: Can I just get you to clarify—and I am sorry if you have already mentioned this. Is there going to be any release of fresh funds involved in the interim agreement?
MR. DAWSON: No. It is essentially what is in the vernacular referred to as a rollover agreement.
QUESTIONER: And you are saying the next 36 hours...
MR. DAWSON: Now, that is as far as we are concerned. You would have to talk to the other institutions about what the nature of their program is in terms of the World Bank and the IDB.
QUESTIONER: And would that assume then that Argentina will make the payment that is due tomorrow?
MR. DAWSON: We will worry about that and consider that when it happens, and as I said we are quite timely and transparent in terms of our announcements in that regard. So we will be—we will be clear as to where we are, when we are, where we are.
QUESTIONER: Tom, perhaps you could explain to those of us who are not privy to the negotiations exactly what are the difference between Ecuador and Argentina. From an outsider's point of view, you have two countries who were in negotiations with the IMF, and neither, for political reasons, was able to deliver on what the IMF wanted. In the case of Ecuador, you decided not to give them a loan and wait for the new government to be elected before renegotiating again. And in the case of Argentina, you have decided to try and make an agreement before the election. Can you explain to outsiders the difference in the two situations, which look very similar and seem to show some favoritism?
MR. DAWSON: I actually do not see any similarity, and there is nothing—I mean, first of all, the Argentines are interested in this sort of an agreement. I am not aware that the Ecuadorians have expressed any interest in any sort of a similar agreement. There ends the idea that they are the same.
QUESTIONER: Does the IMF have any reaction to the new budget that the Palestinian Authority has introduced?
MR. DAWSON: The Palestinian Authority has been making efforts to reform its financial management, and we think good progress has been made. At the end of December, the Minister, Minister Fayyad, the Finance Minister but also, in the interest of full disclosure, a former Fund staffer, submitted a budget proposal to the parliament. The budget is based on a tight expenditure stance and supported by strong reform measures.
We, the Fund, are continuing our technical assistance for these reforms and future reforms planned, such as strengthening of the tax administration and budget reforms in terms of integration of the capital and operating budget. So this is one of those areas where the Fund is involved with countries in a non-program sense of the word but providing technical assistance to help strengthen financial management.
QUESTIONER: For the record, I would like to know which are, according to the Fund, the issues that the Fund intended to negotiate with Argentina for a sustainable long-term program that are left aside at this agreement and have to be faced by the next government. What kind of things do you think or the Fund thinks that is completely left aside of this agreement?
The other thing is you have been all along all this process talking about so-called political consensus. That disappeared in the last weeks. Are you expecting after this sad experience, this long, frustrating negotiation, that with the next government, while negotiating that medium-term program that you are looking forward to, that you will able to see a political consensus emerge in support of a workable proposition, despite the current fragmented political situation in Argentina?
MR. DAWSON: Well, certainly fragmented political situations make it difficult for programs to be developed, approved, and maintained. Indeed, in other regions of the world, I would note the Fund has been criticized for going into countries when there is not such a consensus.
Now, in terms of what the medium-term—what a medium-term program might look like under a new government, I think the best way—the best suggestion I would make is you just could go back to last April and again to this last fall, and look at the programs put forward at that time and that were agreed between the governors of the provinces and the administration. I believe there was first a 14-point program, and then there was another one later on. Those sorts of elements which are of the more structural, longer-term nature are the sorts of things that in the medium term a new government will need to address.
These are not issues raised by the Fund. These were issues raised by the Argentine central government in discussions with the provinces, with the governors. So I think that is indicative. It is not that the Fund has a one-size-fits-all or laundry list we are putting forward. I think the Argentines have developed the sort of sketching out of the areas that need to be addressed, and we would look forward, with a new government, to trying to work with them to see how they can implement what they have identified.
So I think I would go back to the 14 points of April, and you will see a number of those points are contained in the interim agreement. But some of those same points will continue on. I mean, the fiscal, monetary areas will continue on, under any program, and some of the other areas that are not encompassed in the prospective program will need to be addressed by the new government.
So I think the road map is quite there and the road map is "fabricado" (made) in Argentina.
Thank you very much.
[Whereupon, the press briefing was concluded.]
IMF EXTERNAL RELATIONS DEPARTMENT