Transcript of a Press Briefing by Thomas C. Dawson, Director, External Relations Department, IMF
December 4, 2003Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, December 4, 2003
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MR. DAWSON: I am Tom Dawson, Director of External Relations at the Fund, and this is another of our regular briefings. I have a couple of brief announcements before taking questions. Two members of Fund management will be traveling next week.
First Deputy Managing Director Anne Krueger, who has been in Kenya, is, in fact, in Kenya this week, will be visiting Malaysia to participate in a conference in Kuala Lumpur on developing a dynamic capital market. That starts on December the 9th. She is scheduled to deliver the keynote address, which will be posted on the Fund website after delivery. Media Relations can provide you with details on the venue and time of that.
Deputy Managing Director Agustin Carstens will be visiting Lebanon next week at the invitation of the authorities. The official visit on December 11th and 12th is an opportunity for him to review economic developments and hold routine consultations with the authorities. It will be his first visit to Lebanon, and it will be a chance to meet and exchange views with a wide range of people in public and private sectors.
As you know, Mr. Carstens joined the Fund in August and has, as part of his settling in, been visiting various member countries for which he has the responsibility in management. I would note he has been to Peru, Senegal, and Tunisia in this context. I expect he will have some sort of a press availability, a press conference, at the conclusion of his visit. And, again, Media Relations can provide you the information with details.
On December 11th, starting at 10:30, we will hold an Economic Forum here at Fund headquarters on "Russia Rebounds," a panel discussion that will explore the current state of Russia's economy. John Odling-Smee, who formerly headed the IMF's European II Department, which was responsible for Russia, will moderate the discussion. The panelists will include Anders Aslund at the Carnegie Endowment for Peace; Pekka Sutela of the Bank of Finland's Institute for Economies in Transition; and David Owen, an Assistant Director in the Fund's European Department. The event is open to the public.
Another Economic Forum is scheduled for December 16th in which Stefan Ingves, the Director of the Fund's Monetary and Financial Systems Department, will review the state of the Fund's financial sector surveillance activities that were launched jointly with the World Bank in May 1999. This event, which is also open to the public, will take place on the 16th beginning at 2:30.
I expect my final briefing of 2003 will be two weeks from today on December 18th. I would note, as I indicated, Anne Krueger is in Nairobi today, and we expect later this morning to be releasing the text of her address at the African Economics Research Conference, I believe it is called, that she is speaking to.
Because of the holidays, I would also note we may have management travel that may be taking place in early January, and we will let you know and make sure you actually are alerted when we are in the position to be able to announce that.
So now I'd be happy to take questions, and, again, please for proper decorum identify yourself and your institutional affiliation.
QUESTIONER: The completion of Turkey's Sixth Program Review is being delayed because of delays by the Turkish government in finalizing prior actions. Are you concerned about those delays, which have taken place for more than a month and are still not completed?
Secondly, a banking law which is part of the prior actions is now being discussed in parliament. Are you concerned that that law, the draft, could limit the independence of the autonomous banking agency? And, after all, do you have a general time frame in your mind about when the Board discussion could happen? Thanks.
MR. DAWSON: About 80 percent of what you said were reading to me my own talking points, so that's quite well done.
No Board review for the Sixth Review has been set, but it may be possible that we will meet this month. And we, of course, will let you know.
As Minister Babacan has indicated previously, and as you indicated, there are some laws that do need to be completed before the Fund's Board meets to discuss the review. The laws relate to tax reform, public sector, financial management, and banking. Progress is being made on all of these, but we will have to wait until they are approved before setting a Board date.
With regard to the amendments to the banking law that you asked, we share the government's objective of accelerating the asset recovery process from the intervened banks, and we are in general agreement with the government on how best to accomplish this.
In this regard, it is important, though, that the methods used do not undermine the independence of the Banking Regulation and Supervision Agency and the Savings Deposit Insurance Fund in the asset recovery process, as well as the arm's-length relationship to the political process. But as I indicated, to sum up, we do believe that progress is being made, and it is still possible that we will hold the Board meeting this month, and we will let you know.
QUESTIONER: What is the latest on your efforts in Georgia? Are you willing to help that country?
MR. DAWSON: Yes, just a second. Let me get my note. The Fund staff has met with the new authorities, and our resident representative in Tbilisi has had discussions with the acting President, the new State Minister, and the Minister of Finance. High on the agenda is the formulation of an emergency action plan to address the short-term fiscal pressures sparked by the precipitous drop in tax revenue over the last few weeks, focusing on strengthening tax enforcement, prioritizing outlays, and obtaining short-term donor grants as a prelude to policy-based lending for multilateral agencies as well as Paris Club rescheduling of the external debt obligations.
As regard to relations with the Fund, the current three-year PRGF program expires on January 11, 2004, and we are prepared, staff is prepared to move quickly on a successor arrangement.
Besides the staff contacts, including with the Resident Representative that I've just mentioned, the authorities have requested a mission to conduct program discussions in early February which would allow the new administration sometime in January to formulate their position on fiscal policy. But as I say, we expect to remain in contact with them.
QUESTIONER: When will the agreement with Brazil be finalized?
MR. DAWSON: I do expect a Board meeting next week on the subject. Let me just check the date. My memory is not as good as it used to be. The 12th, Mr. Murray says. We'll see if he is correct. Yes, Mr. Murray does seem to be correct. It is the 12th we expect the Board meeting.
QUESTIONER: Maybe you are aware that the term of the Governor of the Mexican Central Bank, Mr. Ortiz, is to expire. And now there is a lot of talk that maybe his replacement or the possibility that he could have a replacement could be subject to some difficulties due to the crisis in the Mexican Congress. No one in Mexico discussed the capabilities of Mr. Ortiz. Actually, he has been given very high ratings. I just wondered if the IMF has a comment on that, I mean, how does the IMF see the potential that Mexico could have some kind of impasse on having a new Governor for the central bank.
MR. DAWSON: No, I don't think it is appropriate for me to comment on that. I just would let that pass.
QUESTIONER: Tom, steel tariffs. We are expecting today or this week, today or tomorrow, the steel tariffs to be lifted. What is the IMF's view on this? And do you think they did more harm than good?
MR. DAWSON: I don't think I will disappoint you by not responding to the specifics of your question. I think the Fund is on the record in association with other multilateral institutions, mostly recently in a joint letter with President Wolfensohn of the World Bank to our member Governors, members of WTO as well as those countries that are members of the Fund and the Bank and not members of WTO, expressing our strong belief on the importance of moving ahead with the Doha Round. So that is a commitment we have often expressed and have called on all members and institutions to work however they can toward that process. But in terms of individual bilateral disputes, I don't think it is appropriate. We, of course, are not a lead agency on any of these individual disputes, in any event.
The letter that I referred to has been posted.
QUESTIONER: Would you give us a sense of how the IMF sees the things going in Argentina, if the agreement is going at the pace that it was expected?
MR. DAWSON: I think we need to keep in mind, I would argue, how little time in a sense has passed since the new agreement was approved. It was approved, in fact, on September 20th, a new three-year stand-by. And it was intended to build on the progress made under the transitional program, which did help restore macroeconomic stability and indeed has led to, I think, quite a decent recovery. And now this program contains a road map of actions to make—for sustaining this recovery.
As I think you are aware, the first review mission has returned to headquarters and staff is working and in contact with the authorities toward finalizing a draft letter of intent to be submitted for Board consideration. There has been progress in a number of areas. The recovery is clearly stronger than anticipated, and the macroeconomic policies are comfortably on track. For example, the monetary and fiscal policy targets for end-October were met.
On the structural agenda, while some fiscal structural measures are advancing, particularly, for example, the anti-tax evasion legislation and the 2004 budget, discussions do continue on the authorities' plans for strengthening the profitability of the banking sector and taking forward the debt restructuring process. I will get to that in a moment. And the World Bank is continuing to discuss with the authorities issues of utility reform where they have the lead.
To anticipate a follow-on question, I think many in this room are certainly aware that the Argentine authorities met with many of their external creditors in New York yesterday. Indeed, the meeting took place yesterday afternoon, and I do not have a report on yesterday's meeting. It is my understanding there is also at least one other event today between the Argentines and their creditors or a group of their creditors. As some services have reported, there was a Fund observer there yesterday, and there is an observer at the event today. But at this point I don't have anything more to say. If we do, we will get in touch with you.
QUESTIONER: On the latest events in the European Union after your last briefing, is the IMF worried by the fact that the Stability Pact could be derailed? And is the IMF still encouraging the EU countries to respect that?
MR. DAWSON: We have seen the recent developments. I think our position on how to deal with the fiscal issue has been pretty well set out. It was set out in the World Economic Outlook this fall and also in the Article IV report on the euro area, which has also been published.
It might be useful in that context, in the fiscal policy context, perhaps just to quote from—but this is not news. I'm quoting from the Article IV on the euro area fiscal policies, and our position was and remains that on fiscal policies, a reasonable compromise between short- and medium-term policy tradeoffs continues to argue for quality fiscal adjustments of at least 0.5 percent of GDP per annum in cyclically adjusted terms in countries with weak underlying budget positions and full play of the automatic fiscal stabilizers around the implied consolidation path. Any delays in the pace of fiscal consolidation must be accompanied by meaningful structural reform that strengthens the medium-term fiscal position and fiscal consolidation of about one and one-half percent of GDP needs to be achieved on a cumulative basis over 2004 to 2006. That is the one-half percent underlying that was mentioned. And, similarly, that structural reforms do need to be stepped up in line with the EU's already articulated Lisbon strategy.
QUESTIONER: Since September, the dollar has been declining in value and there seemed to be an agreement in Dubai that that should happen. I'm wondering if you can speak specifically to what might be going on in China with the IMF with a view to this state visit coming up next week.
MR. DAWSON: Well, I am not quite sure what the link in the second part of the question is, but—our views on the China exchange rate issue have been clearly stated on a number of occasions, including in these briefings, and we have been in good and continuing contact with the Chinese authorities and we share a common view on the need to move toward a more flexible exchange rate system over time. And that is the authorities' view as well. And I don't think there is much to add to that.
I would just note this is a view we have had for some time. It doesn't relate to any particular pending visit nor any particular events that happened, for example, in Dubai.
That was not actually an IMF—I believe the reference that you were making was to a G-7 communiqué, in any event, to which we're not a party.
QUESTIONER: Tom, the "Russia Rebounds" conference, why now?
MR. DAWSON: Well, Russia has rebounded. I would think it is probably also—I believe at the end of November was the passing, fading into history but not the dustbin of history of the European II Department. And Mr. Odling-Smee remains at the Fund concluding his business here, and it seemed essentially an appropriate time to put the conference on.
I happened, just on a personal level, to have lunch with him yesterday, and I never thought to ask him that particular question. But that is as good an answer as I can give you.
QUESTIONER: What time was that Russia rebounding conference?
MR. DAWSON: 10:30 on the 11th.
QUESTIONER: I'm going to follow up on the dollar question. We have seen the decline of the dollar against the euro and we even saw it against the South African rand, you know, the South African rand getting down to six. You know, what are the broader implications of this?
MR. DAWSON: I think we're running to the end of the utility of the questioning. I would again direct you, for example, back toward both the September WEO but also Ken Rogoff's comments at the time that I think he clearly expressed the view on the nature of the current account imbalances and other imbalances in the global economy at this point and the possible paths of adjustment. And I don't think there have been any changes in the scenario that changed what is the fundamental view of the Fund which he laid out both in the WEO and in his press conference.
Again, the one thing that has perhaps been stronger than people expected is certainly the recovery in a number of countries. I'm sure there will be occasions in the next month or six weeks where we will have the opportunity for Mr. Rajan to perhaps express his views, and the Managing Director, of course, regularly does talk. So on the more macro policy question on imbalances, I think our views are pretty well articulated, and we don't respond to the day-to-day sort of movements, or even week-to-week.
QUESTIONER: Thank you. Still another subject. I think President Wolfensohn recently went on the record as saying that Iraq needs debt restructuring, a major debt write-off for its development. Does the Fund share that view?
MR. DAWSON: Well, certainly the expectation is that the process that we are engaged in, both in working with the Iraqi authorities and the Coalition Provisional Authority, is to work up a macro framework that will then set the basis for figuring out what is debt sustainability. That will then be an input into the process both of the Paris Club, which has already indicated their willingness to consider such action, as well as with the non-Paris Club creditors.
The Fund's role in that latter regard has been to be in touch with the non-Paris Club creditors and attempt to get a sense of what the obligations are. And I think everyone expects that down the road, with the adoption of an economic program, there will be the need for some debt restructuring in the Paris Club and broader context. But at this point we can't say precisely what that is.
But as I indicated in the last briefing, the Fund staff is in quite regular contact now with the authorities in Iraq, both the Iraqi authorities and the CPA, as well as with creditors—non-Paris Club creditors and Paris Club. So that is going forward.
I do not expect any particular additional information in a formal sense coming out from us in the near future. We did post, as I indicated, the macroeconomic assessment a couple of weeks ago.
Okay. Well, thank you very much. I will see you in two weeks. Thank you.
[Whereupon, the press briefing was concluded.]