Transcript

Transcript of a Press Briefing by Thomas C. Dawson
Director, External Relations Department
International Monetary Fund
Thursday, February 12, 2004
Washington, D.C.

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MR. DAWSON: Good morning, everyone. I am Tom Dawson, Director of External Relations at the Fund, and this is another of our regular press briefings.

I have a few announcements to start. At 5 o'clock this afternoon Trade Ministers from four Commonwealth countries—Nigeria, Bangladesh, Barbados, and the Fiji Islands—will hold a press conference here to review their meetings with officials in Washington, including Managing Director Köhler. I encourage media to attend this event. There will be an opportunity to discuss and hear from the Ministers on their perspective on the state of world trade negotiations, particularly as they affect the developing countries—Commonwealth in particular but developing countries more broadly.

As you know, the Managing Director along with President Wolfensohn at the World Bank have urged developed and developing countries to redouble efforts to complete the Doha trade round, and we view completion of the trade round as critically important for the world's developing countries who are often reliant on aid rather than trade to sustain economic activity, and trade expansion I think has a very powerful multiplier effect.

I should also note that Deputy Managing Director Carstens will participate this weekend in the Fifth Annual Conference of the Parliamentary Network on the World Bank. This conference, which will bring together some 180 members of parliament from more than 70 countries will be convened in Paris on February 15th and 16th. Jim Wolfensohn from the World Bank will be addressing the conference, as will the French Prime Minister, French Finance Minister, and other notables. A press conference is expected immediately after the closing of the conference around 5 o'clock local time on the 16th, and you can get information from the press office in terms of the precise location. I believe it is at the Palais de Luxembourg.

I will be attending that event as well. This is now our fourth year of attending the Parliamentary Network annual meeting, and I think it is proven quite helpful for us in terms of our outreach and understanding of issues concerning parliamentarians in both developed and developing countries.

I should also note that, prior to my next briefing—i.e., two weeks from now—the Managing Director will be taking a trip to the Asian region, to Korea and Japan in particular. I do not have exact times for the trip at this point. There is an international conference he will be attending in Korea, as well as meetings there and meetings in Japan. There will be press availability, press events, and the Media Relations Office will let you know when we get closer to that.

Finally, I will note, after many promises, that we actually have now started posting the Board calendar. A press release was put out on Monday on that. It is there, and that calendar in association with the work program which we have been putting on a twice-yearly basis can give you an understanding of the nature and pace of Board activities.

That is all I have at this point. I will be happy to take any questions that you may have. Please identify yourself and your affiliations. Thank you.

QUESTIONER: Argentina's President Kirchner said yesterday that if the IMF does not approve the Second Review of the program, they will not pay the $3 billion they owe the Fund by March 9. What do you think about that, and can you give us—

MR. DAWSON: I think we are on a pretty clear track, both in terms of working with the authorities to undertake the next review of the stand-by arrangement, and as you know, on January 28th, the Board concluded the First Review. Monday of this week, senior Fund officials—the Managing Director, Ms. Krueger, and senior staff—met with Minister Lavagna and Argentine officials. Next week we will have the mission going to Buenos Aires to start the discussions for the Second Review. So I think that is a process that is well laid out.

Certainly in a notional sense, if you go back to the Letter of Intent that was approved in September at the Dubai meetings, you will see that a time schedule was set out that we are on. It was a little bit delayed for the January review, but we are on now—for the review that took place in January. And we are hopeful that in March, if things went well, we would be able to have a Board meeting. And that is the pace for the program.

The pace for the payment obligations is independent and distinct from that, and the obligations and the payment dates that are due are well known, and the two operate independent of each other.

To try to go beyond that in answering, the question is a bit hypothetical because, as I indicated, in this run up we are on track in terms of the schedule that we expected to be followed.

QUESTIONER: On the same subject, it is not that hypothetical because it happened before. Argentina did not pay on time before, and the present—

MR. DAWSON: That is true. There was a delay of a couple of days, as I recall. It was regrettable, but indeed we got to be back on track, and there is no reason not to think that we will not be able to maintain current relationships.

QUESTIONER: Now, what is the policy of the Fund in the absence of a payment on the due date? Will management recommend or put Argentina's Second Review on the agenda of a Board meeting? Is that the policy or is it independent of the payment?

MR. DAWSON: The policy is set forth in the Chapter V, Box 5.1 of our publication "Financial Organization and Operations of the IMF", available at our web site (http://www.imf.org/external/pubs/ft/pam/pam45/contents.htm).

Several months ago, I was quoting it quite regularly, and if you take a look at that policy, it is quite clear.

A particular part of the question, in order to make it clear so you do not have to keep trying to get the answer, is the Fund cannot approve a loan if there are any outstanding obligations—overdue obligations.

QUESTIONER: But it did last time, right?

MR. DAWSON: No, it did not.

QUESTIONER: The Argentine Government selected three banks to do their-what is your reaction to that?

MR. DAWSON: I think that is certainly something that we have noted, and I think it is certainly a step certainly a step forward, and I think others who are observing this process have noted it.

The status of discussions with creditors is, as we have indicated, a very important aspect of the state of relations and the state of the program, and so this is something we have taken note of and it certainly is a positive step.

QUESTIONER: Could you just sort of go over what it means, negotiate in good faith? Would this include negotiating in good faith? What does the IMF understand by that?

MR. DAWSON: The Fund staff and the management and then ultimately the Executive Board need to make a judgment at various points in time, but certainly in contemplation of any Board action, as to what constitutes satisfactory progress under the lending into arrears policy. The so-called good-faith issue comes up in the lending—in the context of lending into arrears. It is a judgment that has to be made by the Board ultimately each time, and in terms of the elements of that, I would just direct you to what we have been saying in recent times, but more generally we have published essentially what our views and what the policy on lending into arrears, which gives you the issues that are considered, but ultimately it is a judgment of the staff, the management, and finally, the Executive Board. And there is no magic litmus test as to what does or does not constitute satisfactory progress in that regard.

QUESTIONER: Other than the talks, what are the other key targets the Fund will be looking at in this review?

MR. DAWSON: We have noted certainly that the macro out-turn in 2003, both in terms of the primary surplus, growth targets, inflation, reserves, and so on, have clearly shown a very strong performance. Indeed, the review will be looking at the performance for 2004 under the program.

Besides the issue of the lending into arrears policy, there are also issues regarding the banking sector, the financial system, as well as areas in the utilities and pricing area. These are the issues that we have been discussing, while in the context of this program we have been discussing since the Dubai meeting. They are still all in the program and publicly available. You can take a look at the original Letter of Intent and program documents which the Argentine authorities have been releasing after the Board meetings.

QUESTIONER: World Bank President Jim Wolfensohn in Australia today said that the Fund could approve the Second Review for Argentina within the next few weeks. Does that really stick?

MR. DAWSON: Well, the program—the process we have is what I indicated, which is that the mission will be going out next week; the missions typically take a couple of weeks. They need to come back to the Board and so on. So I would have to get a definition of what "few" is. I mean, our anticipation is it would be at some point during March, assuming all went well.

But, you know, let us not get the cart before the horse. We have just had the Board meeting last week. We have just had—or the week before last, I guess it was. We have just had the meeting with the authorities earlier this week, and the mission is going next week. So it is, I think, a little premature for us to be able to specify when we would be able—we, in the situation of the Fund, would be able to take something to the Board.

QUESTIONER: How concerned is the Fund about the situation with the utilities in Argentina? Something has been mentioned in every statement, something that Argentina needs to address, and yet there seems to be no progress. The dispute with consumers seems to be heating up quite a bit, many blackouts and what not. How quickly do you need to see progress on that issue?

MR. DAWSON: Again, it is one of the number of issues, and the authorities have been working on that. They have been offered assistance from the World Bank and the Inter-American Development Bank, have been working with them. It is, you know, one of the issues that we need to take into consideration when we do each review.

QUESTIONER: Mr. Lavagna was invited in February to a meeting with creditors in New York. I would like to know if the IMF recommends to go there and if it will be a good-faith action from Argentina to do that. And then the bonds related to the growth, if they are still in the proposal, and if the IMF still believes they are useful for Argentina.

MR. DAWSON: I am not aware of this particular invitation that you are referring to. We will have to get back to you on that, and I am not sure which group or the invitation.

With regard to GDP index bonds, which is, I think, what you are asking about, what is in the Argentine Government's proposal is what is in the Argentine Government's proposal, and we do not make suggestions and so on as to what they put in there. That ultimately is their decision.

The issue of GDP index bonds is one that has attracted increased attention. There are actually, I discovered the other day, a couple of countries that have already issued such bonds, not in large amounts, not with great liquidity, but they actually have issued them. So that is something that is in there, and I think I would just leave it at that.

We are not a party in the discussions, but it is certainly worth noting that there has been interest in these GDP index bonds in a number of cases. And whether they will work in the Argentine case is going to depend on how the Argentines and the creditors proceed.

QUESTIONER: I am sorry, but is the IMF aware of the Argentine Steering Committee or not?

MR. DAWSON: We are aware of the Steering Committee. I am not sure what particular invitation you are talking about. And there also are a couple of different committees. So I do not want to give an answer until I understand which committee—

QUESTIONER: The global one that—

MR. DAWSON: Well, various ones claim representation. I am not going to go there. And we will try to get back to you on which particular one. I am also not aware of the particular invitation, which is another problem. So I am not aware of the invitation, I am not aware of the group, so I could really get in trouble answering the question.

QUESTIONER: I just want a follow-up. Do you think that there is a problem of representativity in this group? Lavagna says that that is one of the problems, and you—

MR. DAWSON: That is exactly the question I do not want to go to because I am not familiar with which groups we are talking about in this fashion. And so I just would leave—I mean, I am not in a position to answer that. We are going to go off that.

QUESTIONER: No, no, momento, momento, (?). Do we—do you think it was a good idea for the government to open a register so everybody can register on the—

MR. DAWSON: I do not—

QUESTIONER: Creditors can register?

MR. DAWSON: I mean, I do not have—I do not think I have a view on that. I mean, information is useful, but I do not—again, I am not familiar with the details of the register.

QUESTIONER: On Argentina, just one thing. Since the Fund did not do anything unusual last time in Argentina, I wanted to understand—

MR. DAWSON: No, no, what I noted was, in fact, that the payments were current at the time the loan was approved. That was—

QUESTIONER: Okay. Now, this time—

MR. DAWSON: —I think, not maybe your understanding.

QUESTIONER: I just wanted to understand something. The timetable that you described for the mission going, for the mission coming, the payment as we understand is March 9th. So this time, the timetable between the payment and all the procedures and reports to the Board will be such that we will not have probably the payment or the Board meeting very close to the payment date, right? It will really be independent. Timetables will make it clear there are two independent things.

MR. DAWSON: We will have to see how that goes on. I think that question, if you come back and ask me that question again in two weeks, we might have a better sense because we will have a sense of how the mission is going.

QUESTIONER: I wanted to see if you have anything further than the announcement that you made about the meeting with the Iraqis, that it was a good and constructive—or whatever was the formulation—meeting, whether it was—whether anything was decided, especially on the issue of debt.

MR. DAWSON: We have continued our contacts with the officials. The Iraqi delegation, comprised of the Minister of Finance, Mr. Gailani, the Central Bank Governor Shabibi, and the Vice Minister of Finance, Mr. Hassan, visited Washington after the G-7 ministerial in Boca. They met with staff, Fund staff, on Sunday to discuss policies that could form part of a program that could be supported by the Fund, one of a continuation of meetings that have taken place here as well as in the region. We expect there will be follow-up meetings in late February or early March in the region and then again—that was the essence of the discussion on Sunday. And then on Monday, the delegation did meet with Mr. Kato and they reviewed that and Mr. Kato reiterated our willingness and readiness to assist Iraq and their people.

Now, you had a specific question with regard, I believe, to the status of the debt, assembly of the numbers and so on. I encourage you to keep asking me that question. We do not—we do not have a report at this point, but I would say we are two weeks closer than we were the last time you asked me the question.

QUESTIONER: Maybe another subject, also. I was looking at your recent PIN on Georgia, and from that PIN it appears that there was some disagreement in the discussions, judging at least by the fact that you said in the PIN, "Some Directors suggested that for Georgia it would probably be advisable to start with the technical program where they would establish a track record of fulfilling the targets." Something similar to what happened to Belarus. But then you said no, but the majority said no, we need to go ahead, we need to help the authorities because of the political opportunity there.

My question is basically a question of double standard again. I have asked that question before. How does that compare to your approach to Belarus?

MR. DAWSON: Well, no, I think it is a question of governance where the Fund Board expresses its views, and the staff and management follow the views that come out of the Board in terms of what the consensus is.

Certainly as you read the PIN, as you read it carefully and with some degree of experience, you can see that there are differences of view in the Board. But then there is a prevailing view of the Board that is summed up also in the PIN. And in the context of Georgia, I do not know if the mission is there, actually there. And the decision was to go there to discuss a new three-year Fund-supported program under the country's new leadership.

So I do not think there is a double standard. It is a case-by-case approach. I mean, if—and that is what we have been encouraged by many of our critics to take a look at each country's circumstances and make a judgment.

QUESTIONER: You have already told us that IMF is following the financial scandals in Italy, Parmalat etc. I have read recently that there will be a mission of the Fund to Italy, but I was surprised by the fact that the mission will be just the next year. So in more than one here, it is not a slow reaction to what is happening now, so you can confirm the mission, the timing of the mission? And have you anything more to say?

MR. DAWSON: No, I think it perhaps is a little misleading to think that something is going to happen only next year. As I had indicated, I think, the last time, we had already signaled during the 2003 Article IV consultation the need to strengthen transparency and consumer protection in financial services—a position that, by the way, has been noted recently in the Italian press.

These issues will continue to be addressed. They will be addressed both in the 2004 Article IV consultation, which I do not have a precise date for when that will be taking place. Last year's mission was in July, so you would expect it would be plus or minus a month from there. And then also in the context—and I think this is what your specific reference was to—an FSAP, Financial Sector Assessment Program, that the authorities have requested and is in the process of being scheduled. It is being scheduled for either later this year or into 2005.

So it is not a matter that we are going to wait until a year from now to be looking into this issue. We will be continuing to.

Then I believe at the last briefing you were asking me about a particular quote from the central bank Governor. I am happy to report we have been able to locate the quote, and I think it would be useful just to give you a sense of where it came from.

Last November, our Monetary and Financial Systems Department did prepare a draft—and this is the title of it—"Detailed Assessment of Compliance with the Basel Core Principles for Effective Banking Supervision for Italy." That is the document that was quoted by the Governor in his recent testimony to parliament.

We had provided this as a draft to the authorities. The authorities have provided comments to us, and we are now in the process of finalizing that document, and publication of that document is subject to the authorities' decision. So you can come back and address that at a later point.

QUESTIONER: Is any progress in the negotiations with the creditors an absolute condition for the approval of Argentina's Second Review?

MR. DAWSON: We have to make a judgment each time on the state of discussions, as well as other issues that are involved in the program. So we have to make a judgment, and I think it is very misleading to try to specify particular conditions or particular issues that are a requirement. That is a judgment that staff has to make, and management has to make it, and then ultimately the Board has to make it. These are difficult decisions, and it is not—you know, unfortunately, I can not give you a checklist of a menu and then you add up the scores and come to a conclusion.

QUESTIONER: What is the nature of the Fund's contact with the holders of the defaulted debt? Because I know there is some contact.

MR. DAWSON: I mean, we have an International Capital Markets Department, and one of its mandates is to keep in touch with the markets. And as a matter of course, it is talking to financial institutions, holders of bonds, and so on, both on a proactive and on a reactive basis. This is one of the reforms of the institution that has been introduced in the wake of, particularly, the Asian financial crisis, where we did not have a sense of what was going on in the markets. So there is regular contact, but on a—let me assure you, on a non-exclusive basis, and we are in a listening mode. We are not in a position of negotiating or providing advice to creditors or anything like that. But it is part of our process now to have a sense of what markets are thinking, and that can be done through meetings, telephone contacts, through reading, even through reading the press we learn.

QUESTIONER: A question on Libya. I simply do not know, and it just occurred to me that since the American—since we have just discussed the politicization of decision making in the Fund, that is, the interests of the major shareholders, of course, the Americans are normalizing relations with Libya. What is the status of relations between the IMF and that country? And is there any movement there?

MR. DAWSON: I mean, we did have, in fact, the Article IV discussion with Libya last August, on August 18th. And there was, in fact, a staff mission late last year. The authorities have removed all of the remaining exchange restrictions and it accepted the obligations under Article VIII and have renewed their commitment toward reforming the economy. So we, in fact, had prior to that and now a regular system of discussions and contacts.

QUESTIONER: A question on Liberia. We had a delegation here. Mr. Bryant was here, I think it was on Tuesday. I want to find out what—how far the Fund has got in discussing arrears with Liberia, and also as far as technical assistance or a program for Liberia.

MR. DAWSON: I was aware of the visit, but, unfortunately, I do not have anything on that and we will have to get back to you.

Thank you very much.

[Whereupon, the press briefing was concluded.]