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Transcript of a Press Briefing by Thomas C. Dawson|
Director, External Relations Department
International Monetary Fund
Thursday, May 13, 2004
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MR. DAWSON: Good morning, ladies and gentlemen. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular briefings, which, as usual, is embargoed until 15 minutes after conclusion, and we'll set a precise time at that point.
Before I go through some public engagements and take questions, I'd like to stress that we will keep you informed regarding Mr. Rato's official start date at the Fund, which we expect to be in early June, as he indicated on Tuesday. And also there was a question on Tuesday about travel, initial travel plans, and as soon as we have any events in that regard, we will let you know.
Now, in case you were wondering, I expect that future press briefings here at the Fund in Washington will be conducted in English. We obviously made an exception on Tuesday given the great interest of the Spanish press at the outset. But I expect that our briefings will continue to be in English, although, of course, the Spanish-speaking journalists will undoubtedly try to do what they did with Mr. Köhler, the German-speaking ones did, entrap him and ask questions, and Mr. Murray will ensure that that's not successful.
Now, let me make a few operational announcements. Next Tuesday, May 18th, will be a very busy public engagements day for the Fund. Ms. Krueger will be speaking before the WTO General Council in Geneva to brief them on the Trade Integration Mechanism which the Fund unveiled last month. There is a [press release] from April 12th or 13th that has information on that. The WTO Council event is a morning event in Geneva. She will speak at Geneva's Graduate Institute for International Studies that evening, and we expect to have the text of her remarks available, and Media Relations will let you know about that.
Deputy Managing Director Carstens will be attending a two-day conference on fiscal reforms in the Middle East and North Africa, which the Fund and the Finance Ministry of Lebanon are cosponsoring in Beirut. The conference starts on May 18th, and we expect officials from the region will attend, along with Mohsin Khan, Director of our Middle East and Central Asia Department, and Teresa Ter-Minassian, Director of our Fiscal Affairs Department. And it's likely that Mr. Carstens will also have a press event after the conference wraps up on May 19th. And, again, stay tuned for details.
On Tuesday as well, Deputy Managing Director Kato will be speaking at the Beijing International Finance Forum in Beijing, and we expect to post Mr. Kato's speech on the Fund's website.
With that, I'm happy to take any questions you may have, and we'll wrap up, I presume, reasonably quickly since you had a pretty full opportunity on Tuesday.
QUESTION: The Carstens [inaudible]?
MR. DAWSON: The Carstens, in Beirut.
QUESTION: Two questions.
The first is: Is the IMF concerned about Argentina is spending its fiscal surplus, including the creation of a state-owned oil company?
And the second question is: Is Argentina moving fast enough to renegotiate with its utility contracts in order to meet the June deadline?
MR. DAWSON: I think I should start by noting which--to put things in a little bit of a perspective, the mission for the Third Review has been postponed at the request of the authorities to allow them to focus indeed on some particular issues that they need to deal with, in particular focus with their investment bank advisers on the details of their debt exchange offer, which will mean that the discussions for the review are likely to take place in June. There is flexibility built into our schedules in terms of negotiations, and delay is not highly critical, which is also the direction in which I would point you with regard to the question on utility prices.
You know, we do continue to believe that structural reform implementation is very important, and the authorities do indeed have a lot of work to do to get consensus on those efforts, including, among other things, in the areas of intergovernmental relations.
To repeat, as we've indicated, the Managing Director-elect indicated on Tuesday, the program remains on track, and the fiscal and monetary performance criteria have been met by wide margins, and prospects for the remainder of 2004 are very strong.
I don't have a specific answer for you on your energy company issue, but, of course, we have established targets on the fiscal side for 2004, and there will be a point going forward when we start looking at next year, but we're not there yet.
QUESTION: This is a question regarding your comment on the press conference. Basically, out of curiosity, I would like to know what prompted you guys to take this position of not allowing questions in other languages than English.
MR. DAWSON: You mean as a general policy?
QUESTION: Yes, because -- I remember clearly in the case of Mr. Köhler, when he became Managing Director, there were questions posed in German. And during his last press conference, there were also questions posed--
MR. DAWSON: At the beginning and at the end, I think you can expect that to be the case. But in between, it wasn't the case in--
QUESTION: You didn't make any position--
MR. DAWSON: No, no. At the beginning and the end, I'm sure that will continue to be the case, and there may occasionally be some special circumstance for that. But it's a matter of practicality here.
On the road I think our press conferences are going to wind up being more multilingual than ever before. But there are some who do not have the language abilities, and in Washington, of course, the official language of the Fund is English. So in Washington, that's just sort of the path of least resistance.
That doesn't stop you from asking him questions in Spanish as he walks out, and that's when Mr. Murray takes over.
QUESTION: Despite all the good things that the IMF has been saying about Brazil, there is a lot of instability this week there at the markets. I'd like to have your assessments on that, and also if you think it's still a good idea to not have a program next year with Brazil.
MR. DAWSON: There are certainly aspects of the global environment that have become less hospitable and certainly increased volatility. But I think if you look in the case of Brazil in particular, you see, in fact, a reduction of vulnerabilities in Brazil. And, I think I would view what's happened as actually a pretty decent response to a very volatile global market position. The government over the last year has taken a number of measures to increase the liquidity of their own instruments, to increase--to reduce the terms--I mean, to increase the term and reduce the exchange rate vulnerability of their debt, and all of this has, I think, made adjustment more easier to handle in these difficult conditions. So I think what we see is, in fact, that a strong program has helped them weather what have been some difficult market conditions globally.
More generally, the authorities have reaffirmed their intention to maintain the macro goals that they set forth and to pursue their structural reform agenda. The new budget guidelines law sets forth the 4.25 percent primary budget surplus as the level through 2007. And the policymakers have recently reaffirmed their commitment to a 4.5 percent inflation target for next year, 2005, which we think is reasonable. Performance under the program is strong. The authorities have indicated they wish to continue to treat this program as precautionary.
Just to note--I'm sure you know, but it didn't come out in the question--that the Seventh Review mission concluded its work last week, and we will be letting you know when the review is scheduled for the Board.
So I think in the context of increasingly choppy global market conditions, I think the Brazilian performance has been pretty strong.
QUESTION: What about the new program? Because the high interest rates in America is going to--
MR. DAWSON: Well, I think you're assuming high interest rates that haven't actually happened yet.
QUESTION: No, no. What--
MR. DAWSON: In fact, real interest rates in Brazil are at a multiyear low. So, again, everything needs to be looked at in context and not in response to weekly--daily or even weekly developments.
QUESTION: What I was saying is that the interest rates in America is going to get up next year, maybe, after the elections. And Brazil is not going to have a program with the IMF. That's what I'm asking you, if you--
MR. DAWSON: Well, I wouldn't take your supposition necessarily that way. I mean, I think, you know, I would refer you back to the Managing Director's comments. I think that if the various authorities handle things well, what adjustments there are are going to be orderly and gradual and anticipated by the markets. And so I don't think that does call for a policy shift, particularly with a government like that of Brazil that has been taking a longer-term horizon, planning horizon to begin with. So I think they are, in fact, as are a number of the countries, taking the kinds of measures that prepare them for the expected course of developments. And if you're so confident on the interest market, interest rate developments, put your own money in there. I won't.
QUESTION: Is the IMF concerned with high oil prices?
MR. DAWSON: The Managing Director indicated certainly the rise in oil prices has gotten attention. We have the rule of thumb about how a US$5 increase in the price of oil sustained over a one-year period has about a 0.3-percent effect on global growth. But if you take a look at futures markets, you see a tailing back down, expected tailing back down of rates in the future, and the global economy generally is able to adjust to oil prices more easily than it did in previous decades. But obviously it's something that bears watching, and I refer you again back to Mr. Rato's comments on Tuesday.
QUESTION: I need a clarification on the [inaudible] of Mr. Rato after his press conference, and I have a question--
MR. DAWSON: On the what of Mr. Rato?
QUESTION: On the press conference of Mr. Rato. Mr. Rato told us that he will be at the meeting of the G-8 Finance Ministers. Has he to be also to the G-8 summit or it's tradition that the IMF general director is present at the G-8 summit?
MR. DAWSON: No. The tradition, although not every time, is that the Managing Director attends--generally speaking, attends G-7 Finance Ministerials and often including the G-8 ones that run up to the Spring Meeting, to the Annual Meeting of the G-8. And so that is the meeting in New York that will be taking place the weekend after this in New York. We do not expect that he will be attending the Sea Island Summit, and, again, that is sort of the tradition. There may have been times in the past where the Managing Director attended it, but it is certainly not the rule.
QUESTION: May I have the question--does the IMF share the analysis made today by the European central bank that energy costs and the U.S. deficit are the two most important risks for the worldwide economy today?
MR. DAWSON: I think we have a global responsibility and we see lots of concerns in the world, and I don't think I'm going to do a listing that cuts off at least than about six or seven. So those are certainly issues, but there are lots of other issues, including structural reform in key regions and resolving imbalances generally which are of a global nature, not necessarily just an individual country.
QUESTION: A lot of observers seem to believe that the Chinese economy is headed for a hard landing. I was wondering what the Fund thinks about that. And could you talk a little bit about how the Fund is at work in China?
MR. DAWSON: In terms of the prospects for the Chinese economy, they remain, I think, quite favorable with strong investment activity, and indeed a lot of attention recently has been drawn to the rapid money and credit growth and the risk of overheating. And so in that context, we welcome the recent tightening of monetary conditions.
We have also been--and I'll get to the second part of your question in a second--of the belief and in close contact with the Chinese that a more flexible exchange rate system would be appropriate, and we remain in contact with the authorities on that. I think the authorities share our views on that issue, as, I might add, they share our views on the need for vigilance on the monetary front. And other areas of priority obviously include the performing of the Chinese banking system where they've announced some steps earlier this year regarding recapitalization of some of the banks and improved regulation and supervision.
In terms of our relationship with China, we have an active relationship with them in the form of technical assistance, in the form of a resident representative office, in the form of actually a training institute in Beijing that works with Chinese authorities. So it's a continuing, intense dialogue. I think it's an excellent example of how we have a relationship with one of our 184 member countries where there is not the issue of a lending relationship, a financial relationship. But it's one that is quite close, with regular visits by senior Fund--by Fund management as well as by senior Fund staff. And I noted earlier the visit by Mr. Kato there next Tuesday, which I believe part of the trip is on the occasion of the annual Article IV consultation discussions, which is what often happens with major economies in the world, when the mission is getting toward concluding the Article IV discussions with a country, a member of management will quite often go to wrap up the talks. I know that Ms. Krueger, for example, has gone to Japan for those wrap-up sessions, so that's the sort--for the Japanese Article IV.
So it's a very close relationship, and I think we and the Chinese broadly see the challenges and opportunities about the same.
MR. DAWSON: By the way, you are all very well trained. I forgot to ask you to identify yourselves, and you're doing it. Tuesday, the performance wasn't quite as strong.
QUESTION: Do I still have to identify?
MR. DAWSON: Yes, please.
QUESTION: In one of your surveys--I think it was in February--it was mentioned that the Fund perhaps might restart lending to Iraq in the second half of this year. Is this rough schedule still valid?
MR. DAWSON: The time--the nature of assistance that we might provide I think was laid out by Managing Director Kohler in his speech in Madrid last fall. It does, of course, require a new internationally recognized government, then we would start being in a position to look toward the possibility of post-conflict assistance. At this point, I can't tell you when those conditions would be met, but the timeline and the--I'm sorry, the sort of schedule that we laid forward, whether the timeline needs to be adjusted, we will just simply have to see. But that sort of procedure is the way we would move forward, and we do indeed--I'm sorry, we have indeed kept in pretty close contact with the Iraqi authorities and the CPA and with regular contacts in Jordan as well as elsewhere.
Actually, I'm just corrected here. Mr. Kato will be in Beijing for the Article IV discussions, but it's actually at the beginning of the discussions because of scheduling issues.
QUESTION: As a follow-up, is it possible that this government that's being put in place after June the 30th is the legitimate government?
MR. DAWSON: That's not--I mean, you're asking the wrong people.
QUESTION: In terms of this deal with Argentina, the delay of the mission, what does it entail? I mean, will the Board take the review later? The disbursements will come later? I mean, what does it-
MR. DAWSON: Well, the Board--I mean, as I said, there's flexibility built into the whole schedule. So whether the Board will actually--whether disbursements will be later than some people may have originally expected or not, I think it's too early to tell. I would note that the delay of the mission was at the request of the Argentine authorities. So that's the--I think that's the first point I'd want to make.
What it means going forward, I think it reflects--what it really reflects is the Argentine authorities are very busy right now, both with dealing with their debt issues but also--the external debt issues, but also with dealing on getting the agreement at the intergoverment--within Argentina on some of the structural reform measures that are necessary.
So it's not a surprise, it's not concerning, and we'll worry about what the actual dates are a little bit later. But it doesn't mean that the review will be delayed, but the review in terms--part of your question was disbursements. Disbursements await the conclusion of a review, which awaits the mission. But these things can be compressed somewhat, and there's always flexibility built in to begin with.
QUESTION: Is there any payment that [inaudible]?
MR. DAWSON: There are regular payments due. You can check on the website as to what they are. They're all specified there.
QUESTION: Tom, back on Iraq, I mean, would you expect some sort of framework for lending to be in place on June the 30th?
MR. DAWSON: I'm not quite sure what a framework for lending is. I don't think we particularly have that concept--
QUESTION: Well, some idea how the lending would move forward.
MR. DAWSON: Well, we've specified--
QUESTION: So that it would move, quote, `quickly.'
MR. DAWSON: We've also already specified sort of what the possible path of developing toward financial engagement would be. So that's--I consider that sort of what a framework is.
I should also note in these couple questions on Iraq, I haven't--I forgot to mention that we also are continuing to work on the debt sustainability issue, and that will clearly be something that needs for people to have a sense of comfort with before you go forward with a lending arrangement.
QUESTION: But with the talks at the moment with the Iraqis, is--that includes talks on an emergency--post-conflict lending?
MR. DAWSON: It certainly includes--it includes the parameters for a program going forward for this year and at least notionally for beyond that, and that--meaning their program, I don't mean a lending program. Their economic program. And that, of course, is a requirement for post-conflict assistance, and I direct you to the website where I'm sure we have information on how the post-conflict assistance is designed. And it is for exactly this kind of a situation where assistance is provided in a post-conflict fashion fairly quickly. So once the preconditions are met, it doesn't take--it's not that difficult for that process to go forward. But those are some conditions that are on the political level that were referred to earlier as well as needing to get the debt sustainability issue defined satisfactorily.
QUESTION: Could you give us an update on Venezuela? And, also, I was wondering if--could you comment on the fact that, you know, right now things in Venezuela are not easy? There is a very volatile social situation. The government of Venezuela seems to be more focused in this area, I mean in the political arena rather than the economic arena. I just wonder, I mean, the fact that the country is going through this situation, does that make more, you know, difficult the task of the IMF mission down there, or--
MR. DAWSON: I don't have a report--I mean, as we had indicated I think at the last--my last briefing, you know, that we have a mission, but I don't have any report on what they're doing. So I'm just going to have to take the question. If we have anything, Bill will make sure that you all get an answer. But I have not heard anything back from the mission, and Francisco will follow up.
QUESTION: Yes, on Iraq, you said you are going to work on debt sustainability. Do you know how much debt there is left? Are you aware of discussions on debt forgiveness?
MR. DAWSON: In terms of the magnitude of the debt, I mean, Mr. Murray can direct you to the website that shows, you know, estimates and ranges, and as far as I know, those ranges have not particularly changed. We are working not on the debt quantification issue but on the debt sustainability issue.
Thank you very much. We'll lift the embargo at ten minutes after 10:00. See you hopefully in two weeks.
IMF EXTERNAL RELATIONS DEPARTMENT