Transcript

Director of External Relations Department
International Monetary Fund
Washington, DC, Thursday, October 27, 2005

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MR. DAWSON: As usual, the briefing is embargoed until 15 minutes after conclusion, and I will set a precise time at that point. I'd like to flag a couple of items before I take your questions.

The Managing Director will deliver a keynote speech on November 3rd at the 23rd Annual Monetary Conference of the Cato Institute on Monetary Institutions and Economic Development. We do plan to post the Managing Director's address on the website and Media Relations will be sending the text to the press as well. I would note that it's also the day on which the Jacques Polak Research Conference will be taking place as well, and the Managing Director, I believe, makes opening remarks there.

On November 4th the Managing Director will be in Paris, France, for some meetings including a meeting at the Banque de France, and I expect we will have his comments at that meeting posted as well, and I expect that we will have a press briefing at the Paris office of the IMF on Friday, November 4th, in the morning. For those of you with Paris offices, we will put out a notice as we have done in the past so that he will be available to take questions there.

Also on November 4th, the Fund will hold a round table discussion entitled "Reforming the IMF: Governance and the Executive Board." The discussion will be moderated by Jonathan Ostry, a Senior Adviser in the Fund's Research Department. The panelists will include Charles Calomiris, the Henry Kaufman Professor of Financial Institutions at the Columbia University Graduate School of Business; Lisa L. Martin, the Clarence Dillon Professor of International Affairs in the Government Department at Harvard University; Jong Nam Oh, the IMF's Executive Director representing 14 countries including Korea, Australia, New Zealand, the Philippines, the Seychelles and nine Pacific Island countries; also Tom Scholar, the Executive Director for the United Kingdom, jointly at the Fund and the Bank, he is the Executive Director; and Ngaire Woods, the Director of the Global Economic Governance Programme at University College, Oxford.

The discussion will be held at the IMF Center, again, on November 4th, and more details including registration information is available on the Fund's website, and we will be sending a note to the press as well.

I'd like now to turn to questions. Before though I'd first like to welcome the press that are watching via the Media Briefing Center's webcast. Feel free to submit your questions. I'll do my best to answer them during the briefing, but if I cannot, let me assure you someone from Media Relations will follow-up with a response after we conclude the press conference.

With that I would be happy to take any questions you may have. As usual, observe proper decorum by identifying yourself and your institutional affiliation.

QUESTIONER: Could you give us an update of the state of play with things with Argentina following the weekend election?

MR. DAWSON: In terms of Argentina, there have been no specific developments since the last press conference. As always, we maintain an active dialogue with the Argentina authorities both here and through our Resident Representative Office in Buenos Aires. In terms of the elections, we take note that they've happened, we believe in elections, but I don't think it's proper for us to comment on the details of the election results.

QUESTIONER: Is there any measure of when the negotiations could start?

MR. DAWSON: I think that, as I've indicated before, we maintain an active dialogue with the authorities and in terms of when are the next steps at this point it's very much I think in the Argentinean government's decision and judgment as to how and when they wish to proceed.

[Pause]

Your editors aren't going to pay you if you don't ask questions.

QUESTIONER: Following the Managing Director's--

MR. DAWSON: I just received an email from the Cato Institute about this conference saying only one week left to register so everyone can get that in there!

QUESTIONER: Following the Managing Director's trip to China, are there any further developments as far as the reevaluation? He has been consistently saying that they need to do more, but have there been any further requests, or have there been any requests I suppose to look into China's currency?

MR. DAWSON: No. I mean, I think there was attention during the time of the visit which it was of course also the time of the G20 meeting in China, and I think with that visit past, maybe it is useful for me to simply reiterate what our position is. But to sort of give you an advance in terms of new developments and so on, I think our position in our view, our position remains the same, that the authorities have taken important steps to slow credit and fix investment growth to more sustainable levels. However, it's clear that the pace of the economic activity remains strong, and there is a lot of attention toward the possibility of risk of resurgence in fixed investment growth especially given the excess liquidity in the banking system. Reforming the Chinese banks is a top priority which includes improvements in risk management, internal controls and governance.

We continue, we welcome, as we've said previously, the change in the Chinese exchange rate regime. Obviously it's an important move toward greater exchange rate flexibility, and the authorities are encouraged as we've said before to fully utilize the flexibility in this new exchange rate regime because greater exchange rate flexibility is very much in China's interest as it would provide more room for monetary independence and enhance the government's ability to manage the economy. It is also in the interests, of course, of the rest of the world, so it's a win-win proposition.

QUESTIONER: The present Bush appointee, Mr. Bernanke, the next Chairman of the FRB. As you know, Mr. Bernanke is very active to take inflation targeted monetary policy. So what is the IMF's position about the monetary policy taking the inflation target?

MR. DAWSON: First of all, let me remind you that the Managing Director did issue a statement on the occasion of Mr. Bernanke's nomination to be the Chairman of the Fed, welcoming the appointment, noting his very strong qualifications and we do look forward to working with the Federal Reserve system, as we have a close relationship with them.

With regard to inflation targeting, we have 184 member countries. Quite a few of them have successfully embraced inflation targeting regimes. It's fundamentally the choice of the countries themselves as to whether they have the institutional framework, desire, political situation, to be able to do that. It's been very successfully used in a number of countries, but I would note that there is not a one-size-fits-all approach either to monetary Fund policy or to the Fund's position on it.

Not to point any of my colleagues on the spot, that could be something you might want to ask some of the economists on the fringes of the Jacques Polak Research Conference. Or for that matter, at the Cato Institute. I want to encourage you to attend their conference, too. I have actually learned a lot about inflation targeting in the last six years.

QUESTIONER: I wondered if you could comment on current trade talks, disputes over agriculture subsidies and IMF's role entering the Hong Kong--

MR. DAWSON: Well, first of all, the World Trade Organization is the venue and the forum and the lead international institution in these talks. The Fund has been and remains a very strong supporter of the Doha Round of trade talks, and within our mandate we have been trying to assist countries, taking advantage of the Round and also deal with any consequences in the Round with our Trade Integration Mechanism, for example, that was introduced a year or so ago that I think two or three countries have taken advantage of.

I mean, we are in terms of an institutional viewpoint very much in favor of further and broader trade liberalization, and a successful conclusion of the Doha Round we think would have a tremendously positive effect not only on the global economy, but in particular on the poorest countries, providing them with access to global markets including, I should add, trade among the poorer countries themselves.

I think I would leave it at that, it is not our job to comment on the process of negotiations, although we obviously are following them and look forward to a Hong Kong meeting that is successful.

QUESTIONER: Do you have please any update on two items, the debt reduction and the Iraqi problems?

MR. DAWSON: What was the first question?

QUESTIONER: Debt reduction.

MR. DAWSON: The G8 debt proposal. We are continuing to work on the debt proposal and expect we will meet the goal that had been set in terms of having the agreement concluded, approved by the Board by the end of this year, calendar year 2006. So that was just on the G8 debt proposal.

In terms of the state of discussions with Iraq, the staff have been discussing with the Iraqi authorities a possible standby arrangement. We are making and have made good progress on the main economic elements of a program that could be supported by the Fund. We have said previously and I would reiterate that we seek to conclude a standby arrangement by the end of the year, again, this calendar year, and have absolutely nothing to indicate at this point that that is not possible. Indeed, I would stress if there's one word to take out of this, that progress is indeed being made.

And we would expect to have perhaps a more precise time line within the next two or three weeks and will certainly let you know at that point. So I think the word as I said I would emphasize in this one is progress.

QUESTIONER: Following-up on actually both of those, with Iraq, does the IMF currently still have nobody on the ground? Is there still nobody in Iraq?

MR. DAWSON: We do not have a resident mission, and of course we don't discuss, because of security concerns, movements and how discussions take place and so on. But we do not have a mission there or a Resident Representative there. That is correct.

Let me assure you, that does not impede the ability to have discussions. This is not a situation unique to Iraq. I am familiar with examples in a number of continents where for a variety of reasons missions have been unable to visit a country, Resident Representatives have been unable to be stationed, and we are still able to work with the authorities and develop programs and provide assistance.

QUESTIONER: Also on the debt relief, would you be able to offer and further guidance sooner rather than later by the end of the year? It seemed that during the meetings that there was--

MR. DAWSON: For someone who has only 14 weeks left to work at the Fund, the end of the year strikes me as rather sooner than later. I should also note that we do tend to slow down sometime around the 20th or so of December, so we're not taking a very long period from now. I would expect by the time of my next press briefing we probably would have a specific time line for you.

Having said that, my next press briefing is likely to be in three weeks because of my own travel, just so you know. That probably will be the 15th or 16th of November, and I would expect by then we would have something more specific. If we have it a few days more earlier than that, we will let you know. It doesn't have to wait for the briefing.

MR. DAWSON: I have a question that has been submitted [via the Media Briefing Center], "Is the debt reduction agreement to be approved by the Board at the end of 2005 or 2006?" Two-thousand-five, this calendar year. Thank you, Heather.

QUESTION: Just another follow-up on Argentina. You mentioned in your last press conference about the currency and so on about the inflation in Argentina. There have been some talks in Argentina also about trying to reach an agreement, a social agreement, between companies and unions about salaries, wages. Is there any comment about that?

MR. DAWSON: I have indeed seen references in the press to that. I do read the Argentine press every day. I still have Clarin and Nacion on my personal favorites at home, but I do get a summary now from the Resident Rep Office so Clarin and Nacion aren't what I open my screen to every morning first, but I don't have comments on that particular discussion. We obviously do follow it.

QUESTIONER: I just was reading your Annual Report for 2005 and it just gives a very rosy picture of the world economy at large. I'm just wondering if you could comment on the impact of the rising oil prices on countries like Bangladesh, India, Pakistan and the countries that really depend on the import of oil. What do you foresee about these countries? Thank you.

MR. DAWSON: You introduced your question I think quite appropriately in terms of the overall picture of the global economy is a strong one and we forecast it to remain strong in the balance of this year and into next year. Obviously the situation varies from country to country, and quite frankly, the way to address that is to look at what each country is doing, and we certainly are mindful that this has differential impacts particularly on poor and emerging market countries that are oil importers.

At the same time, we have been impressed with the number of countries that have taken the proper policy responses to deal with the rising oil prices, and we continue to see a reasonably solid, robust growth prospect in a wide range of countries including a number of the ones that you mentioned. I'm not in a position here to go through a detail of the effect on each of the countries you did, but you might wish to follow-up with the press officers and we can point you to on the three countries you mentioned what our most recent analysis is as well as what perhaps, if it's appropriate, to touch base with some of our staff on that.

But clearly what has been impressive is the continued momentum in the growth in the global economy. At the same time, obviously the oil price has a greater adverse effect on some countries and we are mindful of that and stand ready to assist countries that need advice on how to do with that, just as in the context of the region you mentioned, we stand ready to assist countries in the context of natural disasters. That is part of our job.

QUESTIONER: Could you please just give some examples? You said there are some countries that have taken major--in view of the price increase and they're doing well, and could you just name some of the countries?

MR. DAWSON: In terms of taking the kinds of measures that are necessary, for example, to allow the economy as a whole to pass through the effects of rising oil prices while at the same time protecting those most adversely affected who cannot bear that burden which, therefore, as the Managing Director refers to it as having an active social policy that deals with those who have trouble bearing the burden of the higher prices but at the same time reduces the sort of subsidies in countries particularly in the context of rising oil prices can introduce significant distortions and diversions of public revenues to sectors of the economy that don't need the assistance at the price of those sectors that do need the assistance. This is, frankly, one of the lessons learned from past crises and countries are taking those sorts of measures.

As I say, I expect the next briefing will be in three weeks. If we do have additional news, and the question I think of Iraq was the one that's mostly likely, but possibly on the G8 deal as well, we certainly will let you know.

So we will lift the embargo at 25 minutes of 11:00, Washington time. Thank you very much.