Transcript of a Press Briefing by Masood Ahmed

Director of External Relations Department
International Monetary Fund
Washington DC
Thursday, June 22, 2006


View a Webcast of the press briefing.

MR. AHMED: Good morning, I am Masood Ahmed, and this is our regular press briefing. As always, this is going to be embargoed until 11:00 Washington time. That is 15:00 GMT.

I would like to start with a few announcements, please. First of all, travel by the Managing Director, just to mention that the MD will be traveling to Madrid tomorrow to meet with a group of African governors to talk about issues surrounding governance of the IMF. There will be a press conference tomorrow after that, and I think the time for that is fixed for 11:00.

Secondly, if I could mention that we have started now comments on the External Review Committee on the Bank Fund Collaboration. You may remember that the IMF and the World Bank set up a public committee to look at collaboration between the two institutions in March. That committee has now asked for public commentary. That is on our web site, and the public comment period is expected to close on September 15. We expect that the committee will report back to the two institutions before the end of the year.

Third, I would like to mention that we have just issued a press release on debt relief for Mauritania, which is the 21st country that has now received debt relief under the MDRI. The amount for Mauritania is $49 million.

The fourth thing I would like to bring to your attention is that we are releasing today the six-month work program of the IMF. This is something that veterans here will recognize. It is something that we have done every six months, but I would encourage you to look at this particular one because it does lay out a detailed roadmap and the events and the calendar over the next six months in implementing the medium term strategy.

I would like to bring to your notice three areas in which we expect to make progress over the next six months. The first one is surveillance. As I mentioned when we last had this meeting, on surveillance, one element of it is to move forward on strengthening our multilateral surveillance, in particular through these multilateral consultations. The work program lays out how we will move forward on that. Beyond multilateral consultations, we are also strengthening our surveillance on the bilateral side, and in particular, we are planning to, over this period, begin to look at a 1977 decision of the Executive Board which forms part of the foundation of the Fund's work on surveillance. Before the annual meetings, the Board will have a preliminary discussion of that decision. We are also, over the same period, trying to strengthen our surveillance by improving the work we do on analysis and assessments of exchange rates, in particular looking at bringing in emerging markets into the work we do on the consultative group on exchange rates. Finally, we are going to be strengthening the way in which financial sector issues are integrated into our surveillance work.

The second area we are aiming to make progress on is governance and the governance of the IMF. As you know we have work underway following the IMFC meeting in the spring which asked the Managing Director to come back for the September meetings with concrete proposals, actual proposals on quotas and voice. In that context, he is now consulting broadly with the membership, with the view to coming back with a package that can command broad support.

The final area that we are planning to make progress on is on emerging markets and crisis prevention. In particular, what we are aiming to do in the lead-up to the annual meetings is to work on developing a crisis prevention financing instrument and to assess how best we can help countries through reserve pooling arrangements. Again, what we aim to have between now and September is a preliminary discussion of those instruments, and this will then be finalized after the annual meetings.

All of this is set out in the work program. The work program also goes over other areas of the Fund's work. As I said, I encourage you to have a look at it.

Let me end with a little bit of housekeeping. David Hawley, whom all of you know, has been running our media operations in the External Relations Department. He is now moving from that job to join me in the front office of EXR where he is going to have oversight of media and other activities. For the moment, Bill Murray, whom you all know as well, is going to be Acting Chief of the Media Relations Division, and we have started a process of recruitment for David Hawley's successor.

Now, I will turn to questions. As always, please identify yourself when you ask your question.

QUESTION: I have several questions. One, is there any reason why these specific three areas have been chosen for these six months? What happens to the rest of them? Do they come after the annual meetings?

The other one is specific on the exchange rates issues and the findings of the consultative group on exchange rates. Who is this group? I see the finding won't be published. Was that kind of a broad decision and why not?

MR. AHMED: Let me take those two questions, and then if you have others, we will come back to those.

On why these three areas, it is simply a question that, although there is a section in the work program that you will find which is called "The Continuing Work of the Fund," which demonstrates that we are moving on a whole range of issues, including the Fund's work in low-income countries and work that we are doing in other areas. These are three areas where, over the next six months, we believe we can make substantial progress, and these are also the areas that we believe came out of the spring meetings as those where the membership felt there was a need for us to make, if you like, a step increase or a movement in what we were doing. That is why they have been highlighted for this period.

On the consultative group, the consultative group for exchange rates has done its work for a while. The main difference now is that, instead of focusing just on looking at equilibrium exchange rates for the industrial countries, we will also be broadening its scope to cover some of the emerging markets. That work has been and will remain internal because we think that it would be too market sensitive to put that stuff out, and also because this is analytical work that is based on models which are useful to inform decisions, but, as you know, models of equilibrium exchange rates, in and of themselves, can only give you pointers.

QUESTION: Mr. Blair, in speaking at a university a couple weeks ago, hinted at the possibility of merging these two organizations. Does this work that you refer to go so far, and has this idea been discussed anywhere in this proposal?

MR. AHMED: The work that this group is doing is to try to look and see whether there are areas of work where there is either overlap or interaction between the Bank and the Fund that could be made more effective, either through better division of responsibility or through clarification of ways in which the two interact in those areas. It is not looking at the question of whether or not the two institutions ought to be merged, and as far as I am aware, there is no work underway to that effect.

My recollection of the precise wording of that speech that the Prime Minister of the U.K. gave was that it went on to talk about there was need to do reform regardless of looking at whether or not the institutions ought to be merged.

QUESTION: I have two questions. The first one is about the first consultations which will be on global imbalances. Who in our circle will participate in it? In this communication, there is a phrase that the Board will be brief shortly on these modalities for the first consultations. What do you mean by modalities? That is the first one.

MR. AHMED: Let me start with what we mean by modalities. Simply, how will these be carried out? What will be the process by which they will be undertaken?

What we are trying to do in this particular consultation, as we set out in the press release, is to bring together a small number of economies which either have large current account surpluses or deficits and intervene between them account for a substantial share of the economy, so that they can act to address ways in which these imbalances can be contained while maintaining robust growth.

What we have tried to do in that context, therefore, is to brief the Board on how this work is going to proceed. As I said, the aim is to carry this work out through the course of this year. It will entail discussions with the individual economies and ultimately bringing them together at both the official and policy levels. The Board will be kept informed of this, and as the press said, at the end of the process, there will be an opportunity for all members of the Fund represented in the Board to provide their perspective on this work.

In terms of which of the countries are going to be involved in this first multilateral consultation, it is China, the Euro Area, Japan, the United States, and Saudi Arabia.

QUESTION: If the discussions will be in June, can you specify the date?

MR. AHMED: No. The discussion that you are thinking of is simply our briefing the Board on modalities. The actual process will unfold over the course of 2006, and as we said, we expect this work to carry out during then remainder of this year.

QUESTION: It seems that, looking more broadly at what is happening, it looks like this is still in early stages, or do you think there has been substantial progress made until now and this is just basically putting it on paper and making sure that it is going to be ready for the annual meetings? Do you think there will be substantial issues on paper enough for September for the annual meetings to move forward on this, or do you think there will be more discussion after that? I am just trying to figure out how long this is all going to take.

MR. AHMED: Are you referring to a particular element of the work program or broadly?

QUESTION: The first three.

MR. AHMED: I think you are right to say that some of this work will span beyond the annual meetings. The nature of the issues is such that it is not feasible to expect to address global imbalances through some artificial timetable that we impose on ourselves. The thing to do, as the Managing Director has been saying, is to make sure that we embark on a process that is going to deliver results and to do it right, rather than to set ourselves on an artificial deadline.

That said, I think on the area of quotas and voice, there is an expectation that work will have advanced enough by the time of the meetings in Singapore for ministers to be able to make substantive decisions in initiating or in taking that work forward.

QUESTION: Rodrigo de Rato tabled these proposals for the quotas in April. Does that still seem to be the main gist of how to move along in this way, or are you getting a sense that there has been a lot more movement? The U.S. and the developing countries want a comprehensive plan by September, which is a lot of political mess to wade through by then. The Europeans are not that keen for that to happen. How much progress do you think you can make?

MR. AHMED: I think what I can say now is that the Managing Director tabled a set of proposals at the spring meetings. There was an endorsement by the IMFC of the need to move forward and for him to come back with a set of concrete proposals for September. He has indicated that is what he intends to do. He is now consulting broadly with the membership to try and ensure that the proposals that he comes forth with will command broad support. That is the current plan, and we are right in the process now of having those discussions.

I think that it is closer to the date that we will then have a set of proposals to be able to say this is what is going to be taken forward. We are not at the point now where we can say this is the set of proposals that is going to go forward.

I had one question on the Media Briefing Center, but the technology seems to have made it disappear. If it does reappear, I will come back to it.

QUESTION: Is there going to be a concrete proposal on new quotas for the Singapore meetings?

MR. AHMED: Our expectation is that for the Singapore meetings, we will come forward with a concrete set of proposals.

Can you try to get that question back? Perhaps since we can't get it in technologically, can one of you simply read that question, and then I will answer it.

QUESTION: Can you comment on Hungary's new fiscal consolidation plan as it seems that you disagree on the government's numbers about the fiscal outlook?

MR. AHMED: What I would like to do, first of all, is just refer you to the fact that at the end of the Article IV mission which ended on June 6th, we did put up our concluding statement which has our assessment of the situation. I should also say that even though the fiscal package came out somewhat after that, much of the information on the package was publicly known in broad terms at the time that the staff were there, and therefore fed into their assessment of it. Finally, I should say that our view of that is that, while this is very welcome, there is probably more to be done to ensure that the deteriorating macroeconomic situation, in particular the state of public finances, is addressed. That is our current assessment of it.

QUESTION: I would like to ask a question about my country, about Russia. There is a big discussion right now in Moscow, and some economists say that the ruble exchange rate, as well as the euro, is too low due to the fact that they constantly say of the necessity to curb inflation and they have quite big oil revenues. They say that the government should raise the exchange rate of the ruble. Everybody is doing it, as well as against other world currencies. Do you have any position on that? Do you think it would be a good measure? Thank you.

MR. AHMED: I don't have a position on the exchange rate in Russia.

QUESTION: I have two questions about exchange rates. The first one is on Turkey where there is a lot of volatility with the lira. There has been some discussion on the possibility of Turkey maybe adjusting the inflation target. Does the IMF have any view on that one? The second one is we have seen the Chinese yuan strengthening against the dollar. It has been a gradual rise. I was wondering if you also have anything on that?

MR. AHMED: On Turkey, as you say, there has been a correction. In some ways, it is not an unwelcome correction, given where the markets have gotten to. We think that the government has taken a strong set of steps to stabilize the situation and to address it, and in particular, through the tightening of monetary policy and the recent 175 basis point increase in interest rates. Going forward, we have no doubt the Central Bank will carefully reassess developments and take whatever actions are necessary to keep inflation in line with their medium term targets.

On the exchange rate movements in China, without getting into specific movements of the exchange rate, what I can say is that the IMF, for quite some time now, has welcomed the flexibility that was introduced into the system in China in July of last year. We have, at the same time, since then, encouraged the Chinese authorities to make use of that flexibility. We believe that greater use of the flexibility in the exchange rates would be helpful for economic management in China, and that continues to be our view.

Thank you very much. Just to confirm, our embargo is 11:00. I will also say that our next press briefing will be the 6th of July.



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