Transcript of a Press Briefing by David Hawley,
International Monetary Fund
Senior Advisor, External Relations Department
Washington, D.C., Thursday, February 12, 2009
|Webcast of the press briefing|
MR. HAWLEY: Good morning, ladies and gentlemen, and good morning to those of you joining us on the Media Briefing Center for this, one of our regular briefings. I'm David Hawley, Senior Advisor in the External Relations Department.
Let me start by mentioning some events and management travel.
On February the 13 and 14, the Managing Director, Dominique Strauss-Kahn, will be in Rome attending the G-7 meeting of finance ministers and central bank governors.
On February the 19th, he will be delivering the keynote speech at the 2009 Global Forum on Competition, an event organized by the OECD and which will take place in Paris. After the speech, he will participate in a joint press conference with the Secretary-General of the OECD, Ángel Gurría. The press conference will be webcast live.
Deputy Managing Director, Takatoshi Kato, will participate in the Extractive Industries Transparency Initiative—that's the EITI—High-Level Global Conference in Doha, Qatar, from February the 16th to 18th. With those brief announcements, let me turn to questions.
QUESTIONER: Do you have a date for the next visit of the IMF mission to Turkey?
MR. HAWLEY: No, I don't have a date for the next mission. Discussions are continuing with a view to finalizing remaining issues pertaining in particular to the medium-term fiscal reform agenda. Of course, in addition, we need to finalize discussions on conjunctural issues, especially fiscal policy in 2009 and the policy responses in the event of a further worsening of the global environment.
QUESTIONER: Can you tell us what's holding up the Ukraine loan, what kind of problems they're having, budget problems that might be preventing it, and when they would be likely to get it? Thank you.
MR. HAWLEY: I'll fold this question in, if I may, with a question that's come on the Media Briefing Center asking when the final decision on the second tranche of the loan is to be taken and what measures should be urgently taken in order to receive the money.
Let me bring you up to date on where things stand and what might be the situation going forward.
As you know, the mission recently left Kiev after discussions on the first review under the arrangement. A statement was issued at that time, which said that progress was made in discussions on fiscal, monetary and exchange rate policies and on measures to strengthen confidence in the banking system, but that a few issues remain outstanding. Discussions between the authorities and Fund staff on these outstanding issues will continue in the coming weeks, and we expect the mission to return to Kiev to continue these discussions.
Now you may be aware that one of the outstanding issues is on the fiscal side, where we need to find agreement on how to contain the general government deficit in 2009. The budget deficit under consideration in our discussions already excludes the deficit of about 4.5 percent of GDP, which is related to the bank recapitalization. So, regarding the remaining deficit, different options are being contemplated on a fiscal stance that will help the economy stabilize without undermining public finances.
Other issues include monetary policy, as well as the restructuring of the banking sector. We're continuing discussions on policy implementation on these issues as well, so that confidence in the banking and financial system can be restored.
Let me add one final point: our experience in many countries shows that a strong commitment by the authorities to getting the country's economy back on a path of sustainable growth is the key to success in these economic programs. So strong crisis management is essential to implement coherent and credible policies that will help the country overcome the crisis.
QUESTIONER: I just wanted to ask more generally that given that just a few months after giving the loan to Ukraine you're having to essentially revise the loan conditions or soften them slightly, is there a risk that other loans made to Eastern European countries have been somewhat too strict and budget conditions may now have to be relaxed?
MR. HAWLEY: No, I don't think you can draw inferences from the course of discussions on a particular program review in one country for other programs.
QUESTIONER: Is the resignation of the finance minister going to obstruct, I mean, going to influence anything going forward?
MR. HAWLEY: We've seen the news this morning, as I'm sure you have, about the resignation of the finance minister. I think it merely serves to underline the point I made about the importance of strong crisis management, strong crisis management being essential to the success of an economic program.
QUESTIONER: In the Article IV Consultation on Italy you mention the resilience of the Italian banking system. And I was wondering if you could articulate and explain why you see this particular strength in the system in Italy. Do you think it depends on the low level of indebtedness or the low international exposure?
MR. HAWLEY: While vulnerabilities have risen, the Italian banking system has been relatively resilient, and although it has come under stress, the financial system as a whole remains solid. No institution has failed or fallen short of regulatory requirements.
There may be a number of factors that I could mention that explain this state of affairs: the traditional relationship-based banking business model that has supported a broad and stable funding base, relatively low leverage ratios on average, comparatively high quality traditional asset portfolios, and relatively low reliance on wholesale funding.
QUESTIONER: I wanted to ask about a new idea put forward by the President of Kazakhstan, Mr. Nazarbayev. He published a major article recently in a Russian newspaper arguing for a global currency unit that all countries in the world, big and small, would be stakeholders in. He believes that the current system does not have such controls. Basically, my question is: Is this an idea that the IMF would support even in principle?
MR. HAWLEY: I'm afraid I don't have an immediate answer for you, but I'll make sure my colleagues in Media Relations get back to you on that.
QUESTIONER: Have you seen the article?
MR. HAWLEY: I haven't. I'm aware of the article. I haven't read it.
QUESTIONER: I actually sent my questions ahead.
MR. HAWLEY: I know you did, and we're still working on a response to you, and Media Relations will come back to you on that.
QUESTIONER: Could you elaborate a little bit more about what you said on Turkey, specifically about the fiscal policy regarding 2009 and what precautions that should be taken in case of emergency? Is that what I heard correctly?
MR. HAWLEY: Let me repeat what I said. I'd explained that discussions are continuing with a view to finalizing a number of remaining issues, and we need to finalize discussions on conjunctural issues, especially fiscal policy in 2009 and policy responses in the event of a further worsening in the global environment.
QUESTIONER: Any more details about why these are not moving forward? Is it because of the elections coming up? Any reason why?
MR. HAWLEY: I don't have further elaboration.
QUESTIONER: Ukraine reportedly is seeking financial assistance, loans, from other countries. Does that in any way influence the IMF program? Is there an understanding when the IMF does a program with a country that that's basically the exclusive source of external finance, something like that?
MR. HAWLEY: Look, if Ukraine or, indeed, any other country in similar circumstances got additional external financing, which is the question you're asking, this additional budget support would temporarily alleviate the immediate financing constraint. A higher deficit could then be considered, which could help boost domestic demand and smooth the economic adjustment. It would alleviate the financing constraint, yes.
QUESTIONER: Has Pakistan requested another set of loans from IMF and what's the state of the present one?
MR. HAWLEY: We have an existing loan with Pakistan, and an IMF team will be meeting a Pakistani delegation in Dubai between on February the 14th and 26th to hold discussions on the first review of this arrangement with Pakistan and on the annual Article IV Consultation.
QUESTIONER: You saw yesterday that the Irish government recapitalized the banks. Do you have anything for us on that? And I just want to ask directly, is the IMF in talks with Ireland at the moment?
MR. HAWLEY: I've got nothing for you specifically on the banking developments that occurred yesterday. But, on Ireland more generally, I would say that Ireland faces a difficult economic situation and will need to take steps to manage the financial sector and fiscal risks. However, we do not envisage that IMF financing will be needed to deal with these problems.
QUESTIONER: Just coming back to the United States, you've seen Treasury Secretary Geithner unveiling plans. Does the IMF think that they need to move quickly, more quickly on this stuff? Do you think that there was something that was lacking in that plan? Any comments?
MR. HAWLEY: The plan you're asking about sets up a comprehensive strategy and one that is broadly in line in with our view from the Fund for the actions needed to put the U.S. financial system in order. In particular, it's got the elements of asset-loss recognition, bank recapitalization and removal of bad assets from the banks' balance sheets. Of course, it's important to move quickly to flesh out key details and to implement the plan.
QUESTIONER: How about a date for the mission going back to Ukraine?
MR. HAWLEY: I don't have a date for the mission going back to Ukraine.
QUESTIONER: Do you have any comments on what you're expecting from the G-7, What the IMF's role is going to be?
QUESTIONER: I think Secretary Geithner is meeting with the Managing Director of the IMF today. Any details on that?
MR. HAWLEY: Yes. Secretary Geithner is meeting with the Managing Director today. They'll be discussing the global financial outlook. I should note that meetings between the Managing Director and the authorities of member countries, including the U.S., take place regularly.
QUESTIONER: Is there going to be a readout from that?
MR. HAWLEY: I don't know at this stage whether we'll give you a readout.
Let me come back to the global currency question. I'm afraid we don't have the specific comment on the paper you're describing.
If there are no more questions, we'll end the briefing here. Thank you.