Transcript of IMF’s Bi-Weekly Press Briefing by Caroline Atkinson

Washington, D.C., Thursday, June 4, 2009

Webcast of the press briefing Webcast

MS. ATKINSON: Welcome to the regular IMF Press Briefing. I am Caroline Atkinson, Director of the External Relations Department of the IMF. I am welcoming those of you in the room and journalists participating through our Online Media Briefing Center.

I have a number of calendar items to announce, but before that let me brief you on the IMF's Work Program which was discussed by Executive Board yesterday. A press release covering that board meeting and the Managing Director's statement on the Work Program will be released after this briefing. As you know, we establish a Work Program every six months—the Executive Board does. The current program outlines our work priorities in a period leading to the Annual Meetings in Istanbul and the schedule for board discussions and decisions on a number of critical surveillance, policy and governance issues.

The heavy agenda reflects the responsibilities that have been assigned to the Fund by the international community and the needs of our membership during this global economic and financial crisis. You will see also to the agenda the Work Program from the last 6 months which was also a heavy one has been basically broadly repeated, and you've been reporting on that.

Looking forward, our work will focus on crisis response, global financial architecture and the financial system and governance. It will include finalizing the steps to boost our financial resources so that we have sufficient funds available for helping member countries in a crisis. This includes the general SDR allocation of $250 billion to increase global liquidity. We will also expect to complete the overhaul of our lending framework to low-income countries to make lending more flexible and effective. We will be continuing to assess the policy actions that countries have been taking during the crisis with the intent of drawing lessons from the experience so far to feed into our policy advice on crisis management and exit strategies. It's a little bit new for us to be doing this kind of an assessment at this stage, but we want to be more quickly responsive.

We will also be looking to assess vulnerabilities to unexpected shocks and conducting early warning exercises, as you know. On the architecture and financial stability, apart from improved surveillance we will be advancing guidelines and best practices on regulatory reform, work that we will do in conjunction with the Financial Stability Board and others as we all in the international community are working to restore global financial stability.

Finally, we will be pursuing quota and voice reform and reform of the Fund's governance structure. So you can see we have an ambitious agenda until the Annual Meetings. We do hope to make progress on these issues by early October.

Let me now turn to announcements of public events and activities in the coming weeks. First of all, on country matters, next week on June 8 we will release the concluding statement of the Article IV consultations with the Euro Area, our annual consultations. European Department Director Marek Belka will be available for brief comments to the press following the Euro Group meeting in Luxembourg in the evening of June 8 in Europe.

The following week on June 15 we will release the concluding statement of the Article IV consultations with the United States, and First Deputy Managing Director John Lipsky and Western Hemisphere Department Director Nicholas Eyzaguirre and the mission will brief the press on that occasion, and Media Relations will circulate the final details of these too.

Turning to management and the Managing Director's events, next Monday, June 8, the Managing Director will deliver the keynote address at the International Economic Forum of the Americas in Montreal. The event is open to the press. We'll let you know if we have an advance version of the speech. Later that week on June 12 and 13, the Managing Director will attend the G-7/G-8 Finance Ministers' meeting in Lecce, Italy, and we'll advise you later on whether there will be press availabilities. On June 15 to 18, the Managing Director will go on from Lecce to visit Central Asia. He will be going to Kazakhstan, Tajikistan, the Kyrgyz Republic and Uzbekistan. This will be his first visit to the region as Managing Director. He will meet with the authorities of course, but also with parliamentarians, representatives of civil society and academics, and he will discuss how the crisis is hitting this region and these countries and how best the IMF can help them.

The First Deputy Managing Director John Lipsky, beginning today, is attending the International Economic Forum in St. Petersburg, and he will participate in two plenary sessions which will be open in that forum, the first on Post-Crisis Financial Architecture, and the second on the Future of Reserve Currencies. And we will again advise if there is advanced text of his interventions.

Next week on June 16 to 18 Mr. Lipsky will be traveling to Turkey to deliver the keynote speech at a regular conference organized by the Turkish Business Association TÜSIAD. That is open to the press and we will have a press release and a text of his speech.

Finally, Deputy Managing Director Murilo Portugal is also visiting Turkey starting on June 5 for meetings with the Turkish planning team involved in arranging the annual meetings that will be in Istanbul, and he will also be co-hosting our Ninth Debt Manager's Forum. We had a press release on that yesterday.

Let me now turn to your questions and remind journalists participating online to submit questions now. Please identify yourselves and your affiliation.

QUESTIONER: Caroline, I wanted to ask you about Latvia. As you know, there has been a lot of volatility in the markets. (…) The volatility concerns the issue of peg in the IMF program. Do you think that the peg currently is a good idea at this level, and would the IMF support a decision by Latvia to drop that peg?

MS. ATKINSON: Thanks. As you know, there is a mission in Latvia now and they are having discussions on the review. We have commented before that the situation is challenging and that there is a need for action and I think the authorities have stressed the importance of controlling government debt and deficits and maintaining the peg. As Commissioner Almunia noted this morning, the government's budget this week is a first step and there is more work to be done, but with a mission in the field I'm not going to venture beyond that.

QUESTIONER: When you talk about action, you're talking about under the current program?

MS. ATKINSON: Yes. As you know, under the current program there's a review going on now and the review is looking at what steps will be needed to meet the current program. Of course we recognize that we have to respond flexibly to changes. I believe the Mission Chief Mark Griffiths noted that earlier this week, or maybe last week, in response to the changes in the situation. But we're involved in discussions with the E.U. with the authorities. Are there others?

QUESTIONER: I was wondering if you could comment on the current rise in global oil prices, that there's a lot of discussion about whether this rise is due to increasing demand and if a recovery is underway or whether it is just other forces in play?

MS. ATKINSON: I may also get back to you on that one on oil prices. It's always a little difficult to interpret these price movements. There have been developments on the supply side as well as on the demand side that we believe have been behind the recent price action.

QUESTIONER: When will the board meet to discuss the debt issue, the bond issue for Russia? What form will this debt issue take, what term and size?

MS. ATKINSON: Just to say that management, I believe, announced at the time of Russia expressing a commitment to invest in IMF notes once they are issued, that we would be bringing these details to the board as soon as possible, and I expect that will be fairly soon. We are working on how to draw up the terms and conditions of the bonds that we are able to issue under powers that we've had for a long time but which we now have a number of countries expressing interest in.

QUESTIONER: What is the real risk of higher interest rates in the U.S. and Europe and how it can affect the recovery?

MS. ATKINSON: I think at the moment it's hard to interpret why interest rates have gone up a bit at the long end. As First Managing Director John Lipsky was quoted as saying earlier this week, a little bit of a rise in interest rates can reflect a recovery from the extreme risk aversion that we saw in markets earlier this year as well as maybe some indication of recovery and prospects for later years. Real rates still remain rather low.

QUESTIONER: I'm coming back to the issue of the IMF Work Program. On the bond issue, would it be right to say that the IMF then would not only consider Russia at that stage, but that it would also consider the other countries that have come forward, although those countries' commitment doesn't sound the same as Russia's? So the question is would you consider just Russia's or is there a group of countries that you would consider at once?

MS. ATKINSON: On the bond issue? What we're attempting to do is design a bond that can be attractive to various different countries and there would be key characteristics, that we know that there are some features that countries find interesting. For many it's important to see this as an investment, an exchange of reserve assets, if you like, when they invest in the IMF. So we are not tailoring something to a particular borrower, although in each case we would have an agreement with the particular borrower, but those are the sorts of details that we are working on.

QUESTIONER: Then I have a follow-up on the SDR allocation. That paper is going to the board I suppose at the end of June, but that doesn't mean that the allocation will happen soon afterwards. It still has to be debated? Or does it go to the governors after that?

MS. ATKINSON: The SDR allocation needs to be approved by governors, but it doesn’t involve an amendment of the Articles. So an approval by governors can be relatively quick once the board has agreed on the SDR allocation because the governors are represented on the board. So there is that step, but it's the same degree of complication as if you need to amend the Articles. So it's something that can happen fairly quickly once there is agreement in the board. It does require an 85 percent majority, so that's more than most board decisions.

QUESTIONER: If I might follow-up on the SDR issue because there's a lot of interest on it. It also seems that there is some concern about the SDR allocation, that it could push up inflation once those countries convert it into real currency. What are the issues going on at the moment that would be addressed in a paper like this in the proposal?

MS. ATKINSON: In the SDR proposal?

QUESTIONER: Right. What are the issues at play here? I'm just trying to get a sense of -- one thing you're hearing is that Germany and the Bundesbank is pushing back a little bit on it, some countries are expressing concerns regarding the inflationary impact of these things. What are the issues at play within those?

MS. ATKINSON: Of course I think there are complicated issues that I don't really want to get into here but we can certainly discuss if you would like to get into them more later, but the main point is that I think this will be resolved fairly quickly. It's in the Work Program. There's a political push from the G-20. Of course we need to make sure that the board approves the way that it's proposed, but this is not something that I think is going to be held up for a long time. It just takes a certain amount of time to write a paper and get agreement and so on, and given as I said the very heavy work agenda that we have, I don't believe that there are big problems involved there.

QUESTIONER: Do you have a comment on the dollar, which has been clearly falling in recent days? Does the IMF find it fairly valued at this point?

MS. ATKINSON: We have pretty much a rule not to comment on very short-term movements, so I have no change in what we last said which was, I believe, that the dollar was about in line with fundamentals or a bit overvalued and we don't have any comment on regular movements, day-to-day movements.

QUESTIONER: I'm coming back to the Work Program.

MS. ATKINSON: That's fine. Good for you. Yes, exactly. I should say to everybody that there is a lot more detail on the Work Program in the Managing Director's statement that you will have a copy of after the press briefing, and so you can also get some things there.

QUESTIONER: My one question is “reforming the international financial system” and what you talk about, “explore the stability of the international monetary system including reserve currencies”. Does that include the issue of a wider use of the SDR? Would that just normally come into that debate?

MS. ATKINSON: Don't read anything special into that. We would normally be covering that issue. We're also looking at regulatory reform and so on.

Thanks very much.



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