Transcript of a Press Briefing by Caroline Atkinson, Director, External Relations Department, IMF

Washington, D.C.
Thursday, July 1, 2010

MS. ATKINSON: Good morning. Welcome to our regular biweekly press briefing. I’m Caroline Atkinson, the director of External Relations Department at the IMF. As usual the briefing is embargoed until 10:30 a.m. Washington time, 14:30 GMT.

So just before we turn to questions, I wanted to remind you that next week we will be unveiling the update for the World Economic Outlook on the Global Financial Stability Report in Asia for the first time, in Hong Kong, and the economic counselor Olivier Blanchard, financial counselor José Viñals, will be presenting this on July 8th. I believe we’ve sent out a media advisory already. That will be at 11:30 a.m. Hong Kong time which is 11:30 p.m. on the 7th, Wednesday the 7th Washington time. And you can access it through the Online Media Briefing Center and submit questions that way as usual. You can watch the live Web cast, of course.

We’re then going on to Korea to the conference that we’re holding with the Republic of Korea with the Korean government in Daejeon on July 12th and 13th. And we now have a Web site up that gives a lot of information on the program on that. The Managing Director himself will, of course, be there as well as Olivier Blanchard, special advisor Zhu Min, and Deputy Managing Director Mr. Shinohara, and they will all be speaking during the conference. It will all be live and on the record. There will be a lot of press coverage I think. On the 12th, the Managing Director will be opening the conference with the Finance Minister, Yoon Jeung-hyun. And on the 13th he will be participating in a roundtable discussing the global economy and Asia.

Now before that, over this weekend the Managing Director is traveling to Costa Rica where he’s participating in the first meeting of a newly created regional advisory group for the Western Hemisphere Department. We have recently set up regional advisory groups for each of the area departments in the IMF, drawing on current and former policymakers, influential thinkers, and generally high-level experts to give us some advice. And we plan to have a meeting of all of them around the time of the Annual Meetings. On July 5th, the managing director is going to be in Jamaica to attend a summit of the heads of state of Caricom and will also be speaking there.

The First Deputy Managing Director, Mr. Lipsky, on Friday the 9th, he’s going to speak on a panel that concerns supervision and regulatory architecture at the European Central Bank and its Watchers Conference in Frankfort. And as you know, we’ve been putting out some information about our views on supervision and the G-20 also picked up on that and asked us to work on some of those issues with the FSB.

Given all of this travel and in particular the conference -- the Asia Conference -- we will be holding the next of these regular press briefings on July 22nd. So that’s in three weeks’ time from today. So let me now turn to your questions.

QUESTIONER: Caroline, I was wondering if you have anything for us as an update on how talks are going in Ukraine and whether the mission is wrapping up its business tomorrow as was announced a few weeks ago, or do you think that the negotiations are close but are not yet on the final stretch? Whatever you can give us.

MS. ATKINSON: So in Ukraine, as you say, the mission is there. They’re in their second week. And as usual we don’t comment on the progress of negotiations in the field. There have been a lot of discussions. We will update whenever the mission concludes.

QUESTIONER: You can’t tell us if they’re in the final stretch or they’re close to a deal?

MS. ATKINSON: We don’t characterize it and in my experience the reason for that is that you often don’t know until the last minute exactly where you are. I know they’ve had productive discussions and discussions continue.

I have a question online. “Please let me know if there is any possibility of negotiations between the Fund and the government of Pakistan over the reform to general sales tax as the government did not implement the VAT.”

As you know, the VAT or an improved tax on sales and consumption is one of an integral part of the IMF program. And what we’re looking for is that there should be a broad-based tax -- a VAT or a reformed general sales tax that has fewer exemptions and broader coverage. And these discussions will be going on over the summer on this and other issues with Pakistan.

QUESTIONER: Just wanted to know, there was a mission for an Article 4 in China wasn’t there? Is the Board going to discuss it soon? Will they publish a public information notice?

MS. ATKINSON: Thank you. The mission in China is continuing and actually deputy managing director, Mr. Shinohara, is with the mission I believe now. That is usual that we have the Deputy Managing Director there. There’s usually a period of time between the end of a mission and the writing of the reports and the holding of the Board date. I don’t have the Board date for you yet. Whenever there is a Board, after that there would be a PIN issued.

QUESTIONER: Caroline, I wanted to ask you about Congo, the DRC, that came into the Board yesterday.

MS. ATKINSON: Yes.

QUESTIONER: As you know there are concerns from Canada’s side regarding mining rights, and I know that the Managing Director has spoken to President Kabila twice in the run-up to this meeting. Could you -- have you got anything for us on what he discussed? How does the IMF regard governance transparency in the mining sector and what provisions or were there any put into this debt relief that would ensure that the government actually moves in the right direction as far as tackling corruption and so on?

MS. ATKINSON: Thank you. Well, as you know, we announced yesterday that the IMF Board met, and I believe the World Bank Board is also going to be meeting today. Of course, we take very seriously all of the issue of governance and we have advised the government that in any end, this is just a general advice that we give, that any contractual dispute should be resolved through normal channels through arbitration when needed. And the dispute you referred to is indeed the subject of ongoing international arbitration. And we’ve advised the authorities to let that arbitration take its course before they move further. And that’s an important issue.

QUESTIONER: Is it true that the debt relief in such issues doesn’t take into account such commercial issues, that the IMF would not look at that, really look at that or consider that at all, that it’s purely what the government has done as far as target -- meeting the targets and the HIPC?

MS. ATKINSON: Well, the way that the debt relief is constructed requires a number of a number of triggers that have been set out, and we have to determine whether those have been met and whether there are financing assurances. One other contingency is that for the debt relief, our approval is contingent on that of the World Bank for example whereas a lending under a normal loan is not. I think what’s important about the governance is that it’s one of the considerations that the Fund and the Bank would look at. It’s not a particular condition or something that’s specified, but we do definitely mind about whether there is good governance in different countries.

I have a question online about Romania that says, “A constitutional court has now rejected the pension cuts connected to the IMF facility. What is the IMF’s reaction since two weeks ago it was said that the IMF did not expect this result?” I’m not sure about that, but anyway -- “Is the VAT increase from 19 to 24 percent enough for the IMF?”

I believe that the Romanian authorities have identified other measures. As you know what we’re looking at in this case as in others is an overall package that will meet the fiscal targets that the authorities have as part of their program. We’re not specifying that they should come from one measure or another. We believe that the authorities have identified alternative measures, compensatory measures, and there’s a Board date scheduled for tomorrow.

QUESTIONER: Caroline, do you have anything for us on Hungary -- Hungary seeking and says they’re ready to negotiate a new IMF agreement. And considering the other one was not drawn down, what kind of options are out there for Hungary?

MS. ATKINSON: Well, there is a mission that will be going next week -- I think it begins on July 6th and it will be there for a couple of weeks -- that is a review of the existing standby arrangement, bringing together the sixth and seventh reviews. And, of course, you know we’ll see during that mission and after that mission there have been discussions with the authorities and those will be continuing during the mission.

I have a question online that is, “Could you elaborate on the precautionary credit line and systemic risk mechanism that the Managing Director discussed at the Peterson Institute? Where those are in the approval process? What role they might play in rebalancing reserves? And whether the IMF supports a broader safety net supported by the South Koreans?”

As I think you know, we had landmark reforms last year to improve our lending kit, and we found that in particular the introduction of the Flexible Credit Line which three countries used and have renewed -- was a helpful buffer against contagion for them. We do feel that and we’re looking at a mandate and lending toolkit because we feel there are still some gaps in the global financial safety net, that it’s worth looking to fill. And we want to, in general, improve our tools and our ability to deal with systemic events. One aspect of that is a possible precautionary credit line that would allow a broader range of countries access to the kind of credit line that was helpful for Mexico, Poland, and Colombia who applied for the Flexible Credit Line.

Another element is whether you have a systemic, multi-country swap line. These are all ideas that have being floated. As you know, the South Koreans have this week also been discussing ideas for a systemic financial safety net. I think all of these ideas are very useful. I expect that we will -- they will be discussed at our conference in Korea in mid-July, and I’m sure that the Koreans as Chairs of the G-20 this year are also looking for ideas for how to improve and fill in this part of the gap, if you like. Our Board will obviously also be playing a role in discussing the ideas that we put forward, for how eventually the Board will have to approve any changes that there may be in our toolkit. And I expect those discussions in the Board to take place later this month, and they may well be initial discussions with more to go on after that.

QUESTIONER: Do you feel like -- did the crisis in Europe play a role in the elaboration of these new instruments, in their thinking, and could they fit the definition of the past crisis? Could it, you know, have been applied in the past crisis, the systemic safety nets? And the second question is: there was a rating agency announcing the possible downgrading of Spain. Do you feel that we have a new risk of debt contagion in Europe?

MS. ATKINSON: Okay, so in the first question I think that we were already beginning -- actually even at the time Istanbul -- the governors of the Fund asked and the IMFC, the International Monetary and Financial Committee, of the IMF asked us to look at our mandate and our lending instruments. So this work was underway. Of course, one learns as time goes on about what maybe useful and what may not be. So I don’t think that it was triggered by Europe. And you mentioned the possible downgrading, yes, I’m putting them on watch or whatever. Look, the situation as we’ve said for awhile now, the global economic recovery is paradoxically maybe a little bit stronger than we might have thought initially, but there are fragilities and we’ve seen some of those play out in the case of Europe. We do believe that governments are taking strong action. A number of them have announced additional fiscal consolidation measures including in Spain where there have also been structural measures announced. So we do believe that governments are reacting to that.

I have a question about Kyrgyzstan. In Uzbekistan the IMF mission -- there was an IMF mission there that ended earlier this week, and the question is, “This must have considered the Karimov government’s dealing with Kyrgyzstan, the influx of refugees, closing of the border, and so on, and how do we consider these developments?” And, of course, as far as refugees, we’re very concerned about any human cost, but questions on those should be directed to the United Nations High Commission on Refugees, the UNHCR. We have a press release issued yesterday on the results of our mission and our recommendations to the authorities, so that is available.

QUESTIONER: Caroline, when is the Fund starting its work on the country assessments under the MAP? Remember at the G-20 they said they had accepted the MAP news into country assessments. When does it do that?

MS. ATKINSON: Well, I think we’ll be ready to begin right away, and the work I see is somewhat smooth. It’s the second stage of the Mutual Assessment Process. You know we’ve issued the paper that we submitted as part of the first stage. The second stage, as you say, will be looking at individual countries, but at a national and regional as well as global level. And I believe that -- we need to complete the work by November in Seoul so and have discussions with countries before then. Of course, we are also engaged in discussions with countries through our teams all the time, but I know there are teams that are working on this now.

QUESTIONER: My confusion is how that would differ from the Article IVs in many ways?

MS. ATKINSON: Well, it will build on the Article IVs obviously where we have countries -- and some countries we don’t yet have -- I mean in some regions we don’t yet look at things on a regional basis so that will be helping to develop that work. And we will be looking in particular at governments’ aims and if what we’ve said could make a difference with coordinated policies to lead to a better outcome. And we will build on our country contacts and on the Article IV consultations where we have them. We have a team in China now. We fairly recently had the Article IV for Japan. So we’ll build on those discussions.

Okay, well I think that’s it. I don’t believe I have any more questions online. So thank you very much and we’ll look forward to seeing you for the July 22nd briefing. But just to repeat that, we will be briefing quite a lot before then starting in Asia. Thank you.



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