Transcript of the IMF Managing Director and the African Consultative Group Press Conference

April 22, 2012

Speakers:
Ms. Christine Lagarde, IMF Managing Director
Ms. Antoinette Sayeh, Director of the IMF’s African Department
Mr. Jean-Baptiste Nthahwa Kuderwa, Acting Chair of the African Consultative Group and Minister of Budget for Democratic Republic of Congo
Ms. Lucie Mboto Fouda, External Relations Department
Webcast of the press conference Webcast

MS. FOUDA: Good afternoon, everyone. I'm Lucie Mboto Fouda from the External Relations Department of the IMF, and I would like to welcome all of you to this press conference of the African Consultative Group.

It's my pleasure to introduce to you Mr. Jean-Baptiste Nthahwa Kuderwa, who is the Acting Chair of the ACG, but also the Minister of Budget for Congo, the DRC, Democratic Republic of Congo.

And then, we will have, indeed, Madam Christine Lagarde, Managing Director of the IMF and Antoinette Sayeh, who is the Director of the African Department of the Fund. The Chairman of the ACG will offer a few opening remarks, then Madam Lagarde will also offer remarks. We are on the record and I would like to ask you as usual to please identify yourself and state your affiliation before you ask your questions. We have translation facilities in French, Spanish, Portuguese, and Arabic. Now, Mr. Minister, you have the floor for your opening remarks. Thank you.

MR. NTAHWA KUDERWA BATUMIKE [Interpreted from French]: Thank you, Lucie, for giving me the floor.

Good afternoon, ladies and gentlemen of the press. The Group of African Governors at the IMF held discussions which were very fruitful today with Management of the Fund within the framework of the African Consultative Group. I would like to thank Madam Lagarde, with whom I co-chaired this meeting, which ensued in a flawless manner. We had discussions to take stock of the economic situation in Africa, its outlook regarding the uncertainties which characterize the world economy, and the measures needed to protect the African economies from outside shocks.

The uncertainties worldwide facing the African Continent have to do mainly with the situation in the advanced economies, though we welcome the recent calm following action taken by those self-same countries. Another uncertainty which is a considerable one, has to do with the rising volatility of commodities, in particular oil. The African economies to date have displayed good resilience to the crisis and slowdown of growth in the advanced economies. Nonetheless, looking ahead, the African economies may decline if they are not adequately prepared to withstand these shocks from those risks from abroad as well as from the draught in the Sahel and the Horn of Africa or the decline of growth in the emerging economies with which our African economies have growing trade and financial exchanges.

We have looked at economic measures as well as fiscal, monetary, and structural policies in order to prepare our economies for the future.

Now, the determination of these policies, obviously, depends on the specific circumstances of each country, the aim being to safeguard macroeconomic stability if these risks were to develop while protecting vulnerable sectors of the population as well as protecting short-term growth.

We also agreed on the need to persevere with and strengthen our structural reform agenda, often developed with advice from the IMF and intended to improve governance and the improvement of the business climate and services, so as to safeguard the longer-term health of our economies, in particular jobs.

A number of African countries will need financial support in the event of shocks, given their limited room for maneuver. In this respect we welcomed the willingness of the IMF to provide assistance to these countries both in financial and technical terms. We had a discussion and we have seen encouraging signs.

In the present circumstances, it is important to strengthen IMF's resources in order to meet the needs of all its member states, including the low-income countries and small countries. We commend the Managing Director for her leadership in the quest for such general resources. I have in particular the firm commitments obtained to this end, announced yesterday, following the IMFC meeting. Such resources can provide upstream assistance to reduce uncertainties linked to the world situation.Downstream, we welcomed most favorably action underway at the IMF to increase the concessional resources available to the low-income countries. Let me halt at this point and I have pleasure in giving the floor to the Managing Director of the IMF.

MS. LAGARDE [Interpreted from French]: Thank you very much, Mr. Chairman, Mr. Minister, and thank you very much for this co-chairmanship which we conducted together.

MS. LAGARDE: We helped this morning--and we were both co-chairing the session with active support from Antoinette, the head of the African Department at the IMF, and Masood Ahmed, who is also Director of the Middle East Department, because some of the countries clearly fall in that category. And I would like to acknowledge the two Deputy Managing Directors who also work with me, Zhu Min and Naoyuki Shinohara. They're both working very hard and they're both very, very committed to the African Continent. Just a couple additional points to what the President has mentioned.

One is we discussed the economic outlook for Africa and we were able to compare notes and I certainly confirmed to the Caucus that the outlook for Africa is encouraging and there is clearly Africa Hope. I mentioned in this room a couple of days ago the dark clouds on the horizon, where there is certainly African hope on the horizon, as well.

The forecast for the Continent as a whole is about 4 percent. For low-income countries, that is around and slightly in excess of 5 percent. And as I mentioned in a press conference, if you look at all the growth forecasts around the world, you find that in the top 10, there are at least 4 African countries showing double-digit growth forecasts.

For middle-income countries in Sub-Saharan Africa, growth is slowing somewhat to 3, 3.5 percent, reflecting the drag of weak exports to the advanced economies. And for North Africa, where clearly the Arab transition countries are located, the growth is a bit more sluggish to 1.5 to 2 percent. So, it varies from 1.5, 2 percent in North Africa, to over 5 percent, particularly in the low-income countries of Sub-Saharan Africa. This is the outlook that we have at the moment.

We discussed extensively as well this morning the potential shocks that could affect the African Continent. And clearly coming top on the list of those potential shocks is the increase of the price of oil and volatility in general in the price of commodities and also the resurgence, if there was any such thing, of the European crisis, given the links between the euro area countries and the African countries, notably the North African countries, South Africa, and some of the East African countries.

So, facing those shocks that could clearly affect a generally slowed growth, less demand addressed to the countries, less aid, less remittance, less exports, we discussed also the responses, particularly the macroeconomic responses that countries can put in place and should put in place, depending on their circumstances.

And clearly, we concluded that those that have sufficient reserves and fiscal space, they should be able to ease macroeconomic policies to actually support demand. For other countries that do not have such fiscal room to maneuver, they will have to strengthen their fiscal position and seek external funding, if necessary, because we think it is appropriate for them to actually rebuild their buffers just in case they were to face external shocks yet again.

And finally, we discussed how the IMF can further help countries in the African continent. We discussed both the issue of resources, access to resources, the tailoring of both the financial instruments and the analysis tools that is scheduled for the summer. And second, we also discussed what is very, very important to me, which is going to be my next exercise of fundraising, which is going to be the replenishment of the PRGT, the Poverty Reduction and Growth Trust. That needs to be replenished. We need more money in that trust if we want to finance concessional loans for the low-income countries.

So, that will be my goal for the next few months, make sure that we replenish, that there are more contributors, more donors. We have had indication that some countries are considering contributions, which is good. And as you know, we are suggesting strongly to countries that have received their portion of the gold profits--you remember we sold gold a couple of years ago, there was profit. Profit was returned back to member states, as it happens to be required under our procedures, but we also sent a nice encouragement and incentive to countries that received their share of profit to put it back in the PRGT to continue to finance concessional lending. So, that's where we are.

At this point in time, I can tell you that 32 countries representing 24 percent as compared to the 90 percent target that I need to hit to make sure that it is properly replenished, have agreed to transfer their portion of the gold sale profits into the PRGT. So, that will be a priority for Tokyo so that we have appropriate funding for the concessional lending. That covers my initial remarks.

MS. FOUDA: Thank you, Madam Lagarde.We are now going to take questions in the room. As usual, please identify yourself and your affiliation.

QUESTION: Question first for Minister Kuderwa: You've spoken about the general concerns, if you like, for the African continent. Can you spell out how--what kind of consequences you fear from the international financial crisis, specifically for your own country.

And a question for Madam Lagarde: On this question of returning some of the profits from the gold sales, something I didn't understand was why did the IMFC communiqué specifically mention the UK in that context, which I think it did.

MR. NTAHWA KUDERWA BATUMIKE[in French]: Thank you very much for giving me the floor. As we have discussed all along our exchanges over these days, we've seen that, as a consequence of the crisis in the advance economies, northern African countries are particularly feeling the impact. And within this in Sub-Saharan Africa, I would venture in my own country, the Democratic Republic of Congo, the DRC does have oil, but certainly not quite at the level of the exporting oil countries.

And so, if there is an acceleration or a deepening of the crisis in the advanced economies, it is well possible that our country, which is in balance at the moment and predicated on a stable macroeconomic framework for the moment could find itself nonetheless in a more difficult position with regard to the exports of our oil products.

We do export some oil and therefore could suffer an oil shock there if the clients that we turn to generally are not forthcoming, and that certainly could have an impact on our budgetary reserves.

QUESTION: I had a question for Madam Lagarde. First of all, how much, in terms of funding, are you hoping to get to bolster the PRGT?

And for Monsieur Kuderwa, I wanted to ask, the SEC is supposed to be writing rules that require companies to disclose the conflict minerals they get from the DRC. They just announced last month that there will be a phase-in process and they've also already delayed by over a year passing a final rule which was initially proposed in 2010.

What is your reaction to her announcement that there will be a phase-in process and the delay so far?

MR. NTAHWA KUDERWA BATUMIKE [Interpreted from French]: Well, thank you for that question. I believe that the Africa Department of the IMF is quite familiar with this whole matter. I would have been grateful if Madam Sayeh could assist me in replying to your question, because she is quite conversant with this.

MS. LAGARDE: Your question on the issue of how much financing am I looking for, and then maybe you can restate your question for Antoinette so that she can really address it as well.

MS. LAGARDE: Given the current commitments of the Poverty Reduction and Growth Trust, I will be looking for additional financing of $17 billion. Altogether we need 17 to be perfectly transparent about it, but the more, the better.

QUESTION: [Off microphone]--from the gold sales, or that's total?

MS. LAGARDE: Total.

MS. SAYEH: The 17 billion is what we needed between 2009 and 2014, in total, and that's what we're trying to now complete.

MS. LAGARDE: Okay. I think you had another bit of question that you wanted to ask.

QUESTION: I just wanted to ask sort of what your reaction was to the--first, the delay of the rule finalizing by the SEC and then, more specifically, the announcement last month that there would be a phase-in process for companies to comply with the rule.

MS. SAYEH: The rule by SEC? I'm sorry, I didn't follow that at all.

QUESTION: I'm sorry. The Dodd-Frank Financial Reform Law mandated that the Security and Exchange Commission write a rule that would basically require companies that would purchase, I guess, conflict minerals--

MS. LAGARDE: I think this is really beyond the scope of the African development issues that we've been dealing with. It's a nice try, but I think it's a little beyond the scope of what we're doing at the moment.

QUESTION [Interpreted from French]: I have a question for Madam Lagarde. Why have the fourth and fifth review of the program[for DRC] has been stopped here? We're a bit surprised because all the indicators are green in our country, but there's no conclusion to the fourth and fifth review. And secondly, how does the IMF react to the appointment of Mr. Matata, Chair of the African Caucus who has been appointed to the post of Prime Minister.

MS. SAYEH: Let me just say that we were--I was recently in Kinshasa in March when we had this very successful conference on management of natural resources, and of course at that time we were able to follow up with the government there about the planning around the fourth and fifth reviews.

As you know, of course, there's been a transition in DRC. And as you said, the Prime Minister has just been named. When we do a review, we need to look both backwards in terms of performance on the criteria that we had set, the targets we had set. We also need to look forward in terms of what the government can commit to do. It's not possible to do that in the absence of a government that is in place.

And now that we have the Prime Minister named, we are very much working quickly. With the delegation here, are already having some discussions. We expect that we will be able to send a mission out to do the work and get us to the Board, we hope, by June.

QUESTION: Madam Lagarde, thank you. Getting back to the PRGT, you said that 32 countries have committed to plow back their profits into the PRGT. Could you tell me what the value of those gold profits would amount to.

MS. LAGARDE: No, I can't, and to be absolutely open and transparent with you, in the last few days we've been accumulating more and more countries. I think when we started the Spring Meetings, we were at 26. You see, we are now at 32. So, by the day we are just accumulating new countries. But what I can tell you is that a large proportion of the countries that have reinvested in the PRGT are in Africa and are low-income countries. So, it's not only them, but I'm pleading with the advanced economies that they too reinvest their gold profit into the PRGT.

QUESTION: So far, the whole week I heard nothing about Eastern Europe, so I apologize, but I will take my chance to ask about Eastern Europe.What are your solutions--what solutions could be pointed out about this Region that is very dependent by foreign direct investments and by credit capital flows that come from countries? And now, this isn't--European countries seems to be abandoned--so, what solutions could be recommended.

MS. LAGARDE: No, no, no, no, no. We're not abandoning any country. We're not abandoning central and Eastern European countries, either. And to a point, your question is very relevant, because it's the same issue that applies to, say, North African countries and those countries that have trade, commodity exports, remittances, aid flow with the European Union. So, all those countries have as a primary interest that the European Union does well. So, I think that's point number one, to actually make sure that the country in the periphery of the euro zone and the countries that trade and deal with the euro zone do not suffer the shock or better not have the shock to begin with.

And second, we are also trying to tailor and improve the financing instruments that are available and that will be available to make sure that we can deal with the needs of countries that suffer the immediate adverse shock of a crisis that would be renewed anywhere but in particular the euro zone. Countries eventually would risk liquidity crisis.

Well, we have an instrument that is specially designed for that, which is the PLL, the Precautionary Liquidity Line, to help countries that otherwise, from a macroeconomic point of view, policies are doing fine, but that are exposed to an external shock because of their relationship with the epicenter of the crisis, so that they can sustain the shock.



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