Transcript

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

December 18, 2008

MS. ATKINSON: Good morning. I'm Caroline Atkinson, the Director of External Relations at the Fund, and this is the last of our regular press briefings for this year. The next briefing is scheduled for January 15th next year.

May I just begin by pointing out a couple of things. We will be posting our Work Program, I think immediately after the briefing today, which lays out the Fund's agenda for the coming months, and we're planning to focus on three key areas.

The first is how best we can provide financial support to member country needs. We will be looking at our emergency funding and also new facilities that we've introduced and how we can be flexible and responsive. The second area is related to what lessons we can draw from the current crisis and how to best develop policy responses; and then the third area is how the Fund's stream of work [contributes] in the context of the international architecture. That's just a short overview. You will find details in the press release and also the documents that will be published.

May I also remind you that the Managing Director today is attending the informal meeting of European Economic and Finance Ministers in Paris.

And you may have seen the Managing Director and the First Deputy Managing Director have given major speeches this week which are, of course, on our web site, and the Managing Director has also been speaking in Europe today.

Thanks very much, and may I now turn to your questions? Thank you.

QUESTIONER: First, Merry Christmas and Happy Holidays. And the question is late last week, both the IMF and Turkey announced that Turkey had invited an IMF mission in early January. Is there an update since then? Is there a date set? Thank you.

MS. ATKINSON: We don't have a specific date. I don't have a specific date. It will be in early January. As you know, our discussions with the Turkish authorities have been going well, and we expect those to be continued in January. There are discussions now underway about a program. Thank you.

QUESTIONER: I had a question about China. I think it was in Madrid that the Managing Director was saying that the forecast for China for next year could be revised as low as 5 percent. I wonder if you could explain some.

First of all, perhaps confirm that and then provide some rationale. Why do you think that the really monumental fiscal stimulus package they announced won't sustain growth beyond, much beyond that level?

MS. ATKINSON: Okay, thank you. As you know, our new official forecast will be published in January. We do expect, as the Managing Director and Mr. Lipsky have said, that there will be downward revisions across the board. In November when we published our Outlook, I think we were ahead of the curve in terms of foreseeing weak economic conditions. But since then, bad data has come out in many countries, and also other forecasters have been revising downward. So it's a good guess that our next forecast will be revised downwards.

I believe our overall figure for Asian growth was around 5 percent, but that, again, that was at the time of [the last update]-and we don't have a new number for China yet. We will have a new number in January.

Now you mentioned the fiscal stimulus. It is, of course, very important, the fiscal stimulus and also some of the monetary policy measures that China has been announcing.

We do believe in China, as elsewhere, that of course it takes some time for policy measures to come onstream, and their effectiveness will only become evident over a period of time as they are put into effect. But we certainly welcome the determination of the Chinese authorities along with some other authorities to take steps to address what is severe economic downturn and slowdown. Thank you.

QUESTIONER: A quick question about when, in general, you're going to publish the WEO update.

MS. ATKINSON: I'm not sure whether we've put out a date, but it will be towards the end of January. That's the normal schedule. So I can come back to you if we have a precise date, but at any rate at the end of the month.

QUESTIONER: Caroline, could you maybe just some comments on the Fed's move to lower rates close to zero, what effect that could have? Do you think it's enough? I know Lipsky said it was not enough. There needs to be something a lot more. It should not only be with the Fed. The question is what happens now? Where can the Fed go after this?

MS. ATKINSON: Thank you. Well, we certainly welcome the Fed's measures, as Mr. Lipsky said yesterday. And I'll draw your attention, as they did in their statement, not just to the lowering of the Fed funds rate or the formal lowering to zero to 0.25 percent but also their decisions to take other measures to support credit markets and the economy and their statement that they expected for the low rate to continue for some time, and that they would use all available tools.

So I think they gave a very strong signal that they expect to maintain a large balance sheet and to have direct purchases of instruments to support credit markets and bring down interest rates. So I think there are more things that can be done, and I think an indication that they will do those things that they see as necessary.

Perhaps when you were referring, I think what John Lipsky has made clear is that this is a crisis that requires action on three economic fronts. The first, which we shouldn't forget, is on financial sector issues, and the second is monetary policy, and the third of course is fiscal policy. And we do stress the importance of governments acting on all of those three areas of policy and also that their actions will be more effective if they are coordinated and if it is coherent across the world. Thank you.

I'll take a question from the Media Briefing Center, and then I'll come back to you. Thank you. There is a question about how many countries have been asked to borrow from our short-term liquidity program.

When there is a formal request, that will be made public. That's part of the decision that is also available on our web site. So you will see that there has been no formal request.

We do believe that it's very early days for this facility, and we do believe that it has had some impact so far in supporting markets by making clear that it's available. The fact that it's available can be helpful, and we've heard that from some countries.

And we have also had a number of countries come and ask us about the facility and whether or not they would qualify and show some interest. But as you know, at the moment, if you formally request the facility, you also draw at that time. So that would be at the end of a process if you see what I mean. Thank you.

QUESTIONER: Thank you. Back to Turkey again, you've mentioned that the talks are still going on. I know the Fund doesn't want to give out any details at this point. But could you give us some of the talking points that are on the table?

We know some of the issues that are outstanding are the growth rate, the amount that was going to be facilitated by the Fund and maybe the timing of the program. Any details on that?

MS. ATKINSON: I'm afraid I don't have much more to offer. I can tell you that with the mission going in early January, if there is good progress, then that gives you some indication of timing.

And I believe that, as is normal with a Fund program, we would have a number of different issues on the table. We would be trying to reach agreement with the authorities on the size of their financing need, the steps that they plan to put in place to address their financing issues and the amount that we can support them to have a whole package that is a consistent package of financing and adjustment ready to face their difficulties. And so, we expect those discussions to pick up again in early January.

QUESTIONER: On Latvia, have those talks actually completed? Are you ready to announce something?

The Prime Minister said there was an announcement expected, I believe today or tomorrow and during some off the record background. Sorry.

MS. ATKINSON: I was going to say, off the record, you might as well tell me.

QUESTIONER: No. On some background briefings we've had, and I won't tell you where, apparently there's been some indication that the Swedes have not wanted a major haircut on their banks. This is extending a lot of those discussions and that this might still carry on for a while. Could you just give us some sort of idea of where these talks are and are you ready to make an announcement?

MS. ATKINSON: Thank you. Well, I can tell you that we've made a lot of progress with the Latvian authorities, and we've been working. They have been working closely with the European Commission and some bilateral European donors and other regional and multilateral institutions as well as the Fund. We're all working to bring the discussion to a rapid conclusion.

There are some aspects of the program that remain to be worked out, but we are hopeful that we will be able to make an announcement in the next few days. I'm not going to give you a day or a date, but you know we're reasonably hopeful. Thank you.

QUESTIONER: This is on Ecuador. You know the government defaulted on bonds, global bonds this week. What sort of impact do you think that's going to have, long-term impact? Is the Fund in discussions with Ecuador on this and any further comment you have?

MS. ATKINSON: Okay. Thank you. Well, as you know, it's longstanding Fund policy to encourage our members to, wherever possible, be current in servicing debt obligations and when they're economically unsustainable to enter into productive negotiations. We understand that Ecuador's decision to default on these bonds is based on a dispute about legal validity rather than debt sustainability, and of course we don't take sides on the merits. So I think that's about it on Ecuador.

You asked about discussions. As you know, we're always in contact with all of our authorities. I don't believe that there is a mission or anything.

QUESTIONER: So there's no indication it's going to default on any kind of multilateral debt of any sort?

MS. ATKINSON: No, not that I'm aware of.

QUESTIONER: Okay.

MS. ATKINSON: I think they were very clear about the questioning the legality of that.

So I'm going to take one from the Media Briefing Center and then one out there. From the Media Briefing Center, the question is could I please comment on the drop in the Ukrainian currency and on the overall economic prospects for Ukraine.

Well, as you know, we had a visit to Ukraine. I think a mission came back fairly recently just to check up on what was going on, and we do expect a more in-depth review later, well, I can't say later in the year anymore, early next year. And there are a number of discussions.

As you know, the Ukrainian authorities have shifted to a flexible exchange rate regime. They have been taking policies to tighten monetary policy to help stabilize deposit outflows, and we will be looking very carefully at policies during the first review. I think that is scheduled actually in late January, 2009.

QUESTIONER: About the strong signal that the Fed has sent, in the meanwhile, the European Central Bank seems more cautious in cutting rates, and so the exchange between the dollar and the euro is incredibly volatile with the euro going out strongly. Do you have any comment on that and on the action that the IMF would find suitable for the European Central Bank?

MS. ATKINSON: Well, on the exchange rates, I'll just repeat what I said, I think, before which is that currency markets have been very volatile just as other financial markets have been very volatile, and on a medium-term basis the dollar is perhaps closer now to its equilibrium value than it had been before. But basically the way currencies are moving around I think is just an indication of some of the concerns and volatility in markets.

And I think that, well, as you know, the European Central Bank has indicated they made a quite dramatic move earlier this month, and they have indicated their readiness to take steps as necessary and as appropriate on monetary policy. So I think we can look out and see what happens in the new year.

So maybe just one last question here and then that's it. Thank you.

QUESTIONER: Thank you. In light of the Fed action on the rate and quantitative easing, what does the IMF see as the risks in a very volatile market, of the risk of the dollar plummeting and actual spurring a flight of investment from the U.S.?

MS. ATKINSON: Thank you. Well, as I said, I'm not going to comment on individual currencies and especially on particular movements.

What I think is important is that in the U.S. and in other countries around the world and especially the major ones, governments do take steps as they have indicated they want to do to arrest what we see as an abrupt falloff in demand and coming slowdown in the world economy, and that steps on the financial sector, continued steps, and on monetary policy and fiscal policy.

Thank you very much indeed.