Transcript

Transcript of a Press Briefing by David Hawley, Senior Advisor, External Relations Department, International Monetary Fund

January 20, 2011

Webcast of the press conference

MR. HAWLEY: Good morning, ladies and gentlemen. I’m David Hawley from the IMF, and welcome to one of our regular briefings for the media. Welcome to those in the room and those joining us online via the Media Briefing Center.

As usual, the briefing is embargoed, and it will be until 10:30 Washington time. That's 15:30 GMT. Before going to questions, let me make a couple of announcements about forthcoming events.

On January 25 in Johannesburg, South Africa, the Research Director and Economic Counselor, Olivier Blanchard, and the Director of the Monetary and Capital Markets Department and Financial Counselor, Jose Viñals, will be giving updates of the World Economic Outlook and Global Financial Stability Report. The briefing will be webcast live on the Fund’s Web Site, and a media advisory is being distributed.

On January 26 in Davos, Switzerland, the IMF’s first Deputy Managing Director, John Lipsky, and Special Advisor to the Managing Director, Min Zhu, will be participating in this year’s World Economic Forum.

And on January 27, the update of the IMF’s Fiscal Monitor will be released in Washington, here at headquarters, in a briefing led by Fiscal Affairs Department Director Carlo Cottarelli.

And, finally, let me signal a forthcoming public event by the Managing Director, Mr. Dominique Strauss-Kahn, who on February 1, will attend an event hosted by the monetary authority of Singapore, where he’ll deliver a speech on the global economy, Asia’s role, and IMF reform. He will also meet the authorities in the course of that visit.

So, with those preliminaries, I’m open for questions. Thank you very much.

Questioner: Can you categorically state that there have been no requests for either an official or partly official look into whether a country might need a PCL other than the one approved last night?

MR. HAWLEY: The only PCL information I have is Macedonia.

Questioner: So, that would be a no or a yes?

MR. HAWLEY: The only information on a PCL request is Macedonia, and that was approved last night.

And I’ve got no information on any other PCL, hypothetical PCL requests.

Questioner: I have a question on the mission that went to Argentina with regard to the CPI.

Caroline Atkinson said last time that there will be another mission going at the end of the month. So, I wanted to ask you if we can say that next week or this week, we are going to have a new mission.

And the second question is if it’s going to be integrated in the same way, I mean, are the same people going?, Or are there new people going to be added to the mission?

MR. HAWLEY: I don’t have dates for the follow-up mission in connection with the TA mission that took place in December. We will follow-up with Media Relations to see if we can establish dates for you and mission membership.

Questioner: Okay, but even if we don’t have dates, can we say that the same people are going to go and they could be expected, say, at the end of the month?—

MR. HAWLEY: As I say, I’ll get what information I can later for you on dates for that mission. I understand you want to tie me down for dates. I don’t have them at the moment. We’ll see what we can do for you.

Let me say that we remain on the timetable of presenting final conclusions and recommendations to the Argentine authorities at some time in April.

Questioner: April is the deadline in a way —

MR. HAWLEY: That’s the goal for presenting final conclusions, yes.

Questioner: If those conclusions are not adopted by the Argentinean Government, are there any sanctions or will we come back to the Article VIII, as it was planned before the mission went, before the Argentinean Government asked the mission to go? —

MR. HAWLEY: I think it’s way premature to anticipate the recommendations and, of course, to anticipate the response of the authorities.

Questioner: Are there any planned missions for either GFSR updates or any other sort of regular updates for Portugal, Spain, or Italy that you’re aware of? I know that there’s an Article IV mission sometime in the coming months, but other than that, can you give us some heads-up on that, please?

MR. HAWLEY: As you know, there has been a GFSR mission to a number of countries, which as we described at the weekend, is doing preparatory work for the April edition of the Global Financial Stability Report. I don’t have dates other than indicative ones for the Article IV missions to other countries you mentioned, but, as you know, these are countries which are on a 12-month cycle, so, you have a sense from the time of the last Article IV consultation when approximately Article IV missions would take place to those countries.

Questioner: What are the IMF comments on the discussions that took place in Brussels on improving the defense mechanism in the Eurozone and are you concerned that this is taking too long, given the market pressures?

MR. HAWLEY: Okay, you’re talking about the Euro Group meeting.

Questioner: Right.

MR. HAWLEY: As you know, the European Council has asked the Euro Group to develop a comprehensive response to deal with the Euro area’s problems. This will include continued national, fiscal, and structural policy efforts, but also effective crisis management at the European level. An important part of the European approach is to provide adequate liquidity support for sovereigns with market access difficultly through the European Financial Stability Facility (EFSF), condition of course on appropriate policy adjustment.

Ensuring that the EFSF has sufficient resources and can deploy them in a flexible manner to provide effective support when needed is essential for a bolstering market confidence, and we welcome and support these efforts.

Questioner: Has the IMF made any recommendations on giving greater flexibility to the EFSF to allow it to provide liquidity to sovereigns before they are forced out of the market.

MR. HAWLEY: I don’t have a specific comment on that other than to note this is important that the EFSF’s funds are adequate and whether this is achieved through raising the overall level of resources or making more effective use of existing funds is a matter for the Europeans.

Questioner: Does the IMF have any idea what you mean by “adequate?” I mean, what is “adequate” when it comes to resources for propping up these countries? --

MR. HAWLEY: I’m not going to be drawn in offering you a number on that one.

Questioner: I wasn’t thinking of a number. What would be adequate as far as, I mean, clearly, support should be enough to keep the country going, to support the banking system.

MR. HAWLEY: Well, as I said, it’s appropriate. The “adequate” is to meet the needs of sovereigns with difficultly meeting market access.

Questioner: There have been rumors in Argentina that the Paris Club is waiting to see what will happen with this mission of the IMF. I wanted to know if there is any coordination between the IMF and the Paris Club in this subject.

MR. HAWLEY: For a Paris Club response, you should turn to the Paris Club.

SPEAKER: No, but I mean if there is any coordination with the IMF. I mean, there is two. I mean, there is the IMF and the Paris Club. —

MR. HAWLEY: I don’t have a specific comment on Argentina and the Paris Club for you today.

Questioner: Can you help me to understand the difference in why the IMF makes very specific recommendations on countries and regions in terms of policies and liquidity, et cetera, and then why in this EFSF case or the Euro case, where IMF has obviously expressed concern on contagion and not only within Europe, but outside of Europe, and the spillover effects, why the IMF is so reluctant to comment on specifics in terms of a very crucial part of European policy, when the IMF’s primary mandate is to advise and play that role?

MR. HAWLEY: Forgive me, I haven't quite understood that question, what you’re pressing me to comment on or inviting me to comment —

Questioner: I understand that. I’m often verbose and difficult to understand. Let’s take an Article IV for a country.

The IMF is often very specific on the policies and measures that it thinks would recommend to a country to spur on growth, to fix any underling fundamental problems, and to address any problems. It has been mandated to do that for spillover reports for regions or a multiple number of countries, and the IMF has been very involved with the EU on the EFSF. The EFSF is a very critical tool to fixing the sovereign debt problem. So, I’m just wondering why if the IMF is so specific on, say, Article IVs and maybe spillover reports, it’s not so specific on recommendations for the EFSF.

MR. HAWLEY: Well, anyway, I’d refer you to what I just said, and I think we are somewhat specific. We see the EFSF as part of other components of the comprehensive European response to overcome the current difficulties in the Euro area.

Questioner: And to follow-up, is there concern that it may take too long? Some people are speaking of March. Don’t you think something should be done earlier than March?

MR. HAWLEY: Well, we welcome the efforts that the Europeans have made. I think I’ll limit my remarks to that.

Questioner: I have a question on Greece. there’s been more and more comments on the risk of default. I’d like to know where the IMF stands on the idea of changing the SBA into a different sort of loan that would extend repayment dates.

MR. HAWLEY: Okay, there were two questions there; one on default and one on extending —

As you know, we’ve said that we’re advocating a longer repayment period for the Greek Program, which could be achieved by converting the Stand-By Arrangement (SBA) into an Extended Fund facility. We could propose this to our Executive Board. Naturally, to do so, we would have to work in coordination with our European partners.

You asked also about debt restructuring for Greece. I would note only that the Government of Greece has repeatedly stated that debt restructuring is not their intention, nor is it in their interest, and we agree with them on this point.

I’m going to turn to the Media Briefing Center. I have a question on Ireland which is “There are discussions in Europe about lowering the interest rate on the Ireland loan package. Would the IMF consider doing this for its portion of the Irish loan?”

The answer to that is that the Irish loan, as any IMF loan, is made at the SDR interest rate, a rate that does move with the markets, but which is currently about 3.1 percent. There is a further dimension to this question, which refers to the possibility of the Irish interest rate falling, and if there were an increase in the Irish quota in the Fund. This is a somewhat technical question. I’ll do my best to explain it.

As you know, there is a quota review agreed in 2008, which we are hopeful will be approved shortly following consideration by the membership. Ireland is one of those countries whose quota stands to increase under this agreement. As a consequence of that, the amount of its loan relative to its quota would fall, and that would have a bearing on the interest rate that Ireland paid on its borrowing from the Fund. At the moment, I can’t identify what a subsequent interest rate was, but that, I suspect, is the background to the question.

I’ll take another question, if I may, from the Media Briefing Center.

The question refers to a report in “The Guardian” quoting the [Managing Director] and the German chancellor, and he’s asked for comment on this report.

I can say that I have no comment on what amount in this case to a third-hand report of comments. I can, however, confirm what you already know, that the Managing Director, Mr. Dominique Strauss-Kahn was in Berlin last week and did meet Chancellor Merkel.

Questioner: Just on the Irish interest rate, impact from the quota reform, will that be a fall in the interest rate or a rise in the interest rate?

MR. HAWLEY: It would work out as a fall.

But let me stress, I cannot assign

a value to that at this stage. It’s an arithmetical result of the quota increase.

Questioner: Does the Fund see any impact of the events in Tunisia on the Tunisian economy and what about the rest of the region?

MR. HAWLEY: Well, it is too early for a firm assessment of the economic impact of the current unrest, but it is clear that it has led to a decline in economic activity, that the Tunisian Minister of the Interior has estimated at perhaps the equivalent of 4.5 percent of GDP, but I’m not in a position to offer an assessment of that.

You asked, a broader question about our view of the region, and what I would say is that we do see economic pressure building in the region. What you should note is that while the region’s oil-importing countries have only seen a relatively mild slowdown in growth last year to the equivalent to about 4.5 percent, this growth rate is below the level required to create sufficient jobs to absorb new entrants to the labor market and thus bring about a decline in chronically high unemployment in the region. And, thus, addressing the question of high unemployment is a longstanding, but increasingly urgent economic challenge.

Questioner: Will the SDR reform affect any other loan rates?

MR. HAWLEY: I don’t have a specific answer to that because I’m aware of it only in the case of Ireland, but it conceivably could apply to other countries.

MR. HAWLEY: Okay. I have another question from the Media Briefing Center. “What on Tunisia is the current status of IMF programs? And on Ivory Coast what has the IMF done and expended since November 2008?”

So, on Tunisia, there isn’t an IMF program. Tunisia is a country which has Article IV status. In other words, there is an annual consultation with the authorities.

On Ivory Coast we are waiting for the situation to stabilize before there can be further action on the Fund-supported program in that country.

I have an additional question online “On Southern Sudan, what is the Fund planning in the light of preliminary results indicating an overwhelming vote for succession.”

The situation in Sudan as in any country that divides, is that following recognition of the new entity and a request by the new entity to join the Fund, there would be consideration of membership. That is a process which, if experience is a guide, takes some time, perhaps, up to a year.

Okay, thank you very much.