Transcript

Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund

May 3, 2012

Webcast of the press briefing

MR. RICE: Okay. Well good morning everyone, and welcome to this regular press briefing on behalf of the International Monetary Fund. I'm Gerry Rice, Director of External Relations at the Fund. This is the first briefing since we had our Spring Meetings less than two weeks ago. That was a very busy time for all of you and for us, as well. I'm glad we got through it together and I look forward to the period ahead. Upcoming is quite an intensive period of management travel at the IMF and events.

So let me just walk through some of these events, which I think will be of interest to you. And then we'll turn to your questions. So in terms of the Managing Director, Christine Lagarde will be in Zurich next week on May the 7th giving a speech at the University of Zurich, which will be open and we will publish the speech. On May 11th, the Managing Director will be in Istanbul where she will participate in the Investment Advisory Council, an annual event in Istanbul.

Then on May 16, she will be in Aachen, Germany, to give the dinner speech at the annual international Charlemagne Prize.

Our First Deputy Managing Director, David Lipton, will participate in a high level conference next week, May 7 and 8, in Stockholm on issues surrounding fiscal consolidation and medium-term budget frameworks. That's a conference co-hosted by the IMF with the Swedish Finance Ministry.

Our Deputy Managing Director, Nemat Shafik, will visit Lebanon and Morocco on May 8 to 15. She will present a keynote address at the Arab Economic Forum in Beirut, amongst other things. One of our other Deputy Managing Directors, Naoyuki Shinohara, is right now attending the annual meetings of the ADB, the Asian Development Bank, in Manila. And our other Deputy Managing Director, Min Zhu, on May 17 will give a keynote address here in Washington at the annual meeting of the Bretton Woods Committee.

So that's it for management travel. As I said, it's quite active, it's busy. Let me mention one other thing, and then we'll get to your questions. The regional economic outlook for Africa will be launched on Monday, May 14 in Lusaka, that's in Zambia, by our Director for the African Department, Antoinette Sayeh. So thank you for bearing with me for that, and now happy to turn to your questions.

QUESTIONER: As you know, we have elections in Greece. I'm not going to ask you about the election because I'm sure that you don't have anything to tell us. But of course, if you want to make a comment, you are welcome. But I have a question on the aftermath of the elections. When is the mission going to Greece, and what are you asking the new government to do?

MR. RICE: The mission will go to Greece after the elections, once the new government has been formed. I don't have a date for you on that. In terms of what would be asked of the new government, I think we all know that the program has been agreed. The major political parties have given their commitment to the major objectives of that program. And so, things haven't changed in that respect. It will be implementation of the main goals of the program.

QUESTIONER: I have two questions. First, two days ago, Mark Sobel, the U.S. Deputy Assistant Treasury Secretary, mentioned that here is increasing international consensus to increase the emerging markets’ weights in the IMF. Does this mean that new developments and achievements would be made on this issue in the coming G20 Summit or other platforms in coming months?

Secondly, the 430 billion new lending resources for the IMF were to be expected to go to the General Resources Account. According to previous reports, the United States and other countries insist the resources should be going to a special administered account. Is this a concession made by the U.S. and other member countries. Why? Thank you.

MR. RICE: Well, thank you for these questions. Let me take your second one first, because I think it is just a factual answer I can give you that leading members and contributors agreed some time ago that the new round of resources, the more than $430 billion that has so far been raised, would contribute to the GRA, to the General Resources Account of the IMF. And this was reflected for example, in the G20 Ministerial Communiqué from Mexico City on February 26. So GRA.

QUESTIONER: And a long time ago means several months ago? Or you mean it has been agreed a long time ago?

MR. RICE: That was indicated some time ago and the expectation is these resources will be to the General Resources Account.

On your first question, on the question of quota and voice in the Fund, again the G20 and indeed, the entire Fund membership have made clear their commitment to reforming the quota and governments of the IMF.

And this is embedded, and represented best I think, by the agreement on the 2010 Quota and Voice Reform, which as you may know, will result in an unprecedented doubling of IMF quotas and re-aligning of quota shares to better reflect the changing weight of member countries in the global economy. And that I think was really the thrust of your question. For example, all the BRIC countries will be among the IMF's top 10 shareholders once this 2010 Governance and Votes Reform is approved. We need acceptances by a large majority of members to implement that reform.

As I'm sure you heard during the Spring Meetings, the IMF is urging our members to complete the necessary steps as expeditiously as possible. The G20 has urged that progress be made by the time of our Annual Meeting in Tokyo, and so we are pressing for that also. So again, just to sort of step back and encapsulate that, it's the 2010 Quota and Voice Reform on which we're expecting significant progress by the time of the annual meeting in Tokyo.

As you may know, discussions are also underway on the quota formula, with the schedule on that to be completed by January 2013. And then the next review of the Quota Reform itself, to be completed by January 2014. I think we've gone through this before, but just to sort of remind you of the schedule.

QUESTIONER: May I follow up on the resources question? If a new lending resources is channeled into the GRA account, does that mean the IMF should focus on managing the risks, the new risks that might spread across the board to different memberships?

MR. RICE: What I can tell you on that is that staff has engaged with a wide spectrum of the membership on the borrowing modalities and the Executive Board has initiated discussions along those lines. And the Board is expected to consider formally a framework to (inaudible) these additional bilateral borrowings in the coming weeks.

QUESTIONER: This week, Bolivia announced the nationalization of TDE, the private electrical firm. A few weeks ago, Argentina did something similar. What's the position of the IMF about these economic moves?

MR. RICE: Well, on this specific issue, this is a matter for Bolivia and Spain, so I wouldn't have a comment further on that. In terms of the overall question which I think you're raising, it's a very diverse region, and we would not call what we are seeing, you know, a trend. And I think it's important to know that the region overall has enjoyed high levels of FDI, Foreign Direct Investment, in recent years.

QUESTIONER: Just to follow up, but in the Spring Meetings, your chief economist Olivier Blanchard said that this kind of nationalizations now (inaudible) investment environment. What's the position now after a new nationalization in the region?

MR. RICE: Well again, I won’t comment on the specifics of any one case. I think what we have said in the past is that the importance of a predictable investment climate is key in all countries and in all regions and I think that’s the point that we were making during the spring meetings as well.

QUESTIONER: On Spain, you know there’s a question of whether the bad assets in the financial system should be spun off into separate company or separate companies. And I believe the IMF has said that that’s an option to be considered. There’s been reports that the IMF actually has recommended this process. Can you clarify exactly what the IMF’s stance is on the bad asset suggestion and what the consequences are of moving forward on a bad asset program without doing a comprehensive review?

MR. RICE: For your question, generally I’d refer to the preliminary conclusions of the Financial Sector Assessment that we published a few days ago, which I’m sure you’ve seen. So just setting it in the broader context, those preliminary conclusions confirm the need for the Spanish Government to continue with and further deepen the reform strategy to address the remaining vulnerabilities and build strong capital buffers in the financial sector. And we said that dealing effectively and comprehensively with legacy problem assets should be a priority of the next stage of the financial sector reform strategy.

On your specific question, again as we indicated in those preliminary conclusions, there are different approaches to implement the solution. Again, what is needed is a comprehensive diagnosis. It’s critical to do the due diligence of these banks’ assets before taking a final decision on that approach. And in the meantime, banks should be urged to clear as much as possible off their balance sheets.

QUESTIONER: And just a separate follow up. For Greece, in the review, or actually as part of the new EFF agreement, the Fund made it clear that any financing gaps that developed, Europe had given assurances to the IMF that they would cover those financing gaps. But are there similar assurances from Europe on Portugal and Ireland for any potential financing gaps there?

MR. RICE: Well, I think really the question is best addressed to the Europeans, but I think at several points over the last several months the governments of the Euro zone have made clear their commitment to the stability of the Euro zone, including providing resources as needed to program countries, provided the programs are being implemented effectively.

QUESTIONER: Sure. And I understand. I appreciate it and you’ll understand as a journalist why I gently and respectfully will press you a little bit further, even if you can’t say anything more. Just on the note that why I should ask the Europeans; the reason why I asked the IMF is because IMF requires fully financed programs and so it was only through the assurance of fully financing gaps that IMF was able to continue through a Greek program.

Secondly, you will know that there is what’s appeared to be a clear difference between the financial assurance on the Greek program, and the Portugal and Ireland program. So I’m wondering if you, as representing the IMF, see that there is a difference in the requirement the IMF is asking for in terms of Europe and covering financial gaps.

So in the Greek program, the review said probably four or five times, Europe has given assurances if there are financing gaps. There were no similar phrases in the Portugal and Ireland reviews. That’s why I’m asking the question.

MR. RICE: I won’t get into the specifics of the different programs, but again, just to repeat, and I think if you look at some of the declarations made by the European governments, public declarations over the past several months, they have made clear their commitment on the financing side to program countries. Again, provided the programs are implemented effectively. So you know, I didn’t mean to be flippant by saying ask the Europeans. But it’s just I think it’s a matter of public record.

QUESTIONER: Do you have any update for us on the talks with Hungary?

MR. RICE: On Hungary I guess what I would say is we welcome the recent progress and Hungary’s discussion with the European Commission and we’re ready to start negotiations as soon as adequate steps are taken to ensure Central Bank independence as has been discussed with the Hungarian government. We’re in close contact with the Hungarian authorities and our European partners on these issues.

QUESTIONER: So you don’t have a mission planned or anything like that?

MR. RICE: We don’t have anything planned along those lines. Let me go to your online colleagues because I know many are watching this online. There’s a question about Romania from Matthew Lee of Inner City Press. Matthew is asking: with the fall of the government in Romania, what impact does it have on the IMF program there, what steps, or talks, has the IMF begun?

And on that Romanian issue, I can say that the mission in fact is in Romania and is continuing its discussions with the Romanian authorities at the request of the new government. And we will update you on the mission’s outcome when it concludes its work.

QUESTIONER: On Egypt, part of the IMF’s mandate is to warn on imminent crises before they happen and to help countries, a number of countries, avoid them. I’m wondering if you can signal to us on the timing or the sort of deadline that Egypt might have itself. Not that the IMF is setting, but rather its economic situation is setting the Central Bank reserves that it has before it moves into a much more dangerous economic state. Is there some sort of time window?

MR. RICE: There was a fairly extensive commentary from the IMF yesterday on Egypt and indeed on the Middle East more generally in the context of the launch of our Regional Economic Outlook. And I’d refer really to what Masood Ahmed, our Director for the Middle East, said yesterday.

I don’t have much that’s fresh beyond that. It’s pretty fresh. Beyond that, to say again, we had discussions with the Egyptian authorities during the spring meetings, again, just barely 10 days ago. They are now finalizing their 2012-13 budget.

I’ve said here before the Egyptian economy faces a challenging situation. We stand ready to help, to support a program that strengthens macroeconomic stability, that has a broad political consensus, that protects the vulnerable groups, and that’s the discussion we’re having with the Egyptians vis-a-vis their economy right now. But again, there was quite a lot of commentary yesterday, if you didn’t see that.

QUESTIONER: I wanted to ask you, how is the cooperation with the Europeans on the Greek program and on the programs of Ireland, of Portugal, because it seems to us that this cooperation is difficult. It seems to us that the Europeans are asking different things than the IMF.

MR. RICE: You know, each country is different. In general, I would characterize the cooperation between the IMF and our partners in the European Commission and the European Central Bank as excellent, and I think it’s been very effective, as well.

If you look across the various programs, of course, and as would be expected, there are often discussions and different views, exchanges of opinion on different issues in different countries. I think it would be surprising if it were anything other than that. But again, in general, this is a partnership that has worked very well, and is working very well.

So, I appear to have exhausted your questions for once. So with that, let me close out and again, thank you for being here, thanks to the folks that are online, and we look forward to seeing you in a couple of weeks time.