Transcript

Transcript of a Press Briefing by Gerry Rice, Director of the Communications Department, International Monetary Fund

November 21, 2013

Webcast of the press briefing

MR. RICE:Good morning everyone and welcome to this press briefing on behalf of the International Monetary Fund. I’m Gerry Rice, Director of the Communications Department.

Let me begin with a few remarks about the travel of our management and other events and then I will turn to your questions in the room and to our colleagues online. Our Managing Director, Christine Lagarde, will be visiting Asia from December 2^nd to December 7^th. Let me give you a bit of detail on that. On December 2^nd to December 3^rd Madame Lagarde will be in Cambodia where she is scheduled to meet with Deputy Prime Minister Keat Chhon and senior government officials to discuss recent economic developments in the region. She will also speak to students of the Ecole Royale d’Administration and exchange views with women business leaders and policy makers as well as members of Cambodian think tanks and the private sector. So that’s Madame Lagarde in Cambodia December 2^nd to 3^rd.

On December 4^th through 5^th the Managing Director will travel on to Korea and meet with President Park, Deputy Prime Minister and Finance Minister Hyun, and Bank of Korea Governor Kim. She will also meet with women leaders and attend a town hall meeting at the Seoul National University. In addition, she’s participating in the opening ceremony of the United Nations Green Climate Fund and a signing ceremony with the Minister of Strategy and Finance on Korea’s contribution to the IMF’s technical assistance program. So that is Korea, December 4^th to 5^th.

Madame Lagarde will then fly to Myanmar where on December 6^th and 7^th she will meet with Minister of Finance and Revenue, Win Shein, the country’s central bank governor, and other senior officials. She’s also scheduled to have a meeting with opposition leader, Aung San Suu Kyi, and she will conclude her visit to Myanmar by addressing the women’s forum highlighting the role of women in the economy and discussing with students at Yangon Institute of Economics on future economic opportunities for the country. So that’s Madame Lagarde in Asia, week of December 2 – 7. And if you’d like further information on which of those events will be public, speeches, interactions with the press, and so on please be in touch.

Turning briefly to other travel and events of our management team, our First Deputy Managing Director, David Lipton, is in Costa Rica today taking part in the 12^th Annual Regional Conference on Central America, Panama, and the Dominican Republic.

Our Deputy Managing Director, Ms. Nemat Shafik, will travel to Marakesh on December 2^nd to 3^rd where she will participate in the International Tax Dialogue, an event organized by the Fund and the Inter-American Center of Tax Administrations together with other international organizations. Madame Shafik will then fly to London on December 5^th where she will participate in a panel on growth at the London School of Economics. Later that day, she will deliver the Annual Lecture on Global Economic Governance at Oxford University. The following day, December 6^th, she will take part in a roundtable discussion on the European financial crisis to be held at St. Antony’s College of Oxford.

Finally, then, our Deputy Managing Director Zhu will be in Vanuatu on November 22^nd to attend the Second Pacific Island Conference on lifting potential growth in the Pacific Islands. He will be making the opening address at that conference on the Pacific Islands. So, with that let me turn to your questions in the room.

QUESTIONER:Good morning, Gerry. The mission left Greece today and many questions are left unanswered. First, do you think there is time for the next loan in December and can you tell us how long can Greece go without the loans from the IMF and the Europeans. And I have another question about the budget. What is your assessment of the 2014 budget that the Greek government presented to the parliament as I understand without your permission?

MR. RICE: Thank you. There was a statement issued just yesterday on the status of the mission so let me just give an indication of that. The staff teams of the European Commission, the European Central Bank, and the Fund yesterday concluded their visit to Greece following productive discussions with the authorities on a set of policies that could serve as a basis for the completion of the ongoing review of the country’s economic program. As the statement said, good progress has been made but a few issues remain outstanding. The discussions will now continue from our respective headquarters and the teams are expected to return to Athens in early December. So that’s kind of the status of where we are, and, again, there is a statement to that effect.

About the disbursement and Greece’s financing, I think you all know how this works. The timing of the disbursement really depends on how the discussions evolve. Once there is agreement at the staff level a report is produced for our executive board, they discuss, they approve the review, and after the review is approved the disbursement is made. We believe that Greece’s financing needs in the coming months can be met from existing liquidity buffers, thus we see no acute financing pressures. But, again, let me stress, the focus now is on reaching an agreement on the set of policies that would facilitate the conclusion of this 5^th review.

You asked about the budget. Well, let me start by saying that we project a primary surplus for this year which means that the Greek authorities have exceeded a key fiscal target a year ahead of schedule. On the 2014 budget we have had and continue to have productive discussions. As demonstrated in this year’s experience, the Greek authorities have a strong track record on meeting their fiscal targets and are fully committed to those for next year. I can come back to Greece but let me turn to other questions.

QUESTIONER:One of the messages from the IMF during the Annual meetings was for emerging markets to get ready for Fed tapering, to do what it takes before it actually happens. Do you feel this has been done? Have you seen progress in emerging markets? And are they ready for tapering?

MR. RICE:I don’t have details for specific countries for you this morning, but I think one of the points we’ve been making is that the emerging markets in general are much better prepared at this stage than they were, for example, at the time of the Asian crisis some years ago. They have been strengthening their exchange rates, their reserves, and taking other macroprudential measures which should stand them in good stead when the eventual tapering takes place. And I think in terms of our advice it would be to continue along that path, that is to continue to strengthen these macroprudential measures. And on the other side of the equation, we’ve been emphasizing the need for the monetary decisions, and the steps to be taken in a gradual manner, with clear communication, which we feel is very important.

QUESTIONER: But if I can just follow up, I was asking since May, not since the last Asian crisis.

MR. RICE: As I just mentioned, I think a number of countries have been continuing to strengthen their economies in the areas I just mentioned but I don’t have specific details on specific countries.

QUESTIONER:Good morning. I have one question on Ukraine. There was a story a few weeks ago that Ukraine may sign an agreement with the European Union and Russia may retaliate by cutting its energy, and at that point, the IMF and EU may step in with standby financing and Ukraine is set to sign this in a few days. I was wondering if you have any updates on any kind of agreement with the European Union to support Ukraine.

MR. RICE:I don’t have an update for you on that issue. The status of where we are with Ukraine, from the IMF side, is the staff mission visited Kiev in the second half of October for the 2013 Article IV Consultation, and additionally the first post-program monitoring review. Another mission was in Kiev recently from November 18-19 to hold discussions on ex-post evaluation, that’s the evaluation of the 2010 SBA. So going forward, further technical consultations between the staff and the authorities are continuing with a view to ensuring that policies are sufficiently ambitious to address Ukraine’s challenges. I think we talked about this a couple of weeks ago here. The Article IV mission emphasized the need for significant progress in all of the key policy area. One other piece of information may be useful: our executive board meeting to discuss the Article IV Consultation and the ex-post evaluation which I mentioned is tentatively scheduled for mid-December.

ONLINE QUESTIONER:I have a package of questions online from Pakistan and then I’ll come to you in the room. And I want to take these since there are three or four and I’d like to respond to colleagues in Pakistan. So these questions related obviously to the ongoing IMF supported program in Pakistan. The first question is: How do you view the recent trend of monetary tightening by the State Bank of Pakistan? Would that contribute to containing inflation in realistic terms? There I would say that we are supportive of the State Bank’s recent monetary policy decisions. The trend in monetary tightening will help contain inflation and will also aid in the State Bank of Pakistan’s drive to rebuild foreign exchange reserves.

There is a second question from the same source: The IMF has already expressed concern over the potential of increased sectarian violence in Pakistan. How would that affect the Pakistan economy? I don’t have a specific comment on that political issue but what I would say is that it is of paramount consideration to the IMF to have a sound macroeconomic policy and framework and deep structural reforms to boost growth potential over time which will help all the Pakistani people. And that’s very much the focus of the current IMF supported program.

There is a third question: Public in Pakistan is widely holding the IMF responsible for the current wave of inflation. What’s your comment?

MR. RICE:I’d probably just refer to what I’d said about inflation responding to the first question. Inflation is often the heaviest tax on the poor. Its places the heaviest burden on the poor in countries. So we believe that social protection is key to the successful implementation of this program. And the government has agreed to put in place polices to protect the most vulnerable segments of the population from the short-term impacts of the reforms. In the short-run the program includes a significant increase in targeted transfers to the poor.

QUESTIONER:Good morning. What’s your first evaluation on the privatization plan which was announced today by Italian Prime Minister Letta, 12 billion Euros, in order to accelerate the debt reduction? Is there a first evaluation by the IMF?

MR. RICE:I don’t have an immediate reaction to the news from today but perhaps we can get back to you with something a bit later on.

[The following press line was distributed after the end of the briefing: ""We welcome the recently announced privatization plan as an important step to bring down public debt and help reduce Italy's high tax burden. Accelerating the privatization agenda, especially at the local level, would also improve the efficiency of public services and provide more opportunities for private investment, thereby supporting growth."]

QUESTIONER:I have two questions. I would like to go back to Greece actually. Could you please tell us why the review is taking so long? What are the main points of discussion? And also on Germany, Germany has just announced that it was about to introduce a minimum wage. Does the IMF see that as a good way to rebalance growth within the euro area? Thank you.

MR. RICE:On Greece I don’t have the details of the discussions beyond what I’ve said earlier. There has been good progress, as I’ve mentioned, in a range of areas and the discussions are continuing with the objective of coming to closure soon.

QUESTIONER: But why is it taking so long?

MR. RICE:You know, Greece has been facing a crisis for quite some time, as we all know. There are very difficult issues to be addressed in a range of areas and I don’t think it’s surprising that it would take a while to work these through and that’s the process that’s ongoing.

QUESTIONER: And Germany?

MR. RICE:On Germany I don’t have a comment on that particular topic.

QUESTIONER:Because the IMF has been calling for rebalancing of growth in Germany so I was maybe thinking that would be – that you would deem that as appropriate.

MR. RICE:Well, in general you are right. We’ve been calling for a rebalancing which we think would be helpful to the euro zone but I don’t have a comment on the most recent proposal which I think has just sort of popped up today.

QUESTIONER:Back to Greece. Do you have any comments about the few issues that remain outstanding, unresolved?

MR. RICE:Beyond to what I just said, good progress across a range of issues and discussions to continue.

QUESTIONER: Good morning. You mentioned that there are no acute financing needs in the case of Greece, but what about the funding needs of the program going forward for next year? The IMF has asked the Europeans to reaffirm the commitment to help Greece in that respect and I’m wondering, are you concerned that the possible delay of a next disbursement might undermine the success of the program going forward? Thank you.

MR. RICE: Well, again, I wouldn’t speculate on discussions taking place in the context of the current mission, but as you indicate, the Europeans have committed on a number of occasions to provide adequate future financing to Greece provided that the program is implemented and it’s our expectation that these commitments would be met in due course.

QUESTIONER:Good morning. As the IMF recognized the other day, the Australian dollar is appreciated in real terms. So does the IMF see this as a problem for Australia’s competiveness? What other measures would the IMF propose or support for addressing this issue?

MR. RICE: I don’t have a specific comment for you beyond the recent actions – the recent actions taken are appropriate, but I don’t really have much more detail for you on Australia. Perhaps we can come back to you after the meeting.

QUESTIONER: Just to add to the questions on Greece, from a more specific perspective: the privatizations. There is a fourth privatization administrator now in 16 months. Are you worried about what’s going on there? Are they committed to really pushing this through? And then a question on the IMF quota reforms: there is a hope that this could be attached to the most recent legislation so I was wondering if the IMF is on the Hill, trying to educate the lawmakers about these issues or is that something you look forward to doing in the next few weeks?

MR. RICE: On Greece and the privatization, again, I’m not going to get into the specifics of what’s been discussed under the review so I don’t have a great deal for you on that. On the quota, as you know, we feel that good progress has been made. This is the completion and approval of the 2010 quota reform which would increase the voice and representation of emerging markets in the membership of the IMF. Again, we feel that good progress has been made. We are hopeful that the 2010 reform can be completed and that the U.S. will move this forward expeditiously.

QUESTIONER: Are you doing anything to try to help in that process?

MR. RICE: We engage with our membership very actively all the time, so we’re hopeful that this will move forward expeditiously.

QUESTIONER: I have a question on Ireland. I was wondering: do you think that at some point, Ireland should consider raising its corporate tax rate which is one of the lowest among the industrialized countries?

MR. RICE: I don’t have a comment for you on the corporate tax rate in Ireland. Again, maybe just to refer you to our recent statements and reports on Ireland. You may be able to find some of the context you’re looking for there.

QUESTIONER: If I may, one clarification. You see any possibility for the Board to decide on Greece before Christmas?

MR. RICE: You know, I think we just have to let events take their course, take this step by step given the status where we are and let’s leave it there.

QUESTIONER: And another question if I can. I don’t know if you see this press report about the Europeans. They’re saying that they are impatient with Greece. Do you share this?

MR. RICE: I wouldn’t comment on a press report but, as you know, we’ve been working closely with the Greek authorities and people for some time now since the crisis blew up. There are very tough issues to be faced. We’ve been working with them, very much in a sense of partnership, with a shared objective of growth – restoring growth and employment. And so it’s in that spirit of partnership and working together that we intend to move forward into the future.

ONLINE QUESTIONER: How does the IMF see a future role for bitcoins in international finance?

MR. RICE: I would say it’s an issue where we’re following it. It raises a number of topics and issues including issues of regulation, issues of consumer protection. For the time being, it’s too limited a phenomenon to have any macroeconomic significance or financial stability implications, but again, something to watch.

ONLINE QUESTIONER: There is a question on Portugal: Is it possible to confirm the date of the next review on Portugal?

MR. RICE: What I can say is we expect that the next review, which is the 10^th, will take place in the first half of December.

ONLINE QUESTIONER: Has the Fund begun an investigation of whether the U.S. has spied on the IMF headquarters or has asked the FBI to investigate? What’s the consequence of a violation of the IMF Articles of Agreement?

MR. RICE: There I would just reiterate that we’re aware of the press report on this issue and I have no comment at this stage.

QUESTIONER: Just to shake it up a bit. Honduras’ ruling party candidate has said that they intend to seek an IMF deal in the next six months once they are elected. Have you talked with Honduras? Have they expressed any interest?

MR. RICE: We’ll need to follow up with you on Honduras.

QUESTIONER: I have one on Cyprus. What is the status of the program in Cyprus, Gerry? When is the board going to meet? And also there are reports that privatizations are the IMF’s precondition. Can you comment on this?

MR. RICE: Okay, maybe just on the status that you asked. The IMF team, jointly with our partners in the European Commission and the ECB, ended their visit November 7^th in Nicosia. There was a statement at that time. During that visit they discussed with the Cypriot authorities the second review of the program. Again, I refer you to that statement. So the IMF team is now producing a full report that will be discussed by the board, as you suggest, and that will be in mid-December. I don’t have the specific date for you but mid-December. And once the board discusses and approved the review, the disbursement can be made.

On the issue of privatization, obviously it’s an important component of the program. It can provide financing to the state over the medium-term, but even more importantly, it can increase the efficiency of the economy as resources are transferred from the state to the private sector which can help to spark competition for the benefit of the consumers. So where are we? The authorities are currently formulating their privatization plans and we are in close contact with them on assessing how specific modalities can achieve the objectives which I talked about. And I was just going to say achieving those objectives would require an early start to the process.

QUESTIONER: And is it a precondition for the next loan?

MR. RICE: I wouldn’t get into what might or might not be conditions of the next loan, so I’m going to leave it just with what I said. Okay, and with that I think I will wrap up in the room. We will get back to you on the couple of issues where we didn’t have specifics and look forward to seeing you in a couple of weeks’ time.

* * * * *