Transcript

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

September 29, 2014

Webcast of the press briefing

MR. RICE: Good morning to everyone and welcome to this Press Briefing on behalf of the International Monetary Fund. I'm Gerry Rice, Director of Communications here at the Fund. As usual, our briefing this morning will be embargoed until 10:30 a.m., that's Washington time.

Let me make a few announcements regarding travel and events and then I'll come to your questions in the room and to colleagues online.

This will be the last press briefing before our 2014 IMF and World Bank annual meetings which will take place on October 10 to 12 here in Washington. So as many of you know that means the next two weeks will be full of various media events and publications and materials coming to you from the IMF.

The Managing Director, Christine Lagarde, will make a curtain raiser speech for the annual meetings on the challenge facing the global economy, and that will be at Georgetown University here in Washington on October the 2nd at 11:00 a.m., so that's a week today.

Two weeks from today, that's on Thursday, October the 9th, Madame Lagarde will give her usual annual meetings' press conference which will launch the meetings officially. That's going to be at 10:00, on October 9.

A couple of other things that may be of interest to you. We will have in the run up to the meetings the launch of the World Economic Outlook of the Global Financial Stability Report. Now, the analytical chapters of the World Economic Outlook, the WEO, and the GFSR, the Global Financial Stability Report, will be released at 9:00 on September 30th, so that's next Tuesday for the WEO, and Wednesday, October 1 for the GFSR.

I think they've got some interesting issues. The WEO chapters, for example, will focus on the macroeconomic effects of public investment and on global imbalances. The GFSR chapters will focus on shadow banking, and the role of corporate governance, and executive pay for banks. So that's the analytical chapters.

Then formerly on Tuesday, October 7 Olivier Blanchard, our economic counselor will launch the WEO proper, the World Economic Outlook in a press briefing to you at 9:00 here at the Fund. That's Tuesday, October the 7th. The following day, Wednesday October the 8th, Jose Vinyals, who is our financial counselor, will launch the global financial stability report proper, the GFSR. That's at 9:00.

Then on that same day, so we're talking about Wednesday, October the 8th, Vitor Gaspar, who is the Director of our Fiscal Affairs' Department, will present the Fiscal Monitor. So apologies to you for all those dates and various publications, but I know they're important to you and may help our colleagues out there that are also following these things.

One more item. Last week the IMF announced that our staff had prepared a prospective institutional response to the Ebola outbreak, which I know is on many minds right now. By recommending to our Executive Board to extend additional financial support of about $127 million to Guinea, Liberia, and Sierra-Leone, the three West African countries most affected at present.

What I want to tell you is that our Board, the IMF's Executive Board will actually meet on this tomorrow. We will keep you posted on that with press release and other materials tomorrow.

One final announcement that I need to make is a bit more in house and closer to home. That concerns the head of media relations here at the IMF, Connie Lotze. Connie is well-known to all of you, and to our friends online. The announcement is that, unfortunately for us, Connie's leaving the Fund after 15 years here to go onto the very prestigious position, I may say, of Deputy Director General of Communications at European Central Bank in Frankfurt.

So as I say, sad days for us that Connie is leaving after about 15 years at the Fund. I think we're all very fond of Connie, and we know what professional job she's done over the years. I know she's been of help for you, but we're also very happy for Connie that she's going on to something that's clearly a very impressive position, and an opportunity to go home as well. So I know we all wish her well. I just wanted to mention that.

QUESTIONER: On behalf of everybody I want to wish Connie the best. We will miss her so. The last five years she's helped us a lot, and we wish her big success at the ECB.

MR. RICE: We appreciate that. Thank you. That's very nice of you to say. I should have added, just so you know and colleagues know, that Simonetta Nardin is currently the Deputy Head of Media Relations. Simonetta's acting for Connie at the moment, so we're all in very safe hands, I'm happy to say.

QUESTIONER: Gerry, good morning. Again, I have a few questions here. The first one is the issue of whenthe IMF is going back to Greece. Is Mr. Thomsen going back or only Mr. Goyal?

Also, in Greece they are talking about two parts review, one before the annual meeting, and one after the annual meeting. Can you tell us what is the truth and what the IMF is going to do?

MR. RICE: A staff team led by Rishi Goyal will start work in Athens on September the 30th. The objective of the visit is to make progress on a few key issues for the sixth review, issues including the 2015 draft budget and the nonperforming loans. Issues where significant technical progress is needed. This would then facilitate the return of a full negotiating mission later in the fall. On Poul Thomsen, as you know Poul is currently acting director for the entire European Department. At the moment, there are no plans for Poul to travel to Athens, but of course, he can always travel if needed. You know, we play that a bit by ear.

QUESTIONER: The Prime Minister of Greece met with Mrs. Merkel in Berlin, and talked about the impressive correction of Greece's public finances. He stated Athens resolve to continue with reforms and fiscal discipline. Because of the above would the IMF work on a possible early exit from the IMF program as a sign of success because that's what the Prime Minister of Greece has indicated last Tuesday?

MR. RICE: Well, the IMF program is scheduled to end in March 2016, so our focus is, right now, on the successful completion of the sixth review so that Greece can continue to put in place the essential conditions we've all been working for to achieve sustainable growth and job creation. The early end of the program is not an item for discussion during the meetings in Athens later this month.

QUESTIONER: The Prime Minister calmly said to Madame Lagarde that, you know, I have the money. I don't need the money. Can he exit the Greek program? What is the process?

MR. RICE: Again, maybe just stepping back for colleagues who may not follow these things so closely. I'm not referring specifically here to Greece, but all IMF lending arrangements are voluntary. So it's up to the authorities of a member country to request the financial assistance from the IMF. Similarly, it's up to the authorities to request the termination of a program should they consider the financial and technical advice from the Fund are no longer required. Again, I'm not talking specifically about Greece. This is just the general process.

QUESTIONER: So the Prime Minister of Greece or the authorities have not indicated to the IMF that they'd like to end the program early, because they've certainly talked in public about it?

MR. RICE: To the best of my knowledge there's been no such request at this point.

QUESTIONER: Similarly, the Prime Minister of Ukraine has said that its bailout program will need an overhaul given the ravages or war and other economic problems. Has Ukraine requested such a bailout overhaul, more cash, and is the IMF considering it?

MR. RICE: There's been no request. Again, to the best of my knowledge. We are focused on the implementation of the current program that's in place which aims to preserve the macroeconomic stability and launch sustainable growth in Ukraine.

A bit more information, if it's helpful to you. The next two reviews are planned to be combined in one. The staff mission is planned for November. Contingent on that, there would be the Board meeting either toward the end of the year, or perhaps early next year. So that's the timing that we're on.

QUESTIONER: And that would be the time to discuss any overhaul of the program?

MR. RICE: Well, again, I'm not speaking specifically about Ukraine here, but the reason we have program reviews is that a program by its nature is dynamic. We have the reviews so that adjustments can be made given changing conditions on the ground. Again, that's true in all out programs. That's the way the process works.

QUESTIONER: Just asking if there's any update on the quota and governance reform because we haven't been talking about this issue after the spring meetings. So just wondering: any update on that?

Also, during the annual meeting will there be a timetable with things like how or when the Congress might vote for this? Thank you.

MR. RICE: I don't really have much by way of new information for you on that, but perhaps just to remind that where we stand is that by and large we've made very good progress on the implementation and approval of the 2010 quota review.

The membership has noted that the approval of the United States is pending. The membership has also agreed, at the last meeting, that the United States, it's hoped, would be able to make a decision by the end of this calendar year. So we're all hopeful that a decision could be made by the end of this year. It would be at that point then, depending on whether the decision is or is not made, that the membership would look at other options.

I'd note in the G-20 meeting just a few days ago that there is a reference in the communiqué pretty much along the lines I've mentioned and a call for the membership to complete this as soon as possible.

QUESTIONER: I have a question actually on the climate change. As you may know, a group of more than 70 countries have expressed this week support for a carbon pricing scheme which could include a carbon tax. Could you tell us where the IMF stands on that? Do you feel that a carbon tax could have any adverse effect on the global economic activity?

MR. RICE: We've actually said quite a bit on this issue, including recently. There was the launch of an IMF book at the very end of July, actually launched by the Managing Director, Christine Lagarde, which laid out in some detail our thoughts on that issue. By and large, the views of our staff certainly can be useful to help mitigate climate change, and if done in the appropriate manner, it can also be helpful to growth, certainly not harm growth.

But again, we've gone into this in quite some detail in that publication and I'd be happy to point that to you.

QUESTIONER: Unless I'm mistaken, you didn't really express anything on the carbon tax specifically, so this was my question actually. Are you in favor? Is the IMF in favor of a carbon tax?

MR. RICE: I think the staff view is that the carbon tax can be effective. Of course, it depends on how it is designed and implemented. But again, we think it's one of the instruments that can be useful to help mitigate climate change, and without having an adverse effect on growth, again, if properly designed and implemented.

QUESTIONER: I have a question about Chinese economy. The director of the Asian-Pacific Department of the IMF said a few days ago in Manila that he expects the Chinese economy to grow well above 7 percent next year which is much higher than his July projection of 7.1 percent.

But we know that a set of data for the Chinese economy from August doesn't look very good, so what makes you more optimistic about the Chinese economy?

MR. RICE: Well, let me remind you that our latest forecast projected GDP growth of 7.4 percent for China in 2014, and 7.1 percent in 2015. Of course, we will be updating this numbers in the context of the WEO coming up in a couple of weeks. I think what we've been saying, including in the most recent Staff Report and the Article IV, is that China will continue to grow strongly. A moderate slowdown in the growth rate is a desirable adjustment and necessary for other reforms and adjustment to proceed.

So, implementing these reforms and addressing the vulnerabilities entails some costs such as, as I said, a more moderate, slower near-term growth. You know, we have to reflect these costs. We recommended that the authorities could accept a lower range of growth for the 2015 growth target.

We feel the lower growth, again in the near-term, is a price well worth paying for more sustainable growth and higher income in the future. But again, for those who may not follow this so closely, when we talk about a more moderate pace of growth for China it's still relative to the rest of the world and other countries a very strong rate of growth.

QUESTIONER: Even below 7 percent?

MR. RICE: Well, we think the authorities could accept a range somewhere between 6.5 to 7 percent for the 2015 growth target. But again, let's wait for the WEO numbers in a couple of weeks, and we'll be able to discuss this in a bit more detail. So more moderate growth in the near term, but still very strong growth for China.

QUESTIONER: I have a question also on the Chinese economy because in the G-20 meeting, countries agreed that they want to boost their economies by investing in infrastructure projects. But in China people are talking about the economic restructuring and reducing reliance on the investment. Do you think China should continue their infrastructure investment to boost its economy?

MR. RICE: The goal [for a country] is to achieve the fastest sustainable growth rate possible. We think that successful implementation of the authorities' comprehensive blueprint for reform will go a long way toward achieving this goal.

Again, while activity may slow somewhat in the near-term we think the economy will be on a safer and more sustainable growth path. Of course, it's all about finding the right mix of instruments and investments in infrastructure. This is something we've discussed in some detail in the context of the most recent Article IV Staff Report on China, so I won't go into the detail here. Again, I think it's a question of the right pace and the right level of investment to achieve that goal of a strong a growth rate as possible that is sustainable.

I'm going to go online, take a couple of questions here from colleagues, and then I'll come back inside the room. There's a question asking: Has Egypt invited the IMF to visit the country for an Article IV? When will that happen? Do you also expect to meet the Egyptian authorities during the annual meetings?

What I can say is that, indeed, there have been discussions with the Egyptian authorities about the possibility of an Article IV. I do not have the date for that, but we are hoping that would take place before the end of this year.

Of course, as I've said here before, we stand ready to support and assist Egypt as the authorities may deem appropriate. I would expect there to be discussions around that during the annual meetings.

There is another question about Ghana quoting Ghana's president who has said, apparently, ”it's my hope that by January we should start a three year IMF program to try and stabilize the macroeconomic environment.” What's the IMF's response?

I can tell you we currently have an IMF team in Accra to initiate discussions on a program. We will have a press release at the end of that mission. The context is, indeed, that the Ghana authorities initiated discussion on an economic program that could be supported by the Fund. Those are the discussions that are then taking place. So it's premature to have dates and more details on that process because the team is in Ghana. We’re expecting it to conclude this week, and we will communicate at the right time.

Final question I'll take on-line, and then I’ll come back in the room. “When will the fourth review of Pakistan be completed, and submission of the fourth tranche of the EFF?” The status there for Pakistan is that the program remains in effect. Indeed, there have been some delays in concluding the fourth review. Discussion is continuing. I do not have, given the discussions are still ongoing, the date for submission of the fourth tranche, but we will keep you posted on the status.

QUESTIONER: One of the hurdles for this review is something about a protest there going on, is that one of the hurdles?

MR. RICE: We have not -- I don't have much on that. We have no yet carried a comprehensive analysis to assess the economic impact of the recent political unrest. But that's something we will be doing in the coming days in the context of our ongoing engagement.

QUESTIONER: I want to move on to Greece, if I may. Madame Lagarde told the Financial Times recently that she had been forced to boost her personal security after she received death threats from Greece because she spoke out on tax evasion in Greece. Also, a judge in Athens forced Mrs. Lagarde to testify on these threats. My question is did you receive a letter from the Justice Minister of Greece? What did she mean when she said she received death threats? She received it through the mail? Through email? Through the social media? How serious do you think are these threats?

MR. RICE: We did comment on this last week. Just answering your questions, yes, we've received the letter. The reference concerned some comments that were received via social media a few years ago which merited tightening security at that time.

QUESTIONER: Also, I want to ask something else about the rate IMF is lending money to Greece. Because the Vice President of Greece, Mr. Venizelos, told us in New York two days ago that the rate that IMF is charging Greece is higher than the markets. Can you tell us what the rate is right now?

MR. RICE: Greece is currently paying about 3,5% on

Fund interest.

QUESTIONER: The authorities have said that the Ebola crisis could reach 1.4 million cases by, I think, January. They've also warned that the more there's opportunity to replicate the more risk it is for mutations, etcetera.

I'm wondering if the IMF, as part of its Ebola economic assessment, is including the worst-case scenarios beyond West Africa, the potential impacts on the global economy, and whether that will be part of its, I forgot what it's exactly called, the early warning system, the early warning assessment that the IMF does for every meeting.

MR. RICE: I don't have any details of global analysis that we've done at this point. I would expect that implications of the Ebola outbreak would be an issue under discussion at the annual meetings.

Maybe I can give you just a bit more information that might be helpful of what we have done and what we do know. Let me preface this, again, by reminding you that our Executive Board will meet tomorrow to decide on a financing package for the most affected countries, so I don't want to preempt their discussion and decision tomorrow. We'll have more communication tomorrow, obviously.

As Madame Lagarde actually said a few days ago, we all have, of course, first and foremost the concern for the human toll that this is taking. The situation's very fluid, I think as you were indicating, and we're watching it closely. Our preliminary assessment is that growth could decline from Sierra-Leone from 11.3 percent to 8 percent, in Liberia from 5.9 percent to 2.5 percent, and in Guinea from 3.5 percent to 2.4 percent.

Staff's estimates also point to significant fiscal balance of payment needs. The outbreak has caused sharp declines in tax revenues and is generating substantial spending pressures. Staff's preliminary estimates point to a financing gap of at least $305 million for the three countries. So that's around $100 million each, and that's in 2014.

So those are the issues the Board will discuss tomorrow. As I mentioned, the proposal is for the IMF to provide nearly $130 million in additional financial support. That would cover, according to these numbers, about 40 percent of the currently projected financing gap, and would be availableto each country immediately. Again, contingent on approval by our Board.

I know I'm not giving you the global aspect, but we are in touch with our partners, multilateral and bilateral. We are looking to help coordinate this effort in the most effective way, and to close the financing gaps in with the least painful way as possible in terms of economic adjustment measures.

So again, situation remains fluid. We continue to monitor. We'll be revising the economic impact in light of the latest information. We think additional financing needs are likely to be identified, and not just for 2014, but also for 2015.

QUESTIONER: I appreciate that, and I understand that you don't have an assessment of the global impact at this time. As the IMF does in the WEOs and also for any bailout program and Article IVs, it does draw up worst-case scenarios based on some data for a particular risk to the country or region, etcetera. So I'm asking at this point whether the IMF is drawing up worst-case scenario for the Ebola crisis an assessment on the global economy, broader than just West Africa or the African region? I'm not looking for your assessment; I'm just looking to see whether you are assessing that as a risk to the global economy?

MR. RICE: Again, the situation's very fluid. We're monitoring it. We're gathering the information. I would expect that in due course the Fund would make an assessment of what the potential implications would be for the global economy, as you say, as we normally do with these kinds of major issues.

I'm going to take the last question.

QUESTIONER: I have some more.

MR. RICE: Some more?

QUESTIONER: Two more.

QUESTIONER: I'm going to be quick. The Obama Administration has just announced a set of major initiatives aiming at curbing the pace of the corporate inversions. Do you welcome this step or do you think that it could have any kind of adverse impact on the U.S. economy?

MR. RICE: I'm not going to comment on the specific measure that you mentioned for the United States. I think this was discussed by the G-20 last weekend and has been discussed before. We think that the overall issue of international corporate taxation is something that needs to be addressed. The OECD and others, working with the IMF, have done some work on this. We have been doing some work on this and I would expect that it would be another issue under discussion at the annual meetings.

I'm going to compromise with you, one question.

QUESTIONER: The question is: the Greek Parliament today passed an amendment regarding the banks' deferred tax which is something, as I understand, the IMF wanted. This legislation will create €3 billion capital according to the Parliament. It's a €3 billion capital for the banks. Do you still believe that the Greek banking system has the capital it needs? Another question that I have is that do you think that Greece can do their reforms without the IMF? It's a very important question for us.

MR. RICE: Our focus is and has been for some time to do all that we can to help support the government and the people of Greece to emerge from this painful crisis that they've been going through. We've been working in partnership on various measures, as you know, over these years.

I think that in a number of areas, we've seen progress. We've talked about that before. Our focus is on the current program, and we will continue to do our very best to support Greece. I'm going to leave it there.

MR. RICE: Okay. Thanks very much, everybody.