Transcript

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

October 31, 2014

Webcast of the press briefing

MR. RICE: Okay. Good morning everyone and welcome to this briefing on behalf of the International Monetary Fund. I’m Gerry Rice of the Communications Department. As usual, our briefing will be embargoed until 10:30 a.m., that's Washington time. Before I take your questions let me, as usual, give a little run-down on some major events upcoming that may be of interest to you.

On November the 7th, the Managing Director of the IMF, Christine Lagarde, will be in Paris for two events. First she will participate in the Banque de France International Symposium focused on central banking entitled The Way Forward. Madame Lagarde will be discussing the future of the macro-economic policy-mix with, amongst others, Janet Yellen and Mario Draghi. Later that day, November 7th, the Managing Director will deliver a speech focused on the global economy and that will be at the Franco-American Foundation.

Staying with the Managing Director November 10 to 11, she will be in Beijing for the 2014 APEC Economic Leaders Meeting. Then a few days later on November 13th, the Managing Director will join our first Deputy Managing Director, David Lipton in Brisbane, Australia to participate in the last of the G20 Leaders’ Meetings, that's the Leader’s Summit, the last meeting of the Australian presidency of the G20 this year. That's November 12th going into that weekend.

A couple of other smaller things. The Middle East and the Central Asia department will release its annual regional economic core group chapter on the Caucasus and Central Asia next Tuesday, November 4th in Almaty, Kazakhstan.

And a couple of other things. On November 3rd and 4th we are organizing a conference in Seoul with the Korean authorities on the future of Asian finance, that's November 3 and 4. And then about a week later, November 13th and 14th, another conference that's with the Swedish authorities in Stockholm with the Rijksbank Bank to discuss Macro prudential Policy. We can get you more information on any and all of this, as would be helpful to you.

With that, let me turn to your questions. Thank you. Good morning.

QUESTIONER: Good morning, Gerry. On Ukraine, what are your plans for the next steps? Is it true, as people in Ukraine seem to believe that there will be no mission because you are waiting for the new government to be formed?

MR. RICE: What I can tell you is that we’re anticipating the next review mission. That will be a technical mission in mid-November. And since the policy discussions cannot be completed for the review until the new government is formed, you know that's going to take some time, as we all understand. That mission may not be able to complete the discussions until the new government is in place. And so it’s possible that the review would not be brought to the IMF’s Board until later this year or even early next year, but it’s driven by the formation of the new government.

QUESTIONER: Good morning. Is that of any great consequence to the economy if the tranche is delayed until, say, January or February?

MR. RICE: No. We don’t think that would have a material effect.

QUESTIONER: Okay. And then, there are gas payments needed for Ukraine to Russia. There’s debt and also winter payments. Is there any wiggle room in the program as is currently agreed for the country to use some of that gas to pay off its -- either pay off its gas debt or pay for the winter gas needs, or must the cash go to boosting reserves?

MR. RICE: I don’t want to get into the gas discussions which are ongoing as we speak. I would just say we’ve encouraged both sides to reach a mutually acceptable agreement as soon as possible, and don’t really have much more than that.

QUESTIONER: I understand that you can't say anything on the discussions themselves. I’m asking about the program that is currently written. Does it currently allow for payments of the nature I’m talking about?

MR. RICE: I think that's something that we will be discussing in the context of the upcoming review. I don’t have any specific detail further on that right now.

QUESTIONER: I want to jump in because originally you did say when the original package for Ukraine was approved, that IMF did say that it covers payments of all the areas, that that is part of the overall rescue scheme, and that the IMF did believe that the money could be used for paying the gas debts. So what's changed?

MR. RICE: Nothing has changed. That's exactly right and I think they’ll be an update on that status in the context of the discussions on the review.

QUESTIONER: Good morning. My first question is: when do you expect the IMF mission to go back to Greece? We hear from the press that the Europeans have planned to go back on the November 8th.

MR. RICE: Maybe just stepping back for those who don’t follow as closely as you do. The discussions are continuing. Again, as you know, a staff team was in Athens in early October and focused on a few keys issues that are related to the sixth review, which is where we are. And then during the annual meetings a couple of weeks ago, the Managing Director Christine Lagarde met with the Greek authorities here in Washington. She commended the authorities on some significant improvements, so far, in Greece’s fiscal position, and encouraged them to implement decisively the key reforms remaining in-line with the program commitments and reiterated the funds commitment to support Greece going forward.

So in that context, at this stage we’re looking forward to receiving from the authorities the full set of policy proposals that could serve as the basis for further discussions, and that would also determine the timeline for the return of the mission. So I don’t have a specific date for you right now.

QUESTIONER: Can you expand on what Madame Lagarde said on Greece when she said said that, and I quote, “The country will be, in our view, in a better position if it had precautionary support.” That's my first question. And the second question, there are rumors around that they are talking about the European Solution, quote/unquote, that the Europeans are going to give money that Greece is going to need after December 31st.

MR. RICE: As I said, Greece has made important progress. The return to the markets earlier this year was an important milestone. We’ve welcomed it. It was one of the fundamental objectives of the program in the first place. But as recent events have shown, there’s still a way to go before Greece can rely entirely on market financing.

I think it was in that context that we had indicated that we thought a precautionary arrangement support would be the best way for Greece to proceed. Of course, that's for the Greek authorities to decide, and in consultation with its partners, including the European partners and any support that they would be offering in that broader context.

QUESTIONER: Good morning. I’d like to follow-up up with more Greek questions. You said that you're expecting policy proposals from the Greek authorities. When do you expect to receive them, and do you want to see also progress in the next steps for the pension reform? Are you expecting some specifics about that?

MR. RICE: Oh, okay. I don’t have a date in terms of when we would expect those policy proposals. The discussions are active. They’re ongoing and we will update you of course as they proceed. On your question about pensions, what I would say is that we support the authority’s desire to avoid across-the-board cuts in pensions and in wages also. But that's why it’s important to press ahead with the fiscal structural reforms to modernize Greece’s fiscal institutions, and to strengthen the Tax Administration where progress, we feel, continues to lack so that everyone pays their fair share of taxes.

QUESTIONER: My second question is about the precautionary support that is being discussed, as we understand, in Europe these days. And there are reports that the IMF might have a technical role in this next phase of precautionary support with the Europeans providing the money and the IMF providing technical support and the know-how. Would that be something that the IMF might be interested in?

MR. RICE: Well, if the Greek authorities decided that that was the direction they wanted to go in, I think the precise nature of the precautionary arrangement would then need to be discussed with them. It could take various forms, which I won't go into here. But you can imagine it could take various different guises. Of course the IMF, as has been the case now for a number of years, stands ready to support Greece in any way that would be helpful to the country and to the people, and you know that would include technical assistance. But again, it really depends on what the Greek authorities would decide to do, and then what the specific nature of the arrangement might be.

QUESTIONER: Hello. Yesterday the Feds decided to end its Asset Purchase Program. Do you think it was the right decision to make and that the U.S. economy is steady enough to thrive without this monetary stimulus?

MR. RICE: We welcome the Feds well-communicated steps toward a gradual normalization of monetary policy and these are supported by the continued improvements in the U.S. economy as typified by today’s GDP release and the recent improvements in labor market indicators.

QUESTIONER: Do you think the end of QE and a tightening of U.S. monetary policy could have some impacts on current and future sovereign debt from African issuance, such as Ghana, Zambia… countries like that? What might be the consequences on those sorts of countries?

MR. RICE: Well in general, we’ve been discussing this for some time and have talked and written quite a bit on this issue. But in general what we said, and this would include African countries, we’ve been recommending advice on two sides of this equation. One is that the advanced economy that's doing the easing should do this in a gradual well-communicated way. That's very important. And then on the other side of the equation for the emerging markets or developing countries, we said that it’s important that they should pursue robust macro-economic financial policies to guard against the potential vulnerabilities and mitigate the potential adverse external spill-over effects, so rebuilding their buffers and restoring policy credibility. And I think that applies to the African countries, as well. I think the word is vigilance and taking the requisite action to anticipate the decisions that are made.

QUESTIONER: Just to follow-up on that. The IMF produced a paper a few days ago noting that, oftentimes, in initial phase of a major capital flow output of the type described by the IMF, an unexpected rate movement is indiscriminate of the fundamentals within the emerging markets. With that and the IMF noting that there’s such a large concentration of liquidity in institutional investors, is the goal architecture, financial architecture, the IMF prepared to be able to handle the type of liquidity issues that might come from an unexpected rate move?

MR. RICE: It’s difficult to speculate what the exact nature of the situation would be but we stand ready to help our member countries as might be appropriate in individual circumstances. We’ve just had a spate of Article IV Consultations, Article IV reports. And in the context of those assessments, those individual country assessments, many of these issues have been discussed. So I would refer you probably to those in terms of specific circumstances and probably would not speculate more broadly.

QUESTIONER: Good morning. This is a question on the AIIB, the Asian Infrastructure Investment Bank which was formally launched last week. Do you have any comments on that?

MR. RICE: We welcome all initiatives that seek to strengthen the network of multilateral lending institutions and increase the available financing for infrastructure and development, including the newly created Asian Infrastructure Investment Bank, which you mentioned. We work closely with regional institutions and we’re available to offer coordination, advice as would be useful to help these new institutions complement the existing ones so that the bottom line, the overall impact for the member countries is positive.

QUESTIONER: You mentioned coordination. What kind of coordination or discussion you are expecting with this AIIB?

MR. RICE: Well, you know, we hope we’ll have a very productive dialogue and we would offer any kind of support, technical assistance, advice, sounding board, whatever. We would just aim to be as helpful as we could be, depending on the new institution requesting that help and on finding that help useful. But we are in cooperative coordinated mode. And as I said, we welcome this because anything that can help boost development, investment, growth in jobs is something we support.

QUESTIONER: But we see the Asian Development Bank’s President officially said he doesn’t welcome it because the AIIB and the ADB’s functions overlap. Do you think IMF shares the same concern?

MR. RICE: Well I wouldn’t comment on other statements on this. I can only give you our statement and we stress the importance of coordination, complementarity and impact for the membership.

MR. RICE: I’m just going to turn online just for a second -- there’s a question on Ebola asking if we can provide an update on the IMF’s response to the Ebola crisis. This has been discussed in recent days in the context of the release of our African Regional Economic Outlook, but let me just add a couple of points. The baseline outlook for Sub-Saharan Africa remains favorable we believe, though some West African countries are already feeling the impact of the reduced travel and tourism. That baseline scenario assumes that the outbreak doesn’t spread beyond the three most affected countries -- Guinea, Liberia, and Sierra Leone. The outlook for those countries, for the Ebola-hit countries, has worsened with large financing needs likely for 2015. So we discussed this recently at the Annual Meetings with the authorities concerned and they certainly painted a serious picture of the situation. We continue to work closely with the affected countries.

As we’ve said before, there’s a great deal of uncertainty about the extent and the financing needs, but certainly 2015 is going to be a challenging year. Should the outbreak be more protracted or spread to more countries, it would obviously have larger spillovers and we stand ready to do more. And as I say, we are actively working with the authorities to that end. Just to remind for those who may not be following it, the IMF has already committed about a month ago $130 million to the three countries most affected.

QUESTIONER: At the time that you increased your financing for the three countries, you said that covered about 40 percent of their financing gap and that the World Bank and others have provided 40 percent and that there was still 20 percent missing. Now, you just said that there will be large financing gaps for 2015 as the outlook has worsened. Does that mean that the estimated financing gap since a few weeks ago has worsened and that there is a much bigger gap than you originally said then?

MR. RICE: Yeah, what I’m saying is the outlook for the Ebola-hit countries has worsened and one of the things we’re looking at is what exactly that will mean in terms of financing needs relative to what we have said earlier.

QUESTIONER: Okay. And I know you said that it’s uncertain, but do you have any ideas about how much more we’re talking about here?

MR. RICE: That’s something we’ll come to you in due course. I do not have that today.

I’m going to stay online for a few more questions. One is on Egypt and it’s asking “When will the Article IV Consultation mission visit Egypt?” And I do have those dates. The Article IV Consultation mission will visit Egypt on November 11, and I can also say it will be led by the Mission Chief, Chris Jarvis. And they will be there as usual for about two weeks and discuss the country’s economic financial policies with government and central bank officials.

There is a question on Korea and it’s asking again about the end of QE and what will happen to the Korean financial markets after U.S. QE ends regarding especially possible capital outflow. I would say that since the middle of 2013, Korea has maintained resilience to the ways of global derisking associated with QE. Looking ahead, Korea has built up external buffers, which will help limit the impact of any global capital market volatility related to the normalization of U.S. monetary policy, including modest short-term external debt, a sizeable stock of international reserves, and a current account surplus position. The ability of the one to respond flexibly is also a key buffer. So I think it’s an example of what we were talking about earlier in terms of countries taking the necessary actions in response to potential volatility.

QUESTIONER: Some countries in Europe have included drug trafficking and prostitution in their GDP. Could you tell us where the IMF stands on that issue? Do you think that it’s appropriate for countries to include informal or illicit activities in the measures of their GDP?

MR. RICE: That is something I’m going to defer to our economist experts and we will get back to you with a proper technical response on that.

QUESTIONER: I have one question on Cyprus. The Minister of Economics of Cyprus said that the mission is going to Nicosia at the end of the year. Is it possible to tell us what are the obstacles for the mission to go back? Why they don’t go back?

MR. RICE: On Cyprus, as you know, an IMF team with our partners in the European Commission and the ECB ended their visit to discuss the Fifth Review of the program at the end of July. So since then, we have been urging the authorities to further strengthen the legislative package on foreclosures to ensure that the process is effective, which we believe will help Cyprus deal with the high level of nonperforming loans, restart the flow of bank credit, and return to growth. So a legislative package consistent with these goals is needed for the conclusion of that Fifth Review of the program. Now, we’re aware that proposed changes to the foreclosure process are currently with the Supreme Court, so we remain in close contact with the Cypriot authorities on those issues. But, again, I don’t have a date for you right now on the return of the mission.

QUESTIONER: Could you outline to us your thinking about the strategy moving forward in terms of the U.S. Congress and how to persuade members of Congress that it’s actually in the American interest that they should pass the package of IMF reforms that’s now perceived as sort of de facto deadline at the end of the year.

MR. RICE: Well, just a reminder. Where we stand on that issue is that our membership have discussed this a number of times, including most recently a few weeks ago at our Annual Meetings. They had decided that, given the U.S. commitment for rapid action on this issue of quota reform by the end of this calendar year, they would wait for that action to be taken before the end of the year. So that’s kind of where we stand. In terms of the arguments as to why this is in the U.S. interest, well again there’s been a great deal of discussion about this. In fact, the Managing Director of the IMF spoke about this as recently as last night at a public forum. We believe that the IMF’s role in promoting global financial stability and helping to promote growth and jobs across the world is in the interest, in the strong interest, of the United States and all our other member countries for that matter. We are working to make sure those arguments are well understood and I know that the United States administration and Treasury Department are also working very hard to that end. So we’re waiting now for the end of the year to see if the rapid action may be taken.

QUESTIONER: And just to follow up to that: By assessing a deadline, there’s the implication that if that deadline’s not met, then something happens after that. If you have children, I’m sure you understand how that works. So I’m not suggesting that Congress is in that way, but it does stand. Is there a strategy to go about trying to reform the IMF and bring the quota system up to date if the U.S. Congress doesn’t cooperate?

MR. RICE: Again, just for your background, this has been discussed at length and previously. And what the membership have said is let’s wait for the U.S. to take the action and should that action not be taken, then to look at the next steps at that point. That’s where the membership has left it.

QUESTIONER: There is a contingency reserve fund that the IMF approves every six months to keep open. I forgot the exact name of it. It’s an emergency fund that was set up I think in 2010 or 11. It was extra cash.

MR. RICE: You’re talking about the new arrangements to borrow?

QUESTIONER: Yes, yes. And that has to be approved every six months to keep open and the Managing Director has to present to the Board that there is enough of an emergency globally to keep that available. I am correct in thinking that that has been reapproved this October?

MR. RICE: Yes. That was just recently reapproved.

QUESTIONER: And so implicit in that is that there are still emergencies, potential emergencies, around the globe that require access to that $400 billion, $500 billion?

MR. RICE: Well, we believe we’re adequately resourced right now to deal with the current situation on the global economy.

QUESTIONER: Okay, thank you.

QUESTIONER: This is very much from my colleagues in Africa. I was wondering if there’s any update on Ghana. For example, the conditions the Fund’s asking Ghana to accept the size of the fund that the IMF’s willing to commit to Ghana.

MR. RICE: I don’t have a specific number for you on the size of the funds, but obviously that’s something that’s under discussion and we’ll be able to come back to you on that in future days.

QUESTIONER: Do you have any sense of the timeline about how things are going to roll out?

MR. RICE: I don’t have a specific timeline yet.

QUESTIONER: During the meeting with Madame Lagarde and the Finance Minister of Greece, did he tell her that Greece is planning to, or that the government of Greece wants to suspend the program? Did they discuss this issue?

MR. RICE: You know, I’m not privy to private discussions. So what I can just give you is repeat a little bit what I said before, that when they met on October 12 they discussed progress on the program, possible next steps. The Managing Director commended the authorities for, as I said before, improvement, especially on the fiscal aid, and encouraged them to implement decisively the key structural reforms in line with the program commitments. And she reiterated our ongoing commitment to support Greece. You know, we’re focused on this Sixth Review and getting it done and that’s where our focus is.

Okay, thank you everyone.