Transcript

Transcript of a Press Briefing by Thomas C. Dawson, Director, External Relations Department, IMF

June 26, 2003

MR. DAWSON: Good morning. I'm Tom Dawson, Director of External Relations at the IMF, and this is another of our regular press briefings. Before I take questions, I'd just like to note that the Managing Director, who just returned from visits to Uruguay and Argentina, will be traveling again next week to the ECOSOC, United Nations Economic and Social Council, meeting in Geneva schedule for June 30th. I believe the session there is open to the press, but not in terms of questions and answers.

The ECOSOC meeting will touch on a number of issues, but from the Fund's standpoint, it will, of course, be an opportunity for the Managing Director to again underscore the Fund's views on the critical need for successful completion of the Doha Round. As you know, this has been a consistent theme of the Managing Director as well as Mr. Wolfensohn at the World Bank. Now I will be happy to take questions.

QUESTIONER: There is a delay for the fifth review of the program with Turkey. Can you provide us with some sense of how does the IMF see this delay?

MR. DAWSON: First of all, some progress is being made. For example, we welcomed the passage of the social security legislation a few days ago for reforming the Is Kur employment agency. However, there are still measures that need to be taken as set out in the April Letter of Intent and the May mission's press release, which said the authorities needed to take steps to keep the fiscal program on track and accelerate key structural reforms in order to complete the review. And to anticipate the follow-up question, a date for a board discussion has not been scheduled, but we are discussing next steps with the authorities.

QUESTIONER: Are you concerned by statements of certain Turkish officials who say they want to get rid of IMF guidance by the end of 2004? And something else: Is there a possibility that the fifth review could be merged into the sixth review?

MR. DAWSON: Well, even by Fund standards, the end of 2004 is a long time away, so I think it's clearly premature to be talking about the nature of the relationship beyond that period of time. Obviously, we will be in close and are in continuing close contact with the authorities. And as we get closer to that time, I'm sure a mutually agreeable course of action will be taken. In terms of a possible merger of the two reviews, no, I don't have anything on that at this point. We're still looking at the fifth review.

QUESTIONER: Mr. Köhler a few days ago said that the IMF has a reason to review its policy and approach towards Argentina and draw some lessons from the past. Can you explain what that means?

MR. DAWSON: Certainly, there are a number of such efforts underway. Our Independent Evaluation Office is conducting a review of Argentina. We have an internal staff review going on. Clearly, the experience with the Argentine program over the last few years has been a difficult one, in the time when the authorities were trying to maintain the previous currency arrangement. And I think it's natural, and it's not specific to Argentina, but it is important in the case of Argentina, to try to learn lessons from the past. And among those lessons are the need to make sure you have the policies and the confidence that there are the policies necessary to support the policy thrust and in that context the exchange rate regime.

There's also the need to have the appropriate political consensus, ownership. Those are issues that I'm sure will be coming up in the reviews. It's not specific to Argentina, but certainly Argentina is a case study and an important case study. The Managing Director directed himself to some of these issues in his trip to Argentina this week.

QUESTIONER: Mr. Lavagna said that he thought there was time to reach an agreement before August. I wanted to know if the IMF thinks the same. And, second, I would like your reaction on the measures that have been imposed to restrict foreign investment in Argentina.

MR. DAWSON: In terms of the intent to try to reach a medium-term agreement, the authorities and the Fund have indeed agreed that this is the effort that we will make. The next step, I would note, however, is the next review of the existing program, which will take place in early July. And then that would be hopefully followed by a mission to more extensively discuss a possible three-year arrangement.

You know, it certainly is our intent to do this as soon as is possible, with obviously a lot of effort and work by the authorities as well as the Fund staff. And August is certainly possible. I don't think anyone can guarantee dates, but we certainly are working to get it done as quickly as we can.

But as I've said in other contexts and in other countries, it is most important to get it done correctly and in a sustainable fashion and not necessarily done as quickly as possible. But it is a matter of some importance, and I think we will be devoting effort to it. And I think, without revealing secrets, I think that the Fund staff who are working on this issue, will not be taking their traditional August vacation.

QUESTIONER: And on the restrictions?

MR. DAWSON: Short-term capital, yes. We are studying and will be discussing the measures with the authorities. I have not at least seen, —I'm not sure that they've been published yet— the details of the measures that were announced. So I believe they are in the process of being fleshed out and implemented, so it's hard to respond at this point in that case, and we will be looking at it and discussing, as I say, further with the authorities.

Again, to anticipate a possible follow-on question, the Fund has had quite an experience with the issue of capital controls, both controls on inflows and outflows. We have, I think, an extensive case history and studies that we have done on the issue, particularly in the context of the Asian crisis and in other contexts as well. And so it's not an issue on which we have strong theological views. Indeed, there have been a number of countries where controls on short-term incoming flows, where the rules of the game are fairly well established, have worked out quite well. And the case that is normally cited is that of Chile. But we will be looking at the measures. We don't have the details. We are aware of what the authorities in general, you know, are doing, but, again, I have not had a chance to look at the legislation or the measures, and we will be doing that.

QUESTIONER: As you noted, the IMF studies and reports on capital flows are quite in-depth and extended over time. But it seems that the public approach to the IMF is that capital flows should be free and unfettered. And the comments by Minister Lavagna yesterday clearly were going in the opposite direction.

MR. DAWSON: I think I will provide you with a free copy of our study because I think your premise is not quite correct. We have indeed looked at it in a wide range of circumstances, and there are occasions where controls, and particularly on incoming short-term flows, are a perfectly appropriate policy response.

Ultimately, in the long, long run, the idea of free flow of capital in order to provide the needed investment for countries is certainly the Fund's view. But that is not a view that applies in every country at every point in time. And, again, the reports that we did, in particular coming out of the Asian crisis, made those distinctions fairly strongly.

QUESTIONER: What's the opinion of the IMF about the level of the dollar now in Argentina in connection with this policy?

MR. DAWSON: I don't think we have a view. You know, we support the authorities' commitment to the present exchange rate regime, which is one of a freely floating currency. I do note that when I was down there, there were commentaries about the strength of the peso. It's nice to have commentaries about the strength of the peso. But I don't think I have any ability, knowledge, or would it be appropriate for me to discuss the link between these measures and that. Certainly the authorities have, I think, made clear their approach toward the currency, and I don't think it's my position to comment on or speculate on the levels of the currency. But I do note that there's a lot of commentary on it.

QUESTIONER: What must Argentina do to complete the next review?

MR. DAWSON: The targets are set out in the existing program. I don't have them right in my head at this point. If you're asking if there is anything new being added, no, I'm not aware that there is. We put out the release last Friday in terms of where the program was, and the next review is exactly what was anticipated.

QUESTIONER: There have been a lot of waivers, and we don't know if some of these waivers have to be done in this revision or not?

MR. DAWSON: I'm not, frankly, up-to-date on all of that. I would note, however, that some of the waivers were waivers of dates that had been passed but the actions had actually been taken subsequently. So that's a different sort of a waiver than a waiver for something that hadn't been done at all. I believe that most of the waivers were, in fact, in that category. Those other issues will still be an item of discussion in this next review, and as I say, the mission's going down in the next week or so. I think a little over a week.

QUESTIONER: The Vice President of Uruguay said yesterday that initially the IMF thought that the solution to Uruguay's debt problems was a default and not a debt exchange, and that you had pushed for Uruguay to default initially. Do you have any comment on that?

MR. DAWSON: That is certainly not our understanding of what happened. I think our support for the authorities has been well known from early this year where we were quite strongly supportive of their efforts to launch this debt exchange that has been quite successful, and we're quite happy to have supported that effort. I would also note it's my understanding that the vice president's office has put out a clarifying statement today.

QUESTIONER: A question regarding the internal investigation on what happened in Argentina. Could you just give us...

MR. DAWSON: I'm not quite sure I would call it an "investigation." Independent evaluation. That's the IEO. Also there is an internal review by the staff. That sounded kind of spooky.

QUESTIONER: What's the scope? How long will it take? Who is going to submit a report to whom?

MR. DAWSON: As I said, there are a couple of different reviews. One is by the Independent Evaluation Office, which does submit its report to the Executive Board. Separately, there is a staff review on lessons learned. And it is not my position to speak for the Independent Evaluation Office, but it is my understanding that this is something that will be concluded in the next few months, and I think that's basically the same sort of timing that the internal staff review has. If you wish, you can contact the Independent Evaluation Office for a sense, but I'm pretty sure that's basically what their timing is.

QUESTIONER: I'd like to switch to Iraq, please. Can you tell us what was discussed and decided in yesterday's meeting on Iraq? And also about the issue of the debt, are you still within the same time frame for delivering the figures?

MR. DAWSON: I don't think it is appropriate for me to discuss what went on at the meeting, I guess it was yesterday or the day before. And Fund staff did indeed attend it, but as attendees, I just don't think it's appropriate for us to discuss that. As far as the debt discussion, the issue of debt is, of course, a major issue that the Fund and other institutions are involved with. Obviously, the Paris Club is involved in the context of Paris Club members' debt, but the Fund is also involved in trying to collect information on the extent of the debt, who holds it, terms and so on, from non-Paris Club holders.

The reality is there is not a lot of hard information out there, and a lot of work is necessary to collect the information. And indeed it's a case where much of the information needs to be collected from those who hold the debt as opposed to from the Iraqi side itself, because it does not seem that there are full records.

QUESTIONER: You said in the previous briefing that the work was to be completed by the end of June, beginning of July. Is this still true?

MR. DAWSON: I guess that depends to some degree on what "completed" means, but we are still working hard to get that information. I think the data collection as far as debt goes has proven to be somewhat more time-consuming than had been expected.

QUESTIONER: Have you reached an agreement with the Dominican Republic on a new loan program? And how much is it? And, secondly, there was a report in an Argentine newspaper that Krueger is leaving. Can you confirm that or deny it?

MR. DAWSON: I can deny it. But let me get on to that in a moment. Yes, a Fund mission recently, just the last day or two, concluded negotiations on a two-year stand-by arrangement and has returned to headquarters and is preparing its report for management and the Executive Board. When we have more information in terms of timing and amount and so on, we will certainly let you know.

I think there have been a couple of stories in the Argentine press in that regard. I think it may be a case of too many reporters chasing too little news. Some of it seemed to have started from the fact that Ms. Krueger was not at the Managing Director's interview with the Argentine and Uruguayan reporters. First of all, I'm not sure why anyone necessarily expected that she would have been. Sometimes she might be there, sometimes she might not be there. But certainly a clear reason she wasn't there was she was not in the country. And I think the stories then kind of went on from there. So I think there's no foundation in any of that. I know that she is, in fact, back in the office today. She was off in Russia and Ukraine. There's nothing to that, and as I say, I think it's Dawson's law: Too many reporters chasing too little news.

QUESTIONER: Can you tell us the results of her trip to Ukraine?

MR. DAWSON: She will be reporting to the Executive Board on that, I believe in the next day or so. And it was something where the authorities had for some time expressed an interest in both Ms. Krueger and the Managing Director visiting Kiev. On the occasion of her going to Petersburg for this speech that she'd been invited to, she used the occasion to visit Kiev. And I think it's that simple. The fact that there was a Fund mission already there discussing a possible precautionary arrangement was purely coincidental.

QUESTIONER: I would like to know what was Mr. Köhler's impression of Kirchner. And what is the balance of his visit?

MR. DAWSON: I think the balance of the visit was clearly quite a positive one. It is important in the context of relations with an important program country such as Argentina for the Managing Director and the institution to have an understanding and sense of the new leadership. And so they had a dinner as well as meeting on Tuesday —a dinner Monday night and a meeting on Tuesday, and they had a good opportunity to discuss. Certainly from our side, it was a very good meeting. I think we came out of it with an understanding of the president, the president's policies, priorities, and I think it was wholly positive.

QUESTIONER: But did he come with the impression that Mr. Kirchner has really decided to do the reforms?

MR. DAWSON: They certainly discussed the needs, and I think the president clearly understands the nature of the challenge. And so it was wholly positive. I think it fully met our expectations in this important case.

QUESTION: U.S. officials emphasized that planned American aid for Turkey, a grant that could be converted to a loan, will depend on Turkey's success or commitment to implementing the IMF program. Is the IMF in touch with U.S. Treasury officials on that possible loan to Turkey?

MR. DAWSON: We certainly are aware of the U.S. authorities' intentions. In touch with, it's easy to say yes because we're always in touch with the U.S. authorities since they have a full-time Executive Director here. So I'm not sure beyond that what you mean. I think those are probably questions that might be better addressed toward the Treasury, U.S. Treasury.

QUESTIONER: Is there any new development regarding the proposal for Mr. Augustín Carstens to become the next Deputy Managing Director?

MR. DAWSON: The appointment was approved, and I believe he will be starting on August the 1st.

QUESTIONER: Just a clarifying question on Argentina. How many more missions have to go?

MR. DAWSON: There's an additional scheduled review under the present so-called transitional arrangement. That is in, I believe, early July. And then after that would be when the formal, quote-unquote, discussions would start for the successor arrangement, the so-called medium-term arrangement. But there is not a limit thereafter as to how many there will be or how long the mission will last. The only times I can tell you with some sense of how often there will be a mission is when you have reviews that are already scheduled. When you're starting a program, you don't actually know precisely how long it will take.

Thank you very much.