Transcript

Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, IMF

October 29, 2015

Webcast of the press conference

MR. RICE: Okay, good morning everyone and welcome to this press briefing on behalf of the IMF. I’m Gerry Rice of the communication department. As usual our briefing this morning will be embargoed until 10:30 a.m. and that’s Washington time. Let me give you a couple of items of information about upcoming events and travel by our management and then I’ll turn to your questions in the room and to our colleagues online was well. In terms of upcoming items I can tell you that on Thursday, November the 5^th, that’s next Thursday, Managing Director Christine Lagarde will give the keynote address at the New York Fed Conference on Reforming Culture and Behavior in the Financial Services Industry.

Her remarks will be followed by an on-stage conversation with the U.S. Fed Vice Chair Stanley Fisher. And that will be webcast and available to you to see in real time, and report on, et cetera. Secondly Christine Lagarde will be visiting the Gulf region from November 8th through 12th and her trip will include Saudi Arabia, Qatar, where she will participate in the annual GCC administerial meeting. And then Kuwait to attend a global conference on Islamic Finance that is co-organized by the IMF and again you should have full access to that and we can give you the relevant information.

Finally on November 5th and 6^th, our 16th Annual Research Conference will take place here at the Fund. I think those of you who follow the Fund are very familiar with this event. The theme of this year’s conference is ‘Unconventional Monetary Policy and Exchange Rate Policies.’ Ben Bernanke will deliver the key note lecture and of course this will be the first ARC - Annual Research Conference - that is chaired by our new economic counselor Maurie Obstfeld. So the registration for that conference is open and the key panels and lecture will be webcast and open to you.

Okay? So that’s it for the housekeeping and happy to turn to your questions in the room, if there are any.

QUESTIONER: Good morning, Gerry. There has been a lot of discussion about Ukraine and I am specifically interested in the issue of the Ukranian debt. As you know there have been reports including from the Russian finance minister himself that the IMF is preparing new rules or to change the fund rules on lending into official arrears. Can you confirm or deny that?

MR. RICE: Yeah, maybe since you are right in the sense that there has been a lot of interest this maybe just a step back for those who don’t follow it quite as closely as you, and then to get to your question of course this issue revolves around of course the debt restructuring in Ukraine and in particular the three billion Eurobond that is owed to Russia. So I’d like to say a few things about that. One on the Eurobond, Ukraine has remained current on this bond as on all other Eurobonds. The IMF encourages both sites to engage in constructive discussions on the restructuring of this bond to provide the necessary financing for the program, being supported by the IMF in Ukraine and to help restore debt sustainability.

As you know and we’ve discussed it here, we have welcomed the agreement reached between the Ukrainian government and ad hoc creditor’s committee of holders of Ukraine’s sovereign and sovereign guaranteed debt so just wanted to say that by way of context. On your question and on our lending into arrears policy, so this has been part of a much broader program of work related to the reform of our lending framework governing sovereign debt restructurings and that program of work has been phased over the last several years and different elements which again we’ve discussed here some of those elements and it includes discussion of reforms that would allow the fund to lend in the presence of arrears to official bilateral creditors in carefully circumscribed circumstances.

Again if this is part of an ongoing program of work this element was -- in fact has been referenced in the program of work. I would refer you for example to the 2013 board paper which recommended that -- let me just quote from it, because I think it helps the context. So this was the 2013 paper, said I’m quoting, ‘consideration could be given to extend the lending into an arrears policy official bilateral arrears and in that context clarify the modality through which assurances of debt relief are provided by official lenders.’

Again just to reiterate. The work’s been ongoing for some time and that work continues and again maybe just go back to what I said at the beginning, Ukraine has remained current on this bond at this point.

QUESTIONER: If I may follow up on that… Do you expect the work to be completed in the next week or two?

MR. RICE: I don’t have a date for the board meeting or the completion of this particular work, I would not expect it to be completed in the next week. No.

QUESTIONER: Can I just follow up?

MR. RICE: On this issue, yeah.

QUESTIONER: Just to clarify is this something that you expect the board to take up before the end of the year?

MR. RICE: I don’t have a date for you. I think the way I’d characterize it is to say I think it would be reasonable to expect the board would take up this issue in the near future.

QUESTIONER: In Afghanistan, Pakistan, have you received a request for assistance?

MR. RICE: Thank you for the question. No we have not received a specific request just to answer you directly, but again I would like to note that the Fund, the Managing Director has first of all expressed its condolences to both countries involved, Afghanistan and Pakistan on the earthquake and its effects.

In a statement that Christine Lagarde made yesterday she said of course the immediate concern is to get as much help and relief as possible to the affected areas and to insure the safety and well-being of the survivors of this tragedy.

What I can tell you -- I’m not aware of a specific request yet but we are working closely with the authorities in Afghanistan to assess the effect of the earthquake and to assist them. I would be able to offer better views fairly soon I hope. I said Afghanistan working closely with the authorities and we actually have a mission in the field in Pakistan at the moment. So I’m sure this will be an issue that’s also being discussed with the Pakistan authorities.

QUESTIONER: Last week, the Pakistani prime minister was here in D.C., I haven’t seen anything that was discussed. Do you have a readout?

MR. RICE: Yeah, again I don’t have a read out for you on that meeting. I’m sure as you suggest it was a broad discussion of the status of the economy and reforms and as I mentioned the mission is in the field so when the mission concludes we will be able to give you a further read out of that at the time. Okay, good.

QUESTIONER: Good morning, last week the European Commission made a proposal to change its representation within the board and it would result in giving the Euro area a single seat at the board. I was wondering do you support this move and how complicated it would be to be completed?

MR. RICE: I think this is something that would be discussed in the context of the broader quota and governance reforms and I don’t think it’s something that I’d want to comment on separate from that overall package of reforms.

QUESTIONER: Would you be supportive of such a measure? Would it give more credence to the Euro area members position on certain issues on the board?

MR. RICE: Again I haven’t looked at that proposal in any detail. I think what we’re supportive of is a set of governance reforms that would enable the IMF to be more representative of the changing dynamics in the global economy and that’s what the 2010 set of reforms in particular are aimed at doing as I’m sure you know. Again we are looking at that package of reforms and then everything else I think is in that context.

QUESTIONER: Good morning. I have a specific question – and a theoretical one both on Greece. The recent talks of the creditors with the Greek government did the IMF actively participate in the negotiations to the extent of making specific demands on issues like how to deal with mortgages that are nonperforming and this gets me to the theoretical question you have some leverage in the negotiations but some analysts take your terms as a pretext for not participating in the European program. What is the current role of the IMF in the great crisis and are you still committed to participating in the Greek program, thank you.

MR. RICE: Maybe just a number of questions there. Let me try and respond. Some background may be helpful. We took part in a staff visit in Athens last week where we were discussing with the government recent developments and progress with policy implementation. Clearly the agenda ahead is

challenging and I can assure you were are working fully and well with them and the European partners to advance that, so I want to as I say assure you on that. What else can I tell you? That work will go toward advancing the first review of the ESM program -- the European Partners Program. Again we are fully engaged in the policy discussions on that including through staff visits like last week and technical assistance.

Clearly the timing of the conclusion of that first review of the ESM will depend on the strength of the authorities policies and implementation. As we have said many times in addition debt relief will also be needed to ensure the sustainability of Greece’s public debt, so it’s these two legs of the strategy that we’ve said before: a strong and well-specified policy package combined with debt relief.

That will be needed to provide the basis for a credible program that could be supported by the fund. So I think our posture which I think is overall what you are asking about -- our posture is one of the full commitment to helping to support the people of Greece, the new Greek government and get back on track but there are a number of elements that need to be in place before we will be able to say something more definitive and more detailed.

QUESTIONER: Regarding the debt relief that you mentioned, are you on the same page with the Europeans and do you have any specific timeline of where you would expect the negotiations on the debt relief to start?

MR. RICE: I don’t have a time line for you. As I indicated it’s something to be discussed and we have always said and continue to say that it’s the two elements that need to be there on the policy side and on the debt relief side and those discussions I think are linked. They are not separate.

QUESTIONER: Would the Europeans do anything regarding that whole thing?

MR. RICE: Well I think this is all contingent on the assessment the teams make of how policies are being implemented, how the economy is doing and it will be discussed in that context. On Greece okay. Let’s stay there.

QUESTIONER: Can you give us a ballpark of how IMF might be willing to contribute to Greece if those two conditions are met and would the IMF be open to be repaid earlier on its past loans?

MR. RICE: You know, we are always open to being repaid early. And it has in fact happened in quite a number of cases, so the answer is yes to that one.

The answer on the first one, you know, I don't have any indication for you on that, and I think we just have to wait for assessments and further discussions of those things.

QUESTIONER: Do you have a program with Greece or not because I thought the program was dead?

MR. RICE: The old program runs until March, right, next year, so that program is still running; yes.

QUESTIONER: The Eurozone has connected (Inaudible) do you agree with this decision or do you believe it could threaten the program?

MR. RICE: As you know, the assessment from the ECB on the Greek banks is expected, I think, imminently, end of this week. So, let's wait and see the results of that assessment.

More broadly, you know, we feel that adequate recapitalization of the banking sector in Greece together with ambitious financial sector measures to strengthen bank governance and address the NPL issue, the non-performing loan issue, will be key to restoring confidence and ensuring the viability of the financial sector, and its ability to support the economy over the medium and the long run.

QUESTIONER: Correct me if I'm wrong, there are -- Venezuela is not a member of the IMF, but have there been any renewal of relations in any way, shape, or form, first, and secondly, there have been a number of accusations made by the Venezuelan government about the IMF conspiring, people involving the IMF.

How has the IMF dealt with that? Has it left it alone or have there been any official communications to try to correct the record, et cetera?

MR. RICE: First of all, Venezuela is a member of the IMF, but we have not had operational relationships with Venezuela in quite some time. For example, we have not had the opportunity to conduct an Article IV consultation with the Venezuelan authorities since the mid-2000s, so we are talking about probably close to 10 years at this point.

On your question, however, you know, there are no negotiations taking place regarding financial assistance programs or otherwise with the IMF, no negotiations or discussions taking place. So, let me leave it there.

QUESTIONER: Can I just clarify? It's pretty clear you said no negotiations or discussions. Does that mean there has been no contact between IMF officials and representatives of the Venezuelan government?

MR. RICE: You know, I can't tell you, because sometimes people meet people, people attend different kinds of meetings, and they perhaps meet people. You know, in an official way, have there been official discussions? No. Official negotiations? No. I want to be clear on that.

QUESTIONER: Is there a Board date in November for the SDR decision, and are there discussions with Cuba about membership?

MR. RICE: No discussions with Cuba that I'm aware of. No discussions with Cuba on membership at this point.

On the SDR, no Board date as of yet. However, let me just give you a bit more than that that might be helpful. I can tell you the work on the SDR basket review and the request from China for their Renminbi to be included in the SDR basket, that process, that work, continues as scheduled.

You may be aware there already was a Board meeting in the summer where the Board was informed of the status and kept up to speed.

I can tell you that the IMF staff are currently working on finalizing a report that would be considered at a further formal Board meeting planned for November. As you know, the decision on the possible inclusion of the Renminbi in the SDR basket is one that will be made by the Board, by the Executive Board, which represents, of course, our entire membership.

No date for you yet. Again, as we have said before, we expect the Board meeting to take place in November.

QUESTIONER: Good morning. There was a report I think based on a conference that took place in London that occurred, I think, under Chatham House Rules, that the Fund would consider including climate risk as a factor in its world economic projections. Do you have anything on that?

MR. RICE: I do not have anything on that, Andrew. I do not. The reason I'm hesitating slightly is that we clearly have made a number of statements, produced some analyses recently on the broader issue of climate change, and you know, fiscal implications, linkages to energy subsidies, taxation issues, and so on.

But the specific question you're asking, no, I don't have anything on that.

QUESTIONER: Secondly, on the trip to the Middle East, will you set the tone, if you will, for us on that? There was a report that was quite widely read based on IMF analysis, you know, saying at the present rate, a lot of these oil dependent countries are going to run into balance of payment and fiscal difficulties in the not too distant future. What type of message is Madam Lagarde going to have for these countries?

MR. RICE: I think it is in part what you have just said. I think we had a set of messages just a day or so ago on the Middle East, including the countries that will be visited. You know, our Director for the Middle East, Masood Ahmed, went into some detail, I think, including in press conferences, press briefing's and so on, and we in fact published the Middle East Regional Economic Outlook.

So, I would refer you to that. I think it is that set of messages that will be discussed. The Managing Director regularly attends the GCC conference and so on. Clearly, as you suggest, some of these issues are timely and topical, and a number of these countries obviously are facing the challenge of what's happening with oil prices, and I'm sure that will be an issue that is near the top of that agenda.

QUESTIONER: Is the meeting sure to be held in November or possibly being delayed or pushed back to early next year?

MR. RICE: I would just want to reiterate what I said, that this work is continuing as scheduled, and we expect the Board meeting to take place in November. As you know, as it customary with a review of this nature, the staff will recommend for Board consideration the composition of the basket, and then as I said earlier, the decision will be taken by the Board.

QUESTIONER: Just to make sure I understand everything. As of now, as of this moment, the policy of not lending into official arrears stands, right?

MR. RICE: Correct.

QUESTIONER: It will stand until the Board decides otherwise?

MR. RICE: Correct.

QUESTIONER: Which is expected in the near future as you said but no specific date. Secondly, President Putin, when the issue was raised in a Cabinet meeting in Moscow, suggested it might be easier for them to add some additional money to the Ukrainian program rather than changing the rules, with all the implications for precedent setting.

Is this something that is in the realm of possibility, increasing the program by the requisite amount?

MR. RICE: You know, I'd like to go back to what I said earlier, which is the IMF is encouraging both sides to engage in constructive discussions on this issue. I'll probably just leave it there. Thank you.

QUESTIONER: Since you were saying that inequalities are bad for growth, would you consider setting in your bail out programs inequalities predictions next to your fiscal goals, is it something that conceivable?

MR. RICE: You know, I think the next step in our work, operational work on this issue, is to include the issue of inequality on a country specific basis, in our surveillance work, in our Article IV consultations. I can tell you that there is work underway in that regard. I do not have for you right now the list of countries where we will be specifically undertaking that work, but we can get that for you.

That is going to be the next step, discussions of these issues. Of course, with the authorities, our work always driven by the authorities and in consultation with them. The next step is to make it more operational in our Article IVs and in our surveillance work.

QUESTIONER: Will you consider it in IMF programs?

MR. RICE: You know, that is speculation a bit further down the road. I think it really depends on the circumstances of each program. As I said, the next step, important step, I think is to include this in our analytical and operational work at the country level, and that work is underway.

I want to take -- it seems there is just one question. There are lots of questions, but I think they have been mostly covered by what we have said in the room. There is one question on Jamaica that has not been taken, so let me take it.

He is asking in Jamaica, the national democratic movement has blamed the IMF for the country's health care system becoming a national disgrace. He asks what is your response to that.

I don't agree with that, obviously, but maybe a bit beyond that, we are sensitive to -- the Fund is sensitive to social spending needs generally, and we see spending on health as an important outlay by many of our member countries.

For Jamaica, I'd like to point out that the 2015-2016 budget includes a significantly increased allocation to the Ministry of Health to ensure sufficient drugs and other medical supplies. The program in Jamaica, which we are supporting also, includes an important social expenditure element including higher cash transfers for poorer households under the government's main social program.

I think that is important to note, and this is in line with a broader analysis that we have done, that I think you are familiar with, in low income countries, which indicates that social spending on health, education, in countries under IMF programs on the average increases under IMF programs. It does not decrease.

QUESTIONER: I have a question on Cyprus. Do you have anything on this? The government of Cyprus is saying they can make it by themselves without your support. Also, why in your opinion Cyprus succeeded and Greece failed?

MR. RICE: You know, I haven't seen that comment you mentioned on Cyprus. I can only tell you I think we have an excellent relationship with the authorities under this program. It has worked well. It is working well. Cyprus continues to make progress under the program. The credit for that goes to the authorities, the people who have made the commitments and made the efforts under difficult circumstances.

I am going to leave it there. Good to see you all, and look forward to seeing you in a couple of weeks. Thanks for coming.