Transcript

Transcript of IMF Press Briefing

July 12, 2018

P R O C E E D I N G S

MR. RICE: Good morning, everyone, and welcome to this press briefing on behalf of the Intentional Monetary Fund. I'm Gerry Rice of the Communication Department. And, as usual, our briefing this morning will be embargoed until 10:30 a.m. That's Washington time.

Let me begin with a few announcements and then we'll turn to the questions online and, of course, in the room. I want to start with next Monday, July the 16th, because we will be releasing on that day the World Economic Outlook update which will include our new updated global forecasts which I know are of interest to many. We'll be doing that right here at the IMF and that will be a press conference led by our economic counselor, Maury Obstfeld. So that's the World Economic Outlook, Monday, July 16th.

And then a few days after that we will be releasing our G-20 surveillance note in the run up to the G-20 meeting that will be held in Buenos Aires on the weekend of July 20th to 22nd. And, again, this G-20 note covers the broad economic developments facing the world at this point, as we see it. And that will be released on July 18. Okay. So Monday July 16 for the World Economic Outlook update, and then Wednesday, July 18 for the G-20 note leading into the meeting in Buenos Aires at the weekend where I can tell you Christine Lagarde our Management Director and David Lipton our First Deputy Managing Director will be representing the Fund, the IMF, at the G-20 meeting.

Now, one more publication which is July 24th is the Tuesday. So we've had the 16th, the 18th, and I'm talking about July 24th, and that's going to be the External Sector Report which is a report that we've been issuing for the last, well, a number of years now which deals with global imbalances and exchange rates. And what's new about the report this time, at least from the communication standpoint, is that we will be holding a press conference to launch that report. That will be on Tuesday, July 24th, and that will be with, again, our economic counselor Maury Obstfeld. So those three, sort of, big releases and press related events coming up over the next, you know, 10 to 12 days.

So this will actually be my last IMF press briefing before we take the recess in August. But as I've just indicated there's plenty going on, and there will be a number of press conferences to keep us all busy.

Two other things, our Deputy Managing Director Tao Zhang will be in South Africa and Botswana July 24th to 26th and there will be speeches and media events related to that. And our other Deputy Managing Director Mitsuhiro Furusawa will be in Honduras where he will be participating in the regional Economic Conference of Central American Countries, and that will be July 25 to 27.

So that's it for the announcements. Thank you for your patience on that. Before I take your questions today we have a special guest with us, and that she is Kristina Kostial who is our Deputy Director in our Strategy, Policy Review Department. And Kristina is going to tell us about the IMF's work program over the next six months.

We publish our biannual work program twice a year and it looks at the next six months. So it lays out what the Fund is going to be focusing on, what our priorities are, and we thought, as we've done in the past, we thought it'd be useful to have Kristina come and just give you a very quick overview of that work program. It's published, as of now. It's available to you, but, as I say, Kristina will give it to you in summary. You may have a question or two and that's welcome. And then I will come back after Kristina has presented to you and we'll get to your questions and anything you want to cover. Is that okay?

Good. Then let me welcome Kristina to the podium. Christina.

MS. KOSTIAL: Thank you and good morning to you. So, Gerry, thanks for the invite and I want to talk a little bit about our work program. So what is the work program? The work program takes and translates the policy priorities of the Managing Director's global policy agenda in the IMFC communique and translates it into an agenda for our executive board over the next six to 12 months.

Now, maybe before I go into the work program, per say, let me just quickly recap what is the main message of the Managing Director's GPA, the Global Policy Agenda. What she said is when the sun is shining it's time to fix the roof, and you might have heard her in the last months and she sees some clouds on horizon. So what this work program does, it really reinforces her message that the time is now to act.

So what are the policy priorities to act on? We see three of these. First of all, it is to strengthen financial sector resilience. Second, it's to rebuild fiscal buffers and to withdraw monetary stimulus while at the same time addressing infrastructure gaps. And thirdly is to undertake structural reforms, to really support growth over the medium term, and that includes, also, to invest in workforce skills.

And here is where the Fund's work program is coming in and it shows how the IMF, as an institution, can help its members that they have in the medium term strong growth, sustainable growth, balanced growth. And which really, also, is widely shared in the economy. And it also helps members address their most pressing needs.

So what I wanted to do is rather than go into all the details of the work program just give you a few highlights, and let me start out with what we're doing on the multilateral work. You know, our flagships, the world economic outlook, the global financial stability report, and the fiscal monitor, and these flagships are really there to guide our policy dialogue. And for this year, ten years after the financial crisis, what they do is they want to take stock and see what are the lessons learned from the crisis.

And then Gerry already mentioned the external sector report which will be discussed with you at the end of the month. And there I just also want to highlight that the Fund is in a unique position as we are the only institution which looks in a systematic way and also in a consistent way into the external positions of our largest members, and they account for about 85 percent of global GDP.

This is a somewhat revamped External Sector Report because it is based on a revised methodology. And what does the report do? The report really tries to make an assessment of whether external imbalances of our members are excessive or not, and it does that in an evenhanded way. It does it also in a transparent and candid way and underlying it is rigorous analysis. And the idea of the report is that it will raise awareness of the global community of potential risks coming from external imbalances.

Now let me talk a little bit about what is of interest in terms of emerging interests for our membership. Clearly digitalization is on lots of people’s minds and there we have in the work program a workstream which will look into the macroeconomic impact of digitalization on fiscal policies, monetary policies, on the financial sector, on labor markets, and then, of course, also on growth and productivity.

Then as part of our work on digitalization we're looking into Fintech issues. You will be all well aware of the opportunities from Fintech, but, of course, there also risks from Fintech in terms of financial regulation, financial stability, financial sector integrity. And there I want to draw your attention that the IMF, for a long time, has been supporting the global dialogue on anti-money laundering combating the financing of terrorism.

This is an integral part of what we do here in the Fund. And later this year you will see in the work program we have a review of our AMLCFT strategy. And the whole idea there is that we want to serve our membership even better in the future. And, you know, talking about digitalization, talking about Fintech we, as an institution, want to be agile, and really we want to firmly focus on our members' 21st century immerging needs.

Another important issue which we're tackling in the work program is the rising debt vulnerabilities in low income countries. You might recall we had a report out earlier this year which looked into that in detail. And, also, we highlighted that there is a changing predator landscape, and that there are gaps in terms of information. So we are doing their joint work with the World Bank.

What we're doing is, first of all, on the creditor side we look into countries' debt management capacity, so how to record debt, how to monitor debt, how to report on debt. And we're looking there if there are any gaps, and also where we can help, potentially, on technical assistance. And from our side, that is the World Bank's and the IMF's side we see what we, as international institutions, can do to help improve debt reporting in terms, also, of dissemination and we have various databases which we want to link and bring more transparency.

You will see in the work program, also, that we have work ongoing to improve our debt sustainability analysis. We did that already for our low-income countries jointly with the World Bank, and in the work program you see that we will do a similar exercise on the debt sustainability analysis for countries with market access. And why do we do all of this work? Because we think that one of the lessons we have learned from the global financial crisis is that there are dangers if you do not know where debt is coming from.

I think the last point I want to draw your attention to is our work on fragile states. The IMF is learning institution, and a very important component of this is our internal evaluation office and the IEO. The IEO came up with a report on fragile states. You might have seen that. That was published earlier this year. And the report overall thought that the IMF has an important role in catalyzing donor funds, but we can do better. So, what you see in the work program is a paper which we call a management implementation plan which will have actions to respond to the specific recommendations of our internal evaluation office.

Again, we want to serve our members better, and here in the context of fragile states we want to help countries eventually exit from their fragility, and we want to provide them with granular, tailored support which is really in-line with their specific country circumstances.

So there are just some highlights. There is much more in this work program. It's much richer. So I want to stop here, but if you have any questions on the work program I'd be happy to answer those. Yes?

QUESTIONER: Andrew Mayeda with Bloomberg News. I think you mentioned that the methodology for the external sector report is going to be revamped. I mean, can you pull out the one or two major changes? I mean, how will it be different this time?

MS. KOSTIAL: Yes. The methodology has been revamped. And Gerry, at the beginning, said that you will get a press conference that is fully dedicated to the external sector report and I don't want to foreshadow that, but that is the time to discuss that.

Thank you. And see you then in half a year, next work program.

MR. RICE: Thank you very much, Kristina.

MS. COASTAL: Thanks.

MR. RICE: Thanks to Kristina. And, again, I want to refer everyone to that report which is available to you now, and subject to the same embargo as this press briefing, but quite a bit of information there.

Okay. Let's turn to you, questions in the room. And I'm seeing that a few questions are popping up on-line as well from our colleagues who are watching this digitally. Andrew, good morning to you.

QUESTIONER: Hi. Two questions. One of the latest amount of tariffs. And a second one on Turkey. First of all, does the Fund have any updated position on the tariffs that have been announced, this kind of evolving trade conflict between the U.S. and China? I mean, we are up to potentially 250 billion dollars in tariffs on Chinese imports which is about half of all imports into the U.S. To what extent is the Fund concerned about this development?

MR. RICE: It is something we are looking at closely and I want to point you, Andrew, to this series of reports that are coming over the next 10 days or so which will cover the trade and tariff issue collectively in a bit more detail and granularity and I think will, you know, help to respond to the question that you have. So we have got the WEO update, the G-20 surveillance note and the external sector report and I think there will be a lot of information in terms of our most updated assessment of where we are on that issue.

For today, you know, again I just reiterate what the Fund has been saying, Madame Lagarde has said it many times that, you know, we encourage everyone to work constructively, try and reduce trade barriers and resolve the disagreements without resort to exceptional measures. As Madame Lagarde has said, that nobody wins in a trade war.

So again, I would ask that you hold your questioning just a few more days and you will hear from Maury Obstfeld and others on this in the coming days.

SPEAKER: Sure. And on Turkey, question specifically about the legislative changes they made to the selection process for the central bank governor. I think it gives the president more power to select the governor. You know, in the past the Fund has expressed concern about politicization and the independence of the central bank. Any updated view on their position on that?

MR. RICE: Well, I think overall on Turkey, what I would say is that in light of the recent market volatility the new administration will need to demonstrate a commitment to sound economic policies to promote macroeconomic stability and reduce imbalances while ensuring full operational independent to the central bank to pursue its mandate of securing price stability. Good morning.

SPEAKER: Good morning. Two questions about Greece. Can you please give us a time table for your next steps regarding the Article IV and when it will be approved by the executive board and published?

Second, are there any discussions with the Europeans and the Greek authorities about the post program period? Can you clarify how you exactly plan to engage?

MR. RICE: Yes. On both questions. I can tell you the executive board discussion of the Article IV on Greece is expected to take place on July 27. And that publication as usual we would expect to happen some days after that and we would of course alert you to that in advance.

And as I have said here before, one of the interesting features of that staff report will be the debt sustainability analysis. So that is July 27, okay.

On the IMF's role, ongoing engagement with Greece, again I have talked about this before. We would expect our involvement with Greece after the European stability mechanism program ends which is August 20 to be similar to what has taken place in other Euro area countries where we have had a program.

So we have what we call post program monitoring which is our enhanced surveillance that takes place after we have had a program with a country and we will be coordinating our post program monitoring, our surveillance with the surveillance effort of the European partners and they talked about that a little bit this week. You may have seen their announcement.

And since we do work so closely with the European institutions and have complimented -- complimentary areas of expertise, it will probably make practical sense for the IMF to combine its missions with the European institutions. Usually this is about two reports per year to our executive board and, you know, that involves a number of visits to Greece, engagement with the authorities, discussions with the authorities that lead to these reports.

So for us it's very much a normal part of the IMF process after a program to have this ex post monitoring and as I said we will be conducting that in coordination with the European partners.

I'm going to take a couple of questions that have come up online. There are and we have had in the last few days so I'll come back in the room. We have had a number of questions related to Haiti. And there are a few again online so let me take those questions.

Has the IMF spoken to Haitian authorities since during the protest? Is the IMF still pushing Haiti to end the fuel subsidies? Has the IMF changed its position at all on the reforms Haiti needs to pursue? That's coming from McKinney Bryce of Reuters. I know that Matthew Lee has had questions too and I think this touches on the points that Matthew was asking as well.

So let me try and group these questions and respond on Haiti. On Haiti it's an issue that we have been following closely and I think the first thing we want to say is like everyone else, we are saddened by the reports of the violence and the loss of life in Haiti and I think that is point number one.

Maybe just stepping back a bit for those who haven’t been following the situation as closely as some do here in the room. By way of background, the international community including the IMF has been working closely with the Haitian authorities to put in place economic policies, a reform program that would lay the foundation for sustainable inclusive growth for the people of Haiti. So, in this context, the Haitian authorities and the IMF agreed earlier this year in March on what we call a staff monitored program. Which is a way the Fund supports member countries to improve their policy implementation without providing direct financing. So it's not a traditional program which includes financing, it’s a staff monitored program which we hope helps to provide a framework to facilitate deeper financial engagement from the international community from other donors so it is a means of supporting the member country.

So, you know, getting to the questions. An important part of this reform plan was indeed to strengthen revenues which would allow the Haitian government to provide for badly needed public investment and a better social safety net. In that context, the Haitian authorities recognize that generalized fuel subsidies put a significant strain on Haiti's fiscal accounts. They disproportionately benefit the well off and they prevent other priority spending on items such as health and education. So that’s important because that’s the objective behind addressing the fuel subsidy issue is to free up the fiscal space to be able to spend on other priorities including important social priorities.

So going forward is the question about, you know, what is the status of the IMF's relationship now and the status of the program. Going forward, we will continue to support Haiti. We will continue to stand by Haiti and to cooperate closely with the authorities as they develop a revised reform strategy. And discussions are ongoing with the authorities what we would expect that the revised reform program would include at least two important elements that I would like to highlight. One would be a more gradual approach to reducing the fuel subsidies. And two, it

would be ensuring the implementation of compensatory and mitigating measures to protect the most vulnerable people.

A third important point is that we hope that by implementing this revised reform strategy, this can help unlock additional support, continued engagement of the international community and other development partners, including the IMF.

So, this is a major objective as far as we are concerned to try and mobilize additional support to help Haiti through this difficult period that it's facing.

Maybe just one, add one other point, that when the reform program had been discussed the authorities had been working towards some of these compensatory mitigating measures that I had talked about and, you know, to help cushion the impact of the reduction of subsidies, so some of these things included very targeted assistance measures like transport vouchers, and other support programs, and I mention that because we would expect that these kinds of targeted compensatory measures, as I said, would be part of the revised reform program.

So that's, you know, I think it's worth spending some time on Haiti, it's a difficult situation there, and we've had a number of questions. Anything else on Haiti in the room, or else I'll move on to --

Good morning.

QUESTIONER: Good morning. I'm Bryan Bowman, from The Globe Post.

MR. RICE: Welcome.

QUESTIONER: Thank you. Do you have any indication of when we could expect to see the reforms plan regarding Haiti? I know you said talks are ongoing, but any indication on a timetable for that?

MR. RICE: I don't have a specific timetable for you. We would like to move as quickly as possible. I can tell you we've already begun to reach out to other development partners, to the international community to see how quickly we can mobilize support, we will move with all due speed to support Haiti. We stand by Haiti as I said. But I don't have a, you know, a specific timeline.

QUESTIONER: Good morning.

MR. RICE: Good morning to you.

QUESTIONER: (Inaudible) from Anadolu Agency. So my first question, I would like to ask two. My first question is on Turkey. So, as previously mentioned, the election process over in the country, and now there's a new government with a new system, and as a part of the new system, the number of ministries overseeing the economy has been cut in half. So, now there are three ministries instead of six, and the government says that this will reduce the bureaucratic burden and red tape in the country. Could you please command on this change, and how it may affect the economy? Also, on follow-up question, what are the Fund's recommendations for the new economy administration?

MR. RICE: Yes. You know, I wouldn't get into the details of the administrative changes that are being made, but I would repeat what I said earlier, that the important thing is that the new administration demonstrates a commitment to sound economic policies, to promote stability and reduce imbalances.

So, I think that's, you know, where our focus will be as working with the Turkish authorities to ensure that there is this commitment to sound policies, and of course the implementation of sound economic policies too.

QUESTIONER: Okay. My second question is about the appreciation in dollar. So, in its recent report, the Fund has warned about the financial risks arising from the appreciation in the dollar. So, since those reports had been published some of the currencies, especially those of emerging countries, such as Brazil, Mexico and Turkey continue to lose value against dollar. So, what's the IMF's view, current view on this ongoing development in the markets? Thank you.

MR. RICE: Yes. So, more broadly on the emerging markets, generally; again, I want to point you to next week and the World Economic Outlook, and in particular that External Sector Report that we've referred to, because I think it will have detail on that particular issue of exchange rates and emerging markets, and so on.

On Turkey, you know, we don't comment on day-to-day fluctuations in the foreign exchange market, but I can just point you to our most recent Staff Report, on Turkey related to the 2018 Article IV Consultation which is published, and it called on the authorities to tighten policies, to address internal and external imbalances. So, I'd leave it there for now, and hope you can tune in next week for a bit more detail.

There's a couple of questions online relating to Africa, and I want to take those. One is on Zambia, and one is on Zimbabwe.

On Zambia, the question is from Bloomberg, Matthew Hill also Matthew LEE, and relates -- it's a very long question -- but it relates to: reports that the government has provided the IMF with all the information needed for the purposes of reengaging with the program. Zambia hopes the program can be taken to IMF's Board in September. Basically the question is: what's the status? Is that true?

To which I can say, again, on Zambia, discussions on a possible Fund-supported program have been suspended because the authority's borrowing plans compromised the country's debt sustainability and, in our view, undermine its macroeconomic stability.

So on June 14, 2018, they authorities indeed announced a set of measures aimed at addressing these debt sustainability concerns. The Fund has not yet received the specifics of the authority's new debt plans, nor the revised budget numbers, that include the impact of the recently-announced consolidation measures.

Therefore, it's premature to discuss the appropriateness, the fitness, for any potential reengagement regarding a program discussion, which is consistent with the statement we had issued earlier this year.

That's on Zambia. There's a question on Zimbabwe. Again, this is from Matthew Lee. "Can you confirm that the country has repaid its overdue obligations to the IMF's Poverty Reduction Growth Trust, using its SDR holdings? When and separately what the IMF views as possible next steps."

So, I can confirm that Zimbabwe cleared its overdue financial obligations to the poverty reduction and growth trust, and that happened in October 2016. Consequently, our Executive Board lifted the remedial measures relating to a declaration of non-cooperation, the restriction on TA provision, and ineligibility of Zimbabwe to our Poverty Reduction and Growth Trust.

However, and again we've said this before here. To benefit from Fund Program, from Fund financing, Zimbabwe would need to clear its arrears to other institutions, including the African Development Bank, The World Bank and European Investment Bank. It will need to achieve the commitment of debt treatment by bilateral creditors, and have in a place a comprehensive and coherent macroeconomic policy framework, including the strong program of fiscal adjustment and structural reforms.

Going forward, we continue our discussions with the government of Zimbabwe, and we continue to provide policy advice, and technical assistance. So, you know, the IMF's engagement with Zimbabwe in that respect is ongoing, it continues.

Is there anything else in the room?

QUESTIONER: (Inaudible). Yes. I just have a quick question regarding Pakistan. We've seen the Pakistani currency devaluate quite significantly recently, and there's been speculation that their officials may be seeking another condition to IMF loan. Is the IMF in discussions with Pakistani officials regarding a potential loan agreement?

MR. RICE: No. There's been no request, and no discussion of a program with the IMF.

QUESTIONER: Thanks.

MR. RICE: Thank you. I'm going to leave it there for today. And again, just remind you that over the next 10 days, we have some very important reports and precedence coming your way. And I want to thank you for your attention and your patience this morning. And for those of you in the room, thanks for coming along. See you next time.

* * * * *