Transcript

IMFC Press Conference

April 13, 2019

2019 IMF Spring Meetings          
12:45 p.m. ‑ 1:20 p.m.

Speakers:

Lesetja Kganyago, Chairman for the International Monetary and Financial Committee (IMFC)

Christine Lagarde, Managing Director, IMF

Gerry Rice, Director, Communications Department, IMF

Mr. Rice: Well, good afternoon, everyone. Thank you for coming to this press briefing on behalf of the IMFC. I am delighted to introduce to you this afternoon the Chairman of the IMFC, Governor Lesetja Kganyago, who, as you know, is the Governor of the Reserve Bank of South Africa. We also have with us the Managing Director of the IMF, Madame Christine Lagarde.

I am going to ask the Chairman to make a few opening remarks. I know you all have the IMFC communiqué, so the Chairman may touch on that. And then we will take your questions.

And, as usual, this particular press conference will be fairly brief, as is our custom, because we are all running to other things. But we will try to take as many questions as we can.

Mr. Chairman, thank you.

Mr. Kganyago: Thank you, Gerry.

Good afternoon and thank you for coming. Let me thank Christine Lagarde for hosting our meetings at the IMF headquarters.

We had very productive discussions over the past two days. Let me review them briefly before taking your questions.

As you see from the communiqué, we agreed the global expansion is continuing but at a slower pace since the IMFC last convened in October. While we expect to see a pickup next year, trade tensions, geopolitical risks, and political uncertainties are among the challenges. So we agreed we need to act promptly to protect the expansion.

The communiqué outlines some of the policies that will be necessary to do this. Fiscal policy, for example, should remain flexible and growth‑friendly, rebuild buffers, and strike the right chord between debt sustainability and supporting demand. We also agreed that our social objectives need to be considered in the fiscal policy mix. Monetary policies should ensure that inflation is on track, towards target, and inflation expectations are well anchored. And we agreed that central bank decisions need to remain well‑communicated and data‑dependent. We will also need to tackle financial stability risks, if they emerge, with all the available tools, including macroprudential tools.

Joint action was a theme flagged in the communiqué in terms of upgrading international cooperation and confronting broader global challenges. Priorities among them are trade, global imbalances, international corporate taxation, debt vulnerabilities, climate change, and cyber risks. We also welcomed Christine's Global Policy Agenda, with these challenges in mind.

We reaffirmed our commitment to a strong, quota‑based, and adequately resourced IMF to preserve its role at the center of the global financial safety net. We had encouraging discussions as to how that can be achieved by the time the IMFC next meets, which will be in October at our Annual Meetings. We have good momentum coming out of these Spring Meetings and have made good progress to complete the job by the Annual Meetings.

Now let me take your questions.

Mr. Rice: Thank you, Mr. Chairman. Please identify yourselves by name and affiliation. OK. Lady in the front row.

Question: Thank you. My question is regarding the IMF's role because the global economy slows down, with some downside risks. And I think multilateralism is also being challenged at some point. And at this particular time, how do you view IMF's role? And [how] do you think China can play a role in the IMF and in global economic governance?

Mr. Kganyago: The IMF is an institution with membership. And the Articles of the IMF spell out the role that the IMF plays, with respect to its membership. A key value addition of the IMF is, of course, providing analysis of the global economy and also providing an analysis of the individual economies of the member countries.

China is a member of the IMF. And, like all other members of the IMF, China also does undergo an Article IV assessment by the Fund. And any responsibility or any analysis of what is happening with China gets captured in that Article IV report.

China is a significant economy, and that means that what happens in China does affect other economies around the globe. And that is how we see it.

Mr. Rice: MD, would you like to add?

Madame Lagarde: No, that was fine.

Mr. Rice: OK. Staying in the front row. Japan, please.

Question: Thank you for taking my question. I am from Japan's newspaper.

I would like to put a question to Madame Lagarde. Japan, as President of the G20 meetings this year, tries to focus on global external imbalances and proposes that imbalances be addressed in the context of restoring the savings‑investment balance, not by ‑‑ rather than bilateral trade measures. Could I have your views on this approach? And, more generally, what are your expectations for Japan as President of the G20 this year?

Madame Lagarde: Well, first of all, I would like to tell you that all participants ‑‑ Finance Ministers, Central Bank Governors, and their teams ‑‑ are very much looking forward to going to Fukuoka. We are very impressed by the Japanese leadership, by their organization, by the focus they have on the agenda. Clearly, the topic of demographics cuts across all countries and all regions, whether advanced, emerging, or low income; whether it is ageing; whether it is youth dividends. All of that is critically important.

The second topic of health and, clearly, pension, which has a clear impact on fiscal policies and fiscal space, is also a very good topic.

And the third one you have mentioned, the global imbalances, is, in our view, the best way to aim at this good global equilibrium, where all countries can actually navigate their path of fiscal, monetary policy, and structural reforms in a harmonious way around the world. And it is, in our view ‑‑ particularly given that we are in charge of the External Sector Report, it is the best way to look at an inclusive model, where all countries are concerned and involved, and where the level of savings and the level of investments actually determine the position of each and every one, relative to all the others.

Mr. Rice: Thank you, Madame Lagarde. The Wall Street Journal, please.

Question: Madame Lagarde, since the IMF met in October, a number of the central bankers who have been here this week have been facing renewed political pressure.

In the United States, obviously, President Trump has not only tweeted about what he wants the Fed to do but has also begun kind of appointing people who would take the central bank possibly in a more political direction. And many central banks around the world are facing pressure and questions about whether there should be more coordination between monetary and fiscal authorities.

I am curious, are you alarmed by what we are seeing in terms of political pressure on central banks? Or is there perhaps a welcomed discussion, that there needs to be more political involvement in how they carry out their operations?

Madame Lagarde: You know, what I can tell you is that, on the part of all the Central Bank Governors that I have discussed with in the last three days, there was a shared concern, on their part, about two principles, maybe three. The first one was the principle of accountability and how they have to report back to who they are accountable to. The second one was the principle of the transparency of the process by which they reach conclusions or decisions. And probably the third one is that of communication and the ways in which they can come across the often obscure jargonic language of central bankers ‑‑ with no offense to my neighbor, who is also a very, very eloquent communicator.

And I think all of them were saying, we need these three components in order to be credible and in order to deliver on our mandate. And they have different mandates. And there are different ways around the world to organize one's selves, clearly, when you are a Central Bank Governor. But independence has served them well over the course of time and hopefully will continue to do so.

Mr. Kganyago: Let me add something and say that, institutions in society are created for a purpose. Central banks were created for a particular purpose, and the purpose of central banks is normally spelled in the founding laws of a country.

In the case of South Africa, the mandate of our central bank is spelled out in the Constitution of the Republic of South Africa. And there is an increasing trend anyway towards more independent, rather than less independent, central banks.

The clearer the mandate of a central bank, the easier it is to hold a central bank accountable. And so, whilst the central banks are given the independence to pursue their mandate, the flip side of independence is that of accountability; that central banks have got to be accountable for how well they are doing in fulfilling their mandates. The broader the mandate, the more difficult it is to hold the central banks accountable, with respect to the execution of their mandates.

Mr. Rice: Thank you very much. I want to take AFP in the third row.

Question: I have two questions for Christine Lagarde, please.

The first one is about Venezuela. I wanted to know if you have made any progress in recognition of the government.

And the second question is, I wanted to know if you share the view of [French Minister of Economy and Finance] Bruno Le Maire, who said yesterday that the main differences in the EU could be a threat for the common currency, the euro.

Madame Lagarde: Well, thank you so much.

On Venezuela, you know, first of all, I will reiterate that we are extremely concerned about the humanitarian crisis that is unfolding [before] our eyes and the fact that so many people are being affected are ‑‑ in their physical integrity, and so many are being displaced and taking shelter in neighboring countries, all the way down to Argentina. And we are talking millions here.

The second point that I want to reaffirm as well is that we can only be guided by the membership. So it is not a question of us deciding. It has to be a large majority of the membership actually recognizing, diplomatically, the authorities that they regard as legitimate. And as soon as that happens, then we move, following our membership. So we will continue to monitor that.

I know that there are some members who are also looking at their respective positions. And as soon as that happens, and we can actually identify the authorities, then we stand ready to move in and help and, you know, sort of harness all our resources, if we are asked to help, together with others.

There were quite a few discussions about the euro area, its strength. And as you know, we have recommended repeatedly the strengthening of the architecture of the euro area in at least two domains. One is completion of the banking union, which is not going to make anybody dream, but it is going to give huge stability when it happens. And the second, a deep euro capital market that companies, enterprises could tap into in order to get finance on a much broader basis.

So the fact that there is possibly asymmetry in terms of positioning between various members inside the euro area might be, in our view, what we have called the trade‑off between members so that one member agrees to do something in consideration for which another member agrees to do something else. And, therefore, they move towards a deepening of the architecture.

We have said that all along. We have published a paper recently on this issue of the trade‑off in order to complete some of the key projects that will give more strength to the euro area. So I do not know what Bruno Le Maire has been saying exactly; but if it is along those lines, asymmetry of positions, room, and journey towards trade‑off in order to consolidate, we are supportive wholeheartedly.

Mr. Rice: Thank you, Madame Lagarde.

This lady in the second row. You have been trying very hard. I think it is Zimbabwe, is it?

Question: Yes. Thank you so much.

I have a two‑part question. The first one is, Zimbabwe. I know ‑‑ and thank you for confirming ‑‑ that now you have a staff‑monitored program that you have agreed to with the Finance Minister, Mthuli Ncube.

My question is, Zimbabwe has had millions in mass exodus from 2000 all the way through the crackdown of this last January. So you have got so many people who are excluded in their values and aspirations as the structural reform program moves forward. Does the IMF have any plans in inclusivity and in those women in the diaspora who may want to see the reforms go in a particular direction or to have input in every step of the decision‑making process of those reforms, in particular, the media reforms, which are going on right now? And there is a lot of diaspora women who are in the media space. That was my first question.

My second question is, with the economic slowdown that you are projecting, the Finance Minister, just the other day, announced that he will be introducing a new currency later in the year. I would like to know what your views are on, that in the context of the slowdown.

Madame Lagarde: Well, first of all, I would like to reaffirm that we will be conducting a staff‑monitored program with Zimbabwe. And it is particularly appropriate that we do that expeditiously, given the hardship and the loss caused by the recent cyclone. And we will mobilize energy in order to support the authorities.

I can assure you that, on the principle of the social protection of the most vulnerable, of inclusion, we will be deploying the principles by which we now operate.

As I have announced to the IMFC this morning, a social protection framework is going to come up for discussion at the Board in the next few weeks, and we will certainly endeavor to deploy social protection principles in the work that we do with the authorities.

The second point that I wanted to mention, which I believe can and will help Zimbabwe as well. Given the current monetary and currency situation, if used in a smart way, I would hope that financial technologies can be deployed in order to include as many as possible. And any knowledge, any best practices that we are aware of, we will certainly make them available in the course of the weeks to come.

Mr. Rice: Thank you very much, Madame Lagarde. I will swing around here. I think we have maybe two more. Reuters.

Question: Hi. Thank you.

Madame Lagarde and Mr. Chairman, I have a question for both of you. It seems to me that, given the outlook that you have got that is quite uncertain, the one thing that is most under the control of policymakers is trade; that if the United States and China were able to resolve their differences and come up with a lasting agreement, how big is that, in your eyes, in terms of brightening the outlook and sustaining this growth?

By the same token, if the United States decides to go down the route of tariffs on autos, which would draw in a lot more countries, how bad does that look?

Mr. Kganyago: A number of Ministers and Governors throughout these past two days have actually made their views well known about the benefits of trade. So, basically, as a community, we move from the basis that free trade is beneficial for the global economy.

There is work that has been done which, actually, showed that the current trade moves from some of the economies are actually having an adverse impact on the global economy. And, without a doubt, one of the risks that we are actually highlighting as a downside risk to the growth outlook is the impact of the trade tensions. And you are right, when [you] say that it is one thing if it is within the control of the policymakers, except the only other thing is that it is not just the policymakers who are gathered here. We do not have the Ministers of Trade with us. But you are absolutely right. Trade is one of those things which, if we sort it out, it should actually help us sustain the momentum.

If you go back to the global financial crisis in 2008, the big thing amongst us was, how do we restart the trade flows, how do we restart the trade finance, so that you could have trade [growing]? At the time, we could see that the volumes of trade were declining. And any move now that would impact adversely on trade going forward has got to be negative for the global economy.

Madame Lagarde: As a follow‑up to your question, I will give you two numbers, which I have shared with the members of the IMFC this morning. If you model tariffs on a large portion of the goods that are traded, you take the entire volume of goods traded between the U.S. and China, in particular ‑‑ $500 billion ‑‑ and you apply tariffs to that, you are putting at risk 0.8 percent of global growth. If, on the other hand, you eliminate only 25 percent of the barriers on the trading of services, you obtain the same result, except positive. So minus 0.8, if you put heavy tariffs on the goods; plus 0.8 if you eliminate 25 percent of the tariffs on services.

Mr. Rice: Thank you, Madame Lagarde. Thank you, Mr. Chairman.

Last question. I am going to go to the gentleman in the front row here.

Question: Madame Lagarde, I wanted to ask you. It is rather amazing that there was no discussion about Greece in this meeting. But we saw you yesterday chatting with Mr. Tsakalotos outside of this room and I can say that in a casual atmosphere. Kind of tell us, what was the discussion ‑‑ what was it about?

Madame Lagarde: Well, first of all, we have a very pleasant and courteous relationship, Euclid and myself. And I was asking him how the Greek economy is doing, from his perspective, how the fiscal policies are coming out, and how the primary surplus is faring. And we, separately from that, had a lovely conversation about the Greek cinema industry.

Mr. Rice: So on that note, thank you very much to the Managing Director and to the Chairman of the IMFC. And thanks to all of you.