Transcript

Transcript of IMF Press Briefing

June 4, 2020

MR. RICE: Good morning everyone. And welcome to this Press Briefing on behalf of the IMF. I'm Gerry Rice of the Communications Department. And as usual, our briefing this morning will be embargoed until 10:30 a.m., that's Washington Time.

First thing to say is, I hope everyone is managing to stay safe and well. The second thing I want to say is thank you so much for joining us today. Thank you so much to those of you who sent your questions in advance, given our virtual format. It really helps.

We have had a lot of questions. I'm going to try and get to as many as I can, including those that I see are coming in online as we speak.

In the past several press briefings I've been using them to update you on IMF action in response to the crisis. So, I'll do a little bit of that today. Things are moving very quickly. I hope it's helpful to keep you up to speed. And then I'll turn to your questions.

So, since the last time I briefed you here, a couple of weeks ago. As I say, there has been further action and progress in terms IMF support for our membership. I think the last time we spoke, we were closing in on 60 countries that we were supporting with our emergency financing, that number, as of yesterday is actually 66 countries, totaling about 23.5 billion in emergency financing. So, that's 66 countries in 10 weeks or so, and we are expecting another 20 countries to be considered very soon.

As our Managing Director, Kristalina Georgieva, said yesterday, we have a trillion dollars in financial capacity, here at the Fund to help our membership. And as this crisis continues to unfold, we have already deployed about $250 billion. This is across all IMF lending facilities.

So just to recall, we've doubled access to our emergency facilities, enabling us to provide about 100 billion in financing. We expect to triple our concessional credit to low-income countries. We have provided immediate debt relief to 27 of our poorest member countries. In addition, we've established a new Short-Term Liquidity Line to further strengthen the global financial safety net, and of course, we've been leveraging our lending toolkit as I mentioned.

And here I might note, in particular, that just last week, our Executive Board recognized the very strong policy fundamentals in Peru and Chile, and approved their requests for the IMF's Flexible Credit Line, created to protect economies with sound policies and institutions against external shocks. So that was 24 billion for Chile, and about 11 billion for Peru.

This supplements Flexible Credit Lines already for Colombia and Mexico for a total of $107 billion for these Flexible Credit Lines with which we are supporting our membership. You know, as I mentioned the last time, our emergency financing is provided in upfront, outright disbursements, very quickly getting financial support to member countries, and without the traditional IMF conditionality.

That said, of course we are maintaining our commitment to address governance, and corruption vulnerabilities as they apply. We continue to promote transparency and accountability, and ensure that those resources are used for their intended purpose. As Kristalina Georgieva likes to say, we are urging countries to spend what is needed, but to keep the receipts.

I'd also like to give you just a very quick update on the Debt Suspension Initiative. I know that's of great interest to many of you. Just recalling this was an initiative called for my Kristalina Georgieva, and David Malpass of The World Bank sometime ago, then endorsed by the G20. So, about 73 low-income countries are eligible, and this would, potentially, mean 12 billion in debt relief for those countries.

So far 35 countries have made formal requests, so that's just about half of those countries eligible, and we are expecting further interest.

Yesterday the G7 Finance Ministers met, and issued a statement stressing on the Debt Suspension Initiative, the importance of private sector involvement in the initiative, the importance of transparency, and the G7's continued strong support and commitment to this Debt Suspension Initiative.

So, you know, with that, let me conclude just with a few event announcements. You may have seen Kristalina Georgieva quite active in recent days. I can tell you that next Tuesday, she will be speaking at the U.S. Chamber of Commerce, and that will be open, it will be live-webcast, and you can watch it there.

And let me remind of a very important upcoming event on the calendar. I know you watch out for this. On June 24^th, Gita Gopinath, our Economic Counsellor, will be releasing our World Economic Outlook Update with our fresh forecast for the global economy.

And on the following day, June 25^th, our Financial Counsellor, Tobias Adrian, will be releasing the Global Financial Stability Report update on that, on financial market developments, and so on.

So, thank you for your patience in allowing me to give you that update on what's happening here at the IMF. With that, let turn to your questions, there are quite a number, and I'll try and get through them.

I want to start with Africa today. Simon Ateba, of Today News Africa, has a question, it's quite a long question from Simon, I'm going to just paraphrase it a bit: but he's talking about the Chair of the African Union, Cyril Ramaphosa of South Africa, told leaders that Africa is still in great need of COVID testing equipment facilities, PPE, and so on. So Simon is asking, in that context, "Can you tell us about the IMF's financial assistance to Sub-Saharan Africa, and how substantial has that assistance been?"

Thank you for that question, Simon. What I can tell you is that to help Sub-Saharan Africa address this crisis, the IMF is providing emergency financing assistance, on what I characterize as an unprecedented scale.

So what does that mean? As of June 3^rd, yesterday, between 35 and 40 Sub-Saharan African countries have made a request for emergency assistance from the IMF, and 27 countries so far have received financing from the Fund. They have received it, for a total of about USD10 billion.

Again, already disbursed, and without IMF traditional conditionality. More is planned in the coming weeks, so this 10 billion number that I just gave, this is actually about 10 times more than what we have been disbursing to the region on average, on an annual basis our average disbursement in the past has been about 1 billion per year, and already halfway through this year we have disbursed 10 billion, with more to come. So that gives some perspective on what we're doing.

Additionally, 19 Sub-Saharan Africa countries have received debt relief under our Catastrophe Containment and Relief Trust which provides debt relief on IMF payment obligations from countries. And that's been 27 countries as I said, totally, 19 for Sub-Saharan Africa, and that's been for a total of 204 million. More broadly, we are exploring ways to deploy our Special Drawing Rights, to support low-income and small economies, including those in Sub-Saharan Africa.

And together, as I just mentioned, with The World Bank, that we are supporting this Debt Service Suspension Initiative from which many Sub-Saharan African countries can benefit. And of course we are urging other development partners to do more, certainly more needs to be done by all of Africa's partners, complementing the efforts of African countries themselves. And as I said, I mean, in a nutshell, the IMF for its part is making an unprecedented effort in Sub-Saharan Africa.

I'm staying with Africa for a question on Sudan from Matthew Lee, up there in New York, Inner City Press. Thank you, Matthew. "On Sudan," Matthew asks, "What's the status? It's reported that Sudan is seeking its first IMF program since 2014, agreeing the non-financial initiative in June talks and persuading the U.S. to drop its long-standing listing of Sudan as a state sponsor of terrorism, are key planks of the transitional government's plan."

So, again, Matthew is essentially asking what's the status, to which I can tell you that of course we all know Sudan faces very significant economic challenges, compounded by past sanctions, external arrears, and unsustainable external debt, the legacy, the terrible legacy of conflict, and more recently the pandemic.

So, as such, I can confirm for Matthew, the Sudanese authorities have requested a Staff-Monitored Program from the IMF to help build a track record of policy implementation, to support progress toward debt relief for Sudan. An IMF negotiation mission, a virtual mission, of course these days, is expected by be completed by around the fourth week of June, and successful negotiations would indeed lead to the approval of the Staff-Monitored Program for Sudan.

For those of you who don't follow the IMF so closely, the Staff-Monitor Program is not financing at this stage, but it's a way for Sudan to show a track record of good policy implementation, and by showing such a track record, it can help Sudan toward clearing its arrears to the IMF, which in turn, and this is the key, can unlock financing from other sources as well.

So, that's the status with Sudan. There are many, many questions on Lebanon. I'm turning to the Middle East. Emma Graham, CNBC; Lin Noueihed, Bloomberg; Odette Ayoub, Addiyar; and once again, Matthew Lee, all asking questions about Lebanon, what's the status of IMF negotiations. “The Prime Minister has said he thought talks with the IMF would be wrapped up within a month. Again, can we confirm? We know central banks numbers and government numbers are different, what's the IMF's view? What's the IMF's view on corruption? In Lebanon it's said that the IMF is asking to decrease government expenditures, will these costs of reforms fall on the poorest?"

Those are the questions. Let me try and take them. On the status of discussions, I would characterize them as I did last time here, as constructive. They’ve been focused on a better understanding of the government's reform plan and its implications. We all recognize the challenges facing Lebanon are difficult, they're complex, and they will require the right diagnostic and the right set of comprehensive reforms, and of course implementation is key. This needs to be underpinned strong government ownership of its economic program, and support for across the political spectrum and civil society.

There was a question about the timeline. I don't have a timeline for the conclusion of the discussions. We do expect them to be rather lengthy due to the complexity of the issues that I just mentioned.

On the difference in numbers question, between central banks' numbers, government numbers: we have had several rounds of technical meetings with senior officials in Lebanon, to better understand the estimated losses stemming from the assumed public debt restructuring, exchange rate depreciation and other factors, as presented in the government's plan, and these discussions, as I said have helped us improve our understanding of many specific technical issues.

Having said this, the preliminary view from Fund's staff, is that the estimated losses presented in the reform plan, are broadly in the right order of magnitude, given the assumptions presented. Nevertheless, further technical work will be needed ahead to refine these estimates, particularly as specific reforms are implemented.

On the question of corruption, of course this is an issue the IMF is addressing in many countries. In the context of Lebanon, there is significant scope to strengthen the transparency and accountability of economic policies, and public sector entities. And this will be critical, in our view, to restore confidence, and ensure that loss-making sectors are reformed and help strengthen overall economic performance in the year ahead.

Finally, the question about reforms falling on the poor: we are discussing with the authorities how they can implement their economic reform plan in a way, and I want to be clear on this. In a way to ensure that the burden of adjustment does not fall on the poor and middle class, while the proposed fiscal adjustment strategy is successfully implemented.

I am staying in the Middle East, and turning to Egypt. Doa'a Abdel Moneam from Ahram Online, and Samar ELsyaed of Al Mal asking a couple of questions on Egypt. Thank you. "When will the IMF's Executive Board announce its decision regarding the standby arrangement loan for Egypt?"

So, reminder, our Executive Board has already approved emergency financing for Egypt less than a month ago, several weeks ago, 2.7 billion, to help Egypt and with the pandemic that was a Rapid Financing Instrument. On the Stand-by Arrangement, which is what the question is about, I can tell you that an IMF mission, led by Uma Ramakrishnan, our Mission Chief, is currently in discussion with the Egypt authorities. And again, that's virtual, that's how we're doing it these days.

On the modalities of that Stand-by Arrangement, land, size, reviews, et cetera, they’ll have to be considered in the light of the ongoing crisis, its impact on the economy, and I would expect the team to communicate at the end of the mission, as we usually do at the IMF.

If the team, the Staff team reaches an agreement, they will present the authority's request for the standby arrangement to our Executive Board for discussion and final decision. This is our process at the IMF, those of you who watch us, you know how this works. We have discussions with the authorities, we have a Staff-level agreement, and then the ultimate discussion and decision lies with our Executive Board. That's always the case.

So, the amount of the SBA, the Stand-By Arrangement, is not predetermined, depends on various factors, and our Board will make the final decision.

The second question on Egypt is, "When will the IMF revise its forecast in light of the crisis?"

So, we did revise our projections for Egypt in the World Economic Outlook in April. And as I mentioned at the top of this meeting, we will have the WEO Update with Gita Gopinath and her team on June 24^th.

Turning to South Asia, India, and our friend, Lalit Jha; normally with us in the room, but asking online. Thank you, Lalit. "What's the IMF's assessment of the Indian economy? PM Modi this week has announced a series of steps of strengthen the Indian economy, are they enough to put it on track?"

So, again, in the April World Economic Outlook, growth for India was project at 4.2 percent and 1.9 percent, that's for fiscal year 2019-

2020 and fiscal year 2020-2021, with the former matching the national accounts data outturn released last week. There will be an update, again, in the World Economic Outlook, coming, on June 24^th. Like most other countries in the world, given the sharp slowdown in global and domestic demand from the pandemic, and the national lockdown policies, we are expecting that there will be an impact on the Indian economy, and the near-term outlook, again, like many other countries, is clouded by these uncertainties related to the impact of COVID-19.

In terms of India’s response, we would characterize it as a strong response by the authorities to the crisis. India’s economic relief package has included fiscal stimulus, monetary easing, and liquidity regulatory measures for the financial sector and for borrowers, and provides much needed support to businesses and agriculture, and it expands support to vulnerable households. Given the crisis, the priority is -- continues to be swift implementation of this response effort to the crisis, in particular, although, medium-term fiscal consolidation remains important. Further fiscal stimulus can be deployed as needed to support the poor and given the sharp slowdown in domestic and global activity, there may be scope for additional monetary easing, as well, to support growth and financial stability, so, all of this building on the recent government measures, the easing, the liquidity, the financial sector measures, that I mentioned, taken by the authorities as part of their strong response to the crisis in India.

On Pakistan, what’s the status of the Extended Fund Facility, which is another of our instruments that we used, that we use to support our membership? And, again, before talking about that, let me just mention, as I did in a previous case, that, a number of weeks ago, the IMF already provided emergency financing to Pakistan in the context of the COVID-19 crisis, and that was in the amount of about $1.4 billion, approved by our Board in April, and on the Extended Fund Facility, which was already in place with Pakistan, I can tell you that technical discussions with the authorities continue. They remain fluid with a view to bringing that second review of that program, that Extended Fund Facility, to a positive conclusion, as soon as possible. We’re working with the authorities, constructively, to ensure that that can be brought to a positive conclusion, as soon as possible, while taking into account the new conditions that we’re facing in Pakistan, and to ensure the program delivers on its objectives.

I’m turning to Europe. There are many questions on Ukraine, from Julia Ustymovych, from The Page, in Ukraine, and I’m seeing one popping up from Yaroslav Dovgopol, from UKRINFORM, and they’re basically asking about what’s the status of the discussions with the IMF? The Prime Minister indicated that the IMF will approve $5 billion, at a Board meeting. Can we give the status of that? There’s also a question -- this is from Julia, as well. Some media have said that the text of the memorandum between the Fund and Ukrainian government has been released. Can you comment on that? And there’s another question, online, about the -- again, about the calendar and the status.

So, since the last couple of weeks ago, when I was here, we talked about Ukraine. A couple of developments. On May 21^st, IMF staff and the Ukrainian authorities, indeed, reached this staff-level agreement on a new 18-month Stand-by Arrangement with a requested access of around $5 billion. Kristalina Georgieva also had a conversation with President Zelensky, just last week. We communicated about that. She congratulated him on the completion of the prior actions for this IMF-supported program. I can tell you they also discussed, of course, the impact of the crisis on the Ukrainian people and the economy, and how the IMF can help. The agreement on the standby arrangement is, again, subject to discussion and approval by our Executive Board, as in all cases, and that Board discussion is expected on June 9^th. So, I am giving you a date, there.

On the question about the leak of the memorandum and so on, you know, we never comment on leaked documents, but what I can tell you is that the IMF is a transparent institution, as many of you know, from looking even just at our website, and based on our transparency policy, we will be releasing, in full, the staff report, as we always do, on the agreement with Ukraine and all the accompanying documents and details, and we will do that soon after the Board meeting, and assuming the Board’s approval. Again, this is par for the course. This is what we do. We publish our agreements with countries, so that you can see them, the world can see them.

I’m staying on Europe, with a question from Jose De Haro, elEconomista, in Spain. Thank you. Jose has two questions. What is the IMF’s view on the Spanish government’s decision to undo labor reform, and what’s the IMF’s view on the newly approved minimum income scheme for the poor?

On the labor issue, I would say that past labor market reforms have underpinned Spain’s job rich recovery from the global financial crisis, and that has helped create greater flexibility, boost competitiveness, and it helped reduce unemployment, but, of course, now, we have the crisis, and to support recovery from the COVID crisis. Once the containment measures are lifted, it remains critical that labor market institutions continue to provide sufficient flexibility and take into account firm specific needs. Thus, you know, any future reforms should build on past achievements and continue to address structural weaknesses in the Spanish labor market, that are intensifying inequality and that hinder labor productivity growth. What does this mean?

In particular, it means making the labor market more inclusive, which will require lowering the precariousness of work contracts. Moreover, it will be important that active labor market policies boost the acquisition of new skills for people, such as those needed for the digitalization of the economy. One more thing, the dialogue with social partners is very important for future successful reforms.

On the question about the minimum income scheme, the Spanish government’s resolute measures to support people’s incomes during the current crisis are greatly welcome, as far as the IMF is concerned. Ensuring sufficient support for the most vulnerable households is particularly crucial. Beyond the immediate needs of this crisis, of course, a careful review will be needed of how to effectively integrate the existing different levels of income support and embed them in a medium-term budgetary plan, but, again, the introduction of Targeted National Minimum Income Program is an important contribution to enhance the social safety net in Spain, and particularly at this time.

One last question on Europe, just coming in. The European Central Bank, today, said they would spend an extra 600 billion Euros on emergency bond purchases. Does the IMF have a view?

What I can say is this is news just breaking, of course, this morning. The IMF staff welcomes the ECB’s decision to provide further liquidity support, by increasing the size and duration of its Pandemic Emergency Purchase Program, and its commitment to maintain a strong accommodative stance, until the ECB’s medium-term inflation objective is met.

I’m turning to Latin America, and questions on Argentina. Natalia Donato, Infobae, and Liliana Franco, Ambito Financiero, asking until when do you see Argentina has time to close the deal with bondholders on its debt restructuring, and what would happen if there was no agreement?

I won’t speculate on the outcome of the ongoing discussions between Argentina and the creditors, but, as we have said, recently, and I would point you to the technical note issued by IMF staff, just a couple of days ago, quite detailed, but, as we have said, recently, we are encouraged by the willingness of all parties to continue to engage and find a consensus. We are hopeful that an agreement can be reached, that will restore debt sustainability with high probability in Argentina and pave the way for strong and inclusive economic growth. On the timing, I don’t have anything on the timing issue.

Liliana Franco’s question is, yesterday, Kristalina Georgieva said that the aim is to restructure the debt, Argentina’s debt, in a way that it can be paid. Will you include this criteria when the negotiations on a new IMF program begins?

So, you know, I don’t have any updates, at this stage, on the negotiations regarding a new program between Argentina and the IMF. As I’ve said here before, we have a very active and constructive dialogue with the Argentine authorities, and we are looking to be as supportive of Argentina and the Argentine people as we can, but, at this stage, we have not started -- I want to be clear. We have not started discussions on a Fund-supported -- a new Fund-supported program for Argentina. As always, that will be the prerogative of the Argentine authorities.

I am taking some questions on Ecuador, from Evelyn Tapia, and Monica Orozco, of El Comercio, and hello to Wilmer Torres, of Primicias. How is the process for a new agreement with the Fund going, in Ecuador? What steps have been taken? Can you give us the status, the amount, and so on, and will the Fund deliver more resources through the emergency financing for Ecuador?

So, Ecuador, like most other countries, has been hit by COVID-19. It’s also been hit by the sharp oil and fallen oil prices. Indeed, I mean, it’s one of the worst outbreaks of COVID-19 in Latin America, the collapse in global demand, and so on. In the context of the Ecuadorian authorities’ response to the virus, we have already provided $643 million in immediate and, again, virtually unconditional support to help Ecuador address the effects of the health crisis and its impact.

Now, in parallel to that emergency financing, so, you’re seeing this familiar story in a number of countries, there’s the emergency financing, and, in parallel, there’s complimentary support via other IMF mechanisms. So, in parallel to the emergency financing, we continue to work with the authorities on a successor program to the previous Extended Fund Facility, and, you know, that will be aimed at broader economic objectives to bolster economics, Ecuador’s economic performance, strengthen the foundations of Ecuador’s dollarization, which has contributed to the stability of the Ecuadorian economy, and is greatly valued by the people of Ecuador, as well as, you know, help deliver broad-based benefits for all Ecuadorians, especially the most vulnerable parts of the population. So, that’s where we stand.

A question is could we deliver even more emergency financing? Ecuador could request additional emergency financing next month, under the IMF’s Rapid Financing Instrument, that could be anywhere around U.S. $250 million, if the effect of recent economic shocks persist. However, and, again, let me be clear, the Ecuadorian authorities have indicated their interest in negotiating a comprehensive IMF-supported program, and are working with IMF staff in pursuing that objective. So, that’s where we stand. There’s one other question on Ecuador, and I want to take it because it’s important be -- the question is can you confirm that the IMF Mission Chief held meetings with political party leaders in Ecuador, and what’s the reason for this meeting?

So, let me just step back here, again, for those of you who don’t follow the Fund so closely. Similar to the engagement we have with all member countries, including in the context of our regular surveillance, our Article IV missions, and program discussions, IMF staff engage with a broad spectrum of stakeholders, so, including leaders across the political spectrum, civil society, trade unions, academics, think tanks, and the private sector. This is what we do in all countries, across a broad spectrum. So, this is also what has been happening in Ecuador, and there’s nothing more or less to it. This is what we do, in all countries, and that’s been the case in Ecuador, as well. These discussions are important. They help enrich our understanding. We’re a listening institution, and, so, they help inform our assessment of the economy by talking to this broad group of stakeholders, and, again, not just in the case of Ecuador, in all countries. I hope that’s clear.

I’m going to take the last question. It’s from Xinhua, in China. It’s from Maoling Xiong, and it’s not a question on China, actually. It’s a question on, more broadly, on trade, and asking, according to a recent report, some 156 export controls on medical supplies and medicines have been executed by 85 governments, just since the beginning of this year. What’s the IMF’s reaction?

Look, broadly, as I’ve said here before, we’ve said we believe we are all better off in a world where trade and investment flows freely, and supply chains adjust with the needs of the global economy. Today, more than ever, the global economy would benefit from a more open, stable, transparent, rules-based trade system. On the particular questions, we have, in fact, raised our concerns over supply disruptions from the use of export restrictions and other actions that limit trade of key medical supplies and food. In particular, and in the context of this crisis, we’ve raised this concern, and you might recall that, in the global financial crisis 10 years ago, global leaders, in fact, jointly committed to refrain for a year from new import, export, and investment restrictions. This was very helpful. I think it helped the world to recover from the global financial crisis, and we think a similarly bold step is needed today. As I said, the Fund, and I believe the WTO, others are calling on governments to refrain from imposing or intensifying export and other trade restrictions, and to work to promptly remove those put in place since the start of the year, particularly in the area of medical supplies, equipment, and food.

So, on that note, let me leave it there. Let me thank you, again, for your very cooperative approach working with us in these virtual days, enabling us to have this regular press briefing, and provide you with information about what the IMF is doing in the midst of the crisis. Thank you for your attention, and I’ll see you again in a couple of weeks. Stay safe, everyone.