Transcript

Transcript of IMF Press Briefing

June 18, 2020

MR. RICE:  Good morning. Welcome to this press briefing on behalf of the International Monetary Fund.   I'm Gerry Rice of the Communications Department.  And as usual this morning, our briefing will be embargoed until 10:30 a.m., that's Washington Time.

Thank you for joining us in this virtual format, I appreciate that many of you have sent in your questions to us in advance, and we're taking some questions online as we proceed.  Let me also begin with a few updates and then I'll get right to the questions.

You know, as I noted, the last time I was here a couple of weeks ago, the IMF continues to move at a record speed in trying to support and help our member countries deal with this crisis.  We have deployed, as this crisis unfolds, about $250 billion across all our lending facilities, and in terms of emergency financing in the crisis, again, we are moving faster than we have done probably at any period in our history.

The last time I was here, I think we were talking about roughly 60 countries receiving emergency assistance from the IMF.  Tomorrow we expect that number to be 70, so 70 countries supported by the IMF with emergency financing roughly about $25 billion.  And just a reminder, this emergency financing is very fast-disbursing, countries receive the money within days, it does not carry traditional IMF conditionality, it is money to be spent on paying for things like nurses' and doctors' salaries, and equipment, and medical equipment to deal with the crisis.

And of course while I said, no conditionality, basically we are saying: keep the receipts on the expenditures, meaning, pay attention to accountability to transparency, to good governance in how those monies are spent.

It might be helpful just to give you a little bit of a breakdown of that emergency financing by region.  For the Asia and Pacific region, it's seven countries have received emergency financing totaling about $1.5; in Europe it's five countries for about $1 billion; in the Middle East and Central Asia, 12 countries for about $7 billion; Latin America and the Caribbean it's about 17 countries for about 5.1 billion; and in Sub-Saharan Africa, 28 countries totaling almost 10 billion.

And again, on Sub-Saharan Africa, just to give you a sense of the scale and the speed with which the IMF is moving.  In an average year our lending to Sub-Saharan Africa would be about $1 billion in an average year.  As I just mentioned, so far this year, and actually within the last just several months, we have committed $10 billion to Sub-Saharan Africa, so that's ten times the average lending to Sub-Saharan Africa, average annual lending to Sub-Saharan Africa this year alone, and we are half-way through the year, so there is more to come.

And again, just a quick reminder, we have doubled our access to emergency facilities, we expect our concessional credit to low-income countries to triple, we have provided immediate debt relief that's in grant form to 28 of our poorest members.

And on the debt suspension initiative which Kristalina Georgieva, the Managing Director of the IMF; and David Malpass, the President of The World Bank, called for some months ago, close to 40 countries now have made formal requests under that debt service suspension initiative.  It's actually 37 countries as of now.

So that's it in terms of, you know, how the Fund is moving in this crisis.  Let me give you just a few other announcements in terms of what some of the senior managers here at the Fund will be doing in terms of public communication.

Later today, at 12:45 p.m., Kristalina Georgieva will be the Guest Speaker for the TIME 100 Talk Series, where she will be in conversation with CNN's Poppy Harlow, that's at 12:45 later today.  You can catch that across all our social media channels, and on TIME's website.

Also later today, 2:00, our First Deputy Managing Director, Geoffrey Okamoto, will have a one-on-one conversation with Desmond Lachman of the American Enterprise Institute.  That event is also opened to you; it's opened to the media and to the press.

On Monday, June 22^nd, the Managing Director, Kristalina Georgieva, will be speaking at the Milken Institute that also will be live-streamed and will be made available to you.  That's 12:00, that's noon, Washington Time, on Monday. 

Also on Monday, our Deputy Managing Director, Tao Zhang, will take part in the Carbon Pricing Leadership Coalitions, Leadership Dialogue.

And just to underline for you, to highlight for you again, next Wednesday, Gita Gopinath, our Economic Counselor, will be releasing the update to our World Economic Outlook, including our updated forecasts for the global economy.

And then on Thursday, June 25^th, our Financial Counselor, Tobias Adrian, will release the Global Financial Stability Report, update on that.

So the global economy on Wednesday, and the Global Financial Stability and Sector on Thursday, two very important updates that I know many of you will be looking for.  And then just to tie up the week on Friday, June 26, Kristalina Georgieva will be the Guest of Reuters Breakingviews, in conversation, on Friday morning.  And again, that will be open and made available to you.

So, lots of activity, lots of information, and you can find all this on IMF.org, our website, and if need be please be in touch with Media Relations for follow up.

I am going to then turn to your questions that you’ve send in, and which we're looking at online.  I'll try and get through this as quickly as we can, take as many as we can.

I'm going to begin with Spain. How do you think the Spanish economy is opening?  Why do you think Spain is one of the worst-hit countries?"  And he also has a question about, "Do you think it's necessary that the rich in society should pay more taxes to help resolve this crisis?"

Well, of course, actually Kristalina Georgieva spoke in detail about Spain in an interview with El País earlier this week.  So, if you haven't seen that interview and you are interested in Spain, take a look at that.

But turning to questioner’s questions, indeed Spain's economy has been one of the hardest hit by the pandemic.  Spain has a large service sector dominated by small- and medium-sized enterprises, strong reliance on tourism, which has been hit very hard, and widespread use of temporary employment.  So, indeed the Spanish economy has been severely affected.

We will be updating our forecast as I mentioned on June 24^th, next week.  The Spanish economy has hard-hit.  That said, and this was a point Kristalina Georgieva made in the El País interview, the Spanish Government has been resolute and swift in its economic response to the crisis, using an arsenal of well-targeted liquidity and income support measures.

So, questioner was asking about taxes and who should pay.  Again, I would want to underscore that Spain has taken important measures to mitigate the effects of this crisis.  And the Managing Director did talk about this in some detail.  For example, people's incomes are supported by short-time work schemes, expanded unemployment benefits and greater social assistance through the new, vital, minimum income scheme.

Businesses are receiving liquidity support through guarantee programs and tax deferrals.  Now, as a result of the recession, and the public spending, the fiscal deficit and debt will rise, but helping the economy with fiscal support is the right thing to do at the moment, and the deficits can currently be financed at low interest rates.  When the crisis is behind us there will have to be adjustments.  In fiscal policy, of course, the lower the deficit and public debt over the medium term.

Unfortunately, the crisis will increase further inequality that's something the IMF has been saying, at not just in Spain, but in many countries, and so principles of fiscal adjustment, should aim to tackle inequality while seizing the opportunity to transform, improve the economy in terms of challenges economies are facing from issues like inequality, but also climate change and digitalization.

This calls for greater burden-sharing, for example, taxpayers, companies and individuals that have benefited from past global trends, or have been less affected by recent adverse developments, should contribute a greater share to overcoming the crisis and addressing future societal needs.  And again, this is true not just for Spain, but for pretty much all countries.

I want to take a question on Ukraine.

Questioner is asking about: The new standby arrangement between Ukraine and the IMF. Could we say more about when the first review of that program is scheduled, and what are the specific conditions that Ukraine should fulfill before new disbursements can be approved?"

So, just last week, our Board, the IMF Board approved the new $5-billion 18-month standby support arrangement from the IMF to Ukraine, that was $5 billion last week, and that will support the Ukrainian authorities' response to COVID-19, to the crisis, but also aim to preserve gains and advance a small set of critical reforms that are needed to position Ukraine for recovery and growth post-crisis.

Importantly, this IMF arrangement will help unlock broader international support for Ukraine, including from the European under a new macro financial assistance program.  The first tranche of the IMF program, the first disbursement, has already been made, that's been about $2.1 billion, and the remainder will be phased over four reviews.  The program has just started as I said, so it's too early to confirm the first review date, but I can tell you we're looking at around September.

As to the specific conditions, look, these are all listed in the Staff Report which has been published and available online, so I won't go into those in details, but I hope, questioner; that helps to respond to your questions.  And again, on the specific conditions you're asking about, they're all there, online, so I will point you to that.

There's a question about the United States.

Questioner is asking “It looks like the recovery has started in May, in the United States, as the economy has reopened progressively with encouraging economic indicators."  Questioner cites the Job Report, the Industrial Production retail sales, and she asks, "Do you see a strong recovery?  Should the U.S. do more to support the recovery?"

So, again, as I just said, we'll be publishing our revised projections including for the United States, next Wednesday in that update to the WEO, to the World Economic Outlook.  That said, the data we're seeing suggests that the de facto lockdown in the U.S. has continued for longer than we had anticipated back in April, at the time of our last set of forecasts, even as government restrictions on mobility have been rolled back.

This is likely to mean the contraction in the second quarter will be deeper than we had anticipated previously, and that the pace of recuperation, may be slower.  At the same time the U.S. has significant fiscal space which can be fully deployed to react to the pandemic, given the unprecedented effects on livelihoods and employment.

This will inevitably involve in an increase in the public debt to GDP ratio.  But this should not be a constraint to up front action to support the economy and minimize the economic damage from the pandemic.

I'm turning to China and it's another question referring to a blog by Gita Gopinath earlier this week where Gita talked about China.  And said in the case of China, of the early exiters from lockdown, the recovery of the services sectors lags manufacturing in such services as hospitality and travel.  And they're struggling to regain demand.

As the recovery in the services sector is slow in China and new clusters of the epidemic have appeared followed by the new lockdown, questionerasks how do you see the Chinese economy for the rest of the year.  And again, as in the case of these other countries, the WEO update is coming on Wednesday June 24th and we'll have some new forecasts. 

The Chinese economy contracted in the first quarter for the first time in more than 40 years pointing to the severity of the sudden economic halt forced by the pandemic.  But the Chinese economy has again gathered momentum as national containment measures were withdrawn and policies support gained strength.  We are seeing this in the high frequency data for China.  For example, where recovery in investment and services through May has been stronger than expected. 

Overall, the balance of risks to the outlook is still on the downside.  A broad-based return of the pandemic could force a new national lockdown and slow domestic activity.  And exports could disappoint more than expected as overall global growth weakens further.  So, policymakers we need to keep an eye on this as they are doing and be ready to add to the macroeconomic support should the recovery falter. So, that's China.

I'm turning to Africa and Zambia.

questions are about remarks from the Zambian finance minister last week and asking about the precise dates for consultations between the IMF and Zambia.  And along the same lines, another questioner asks, can we confirm or deny that the IMF consultative exchange mission for Zambia will take place from June 22nd to July 1. 

So on Zambia, in the face of the COVID-19 pandemic, the Zambian authorities have requested emergency assistance from the IMF.  This comes in addition to an earlier request from Zambia for Fund support for their broader economic reform program aimed at restoring economic stability and fiscal as well as debt sustainability while increasing growth and fighting poverty. 

The Zambian authorities are aware that steps would need to be taken to restore debt sustainability.  And in this regard, the IMF staff notes the government's commitment to restore debt sustainability through fiscal policy adjustment and debt management in line with the finance minister's statement back in February.

On the specific questions about timing. I can confirm that Fund staff will be holding virtual consultations with the Zambian authorities regarding their requests for emergency financing in the week beginning June 22nd.  Discussions will cover, as I said, the economic response to COVID-19 as well as medium term macroeconomic objectives and policies. 

I am staying in Africa turning to Cameroon.  Questioner says, finance minister, Cameroon's finance minister Louis-Paul Motaze said the IMF funds for the emergency financing will be used to equip hospitals, supply needed material in a transparent way.  And he asks, can you summarize the restrictions and the specific purposes.

So, this relates back to what I said at the beginning.  IMF funds, emergency funds are aimed at supporting governments efforts to mitigate the impact of the COVID-19 pandemic and the terms of trade shocks.  That's true in Cameroon, it's true in many countries.  These funds are subject to the strict application of the budgetary procedures and controls provided by Cameroon's national law on the code of transparency and good governance in public finance management.  And the law on the financial regime for the government and all other public entities all adopted in July 2018.  So, that's the, you know, questioner was asking about the restrictions and specific purposes.  So, that explains that. 

In the wake of the pandemic, the IMF, as I said earlier, strongly maintains its commitment to address governance and corruption vulnerabilities in member countries.  The IMF emergency financing is provided in up front, outright disbursements.  So, while there is less scope for attaching, as I said earlier, our traditional conditions, we are working on measures to promote transparency, accountability and ensure that IMF resources are used for their intended purposes. 

So again, we've been using this phrase, keep the receipts.  Spend the money as needed to protect people and livelihoods but keep the receipts of the emergency financing.  Meaning, ensure proper accountability, transparency and use of funds.  We can see this in countries commitments in what we call their letter of intent which is attached to the financing. 

We are recommending, supporting, advising enhanced reporting, commissioning of independent audits of the emergency financing.  And again, ensuring that the emergency assistance is used for the urgent purposes of resolving the current crisis and not diverted for other purposes.

I am turning to the Middle East.  And many questions on LebanonA number of questions.  How are the different numbers for losses in the financial system in Lebanon impacting the negotiations, the discussions between the IMF and Lebanon regarding a possible program of support?

On that question, I can say that discussions are ongoing, of course.  These are complex issues that require a common diagnostic of the sources of the losses and the size of the losses in the financial system.  As well as on the feasible options to address them in an effective and equitable manner.  The size of the potential losses is quite large and the authorities are still discussing among themselves the choice of feasible options in terms of public debt sustainability and financial sector restructuring.

There is a question, how much money can Lebanon expect from the IMF?  Given these discussions are ongoing as we speak, it's premature to talk about any potential access to the size of -- any potential access to IMF financing right now.  The discussions are focused on policies and reforms to restore macro stability and sustainable growth.  And, of course, at the end of the day, the support from the IMF, the scale and the size will be the decision of our Executive Board as is always the case.

Another question on Lebanon.  Is there a major reform that needs to be completed before the IMF would authorize a program, if so, what is that?  What are the stumbling blocks, etcetera?  On that, I can only say again we're not yet at the stage to discuss specific measures under a possible Fund program to support Lebanon. 

The discussions remain focused on the government's plan.  I have said that here before.  The government's diagnostic and the reforms proposed.  Again, these are complex issues which require consensus on how to address the difficult challenge in and effective and equitable manner.  Comprehensive reforms in many areas are needed and these require ownership and consensus from society at large.

Final question on Lebanon, I mentioned there were quite a number.  How can the IMF ensure that the government will implement reforms?  Well, as in any country, not just the case with Lebanon, any country.  The implementation of reforms rests with the government of that country itself. 

And, of course, that's true in the case of Lebanon as well in consultation with all relevant political parties and members of civil society at large as well. The Fund usually supports implementation of reforms through our advice, through our technical assistance at the authority's request.  And in the case of a Fund supported program through specific conditionality.  So, that's on Lebanon.

I'm turning finally to Latin America and a question on Argentina, sorry, four questions on Argentina.  They are around the negotiations between Argentina and its creditors.  The negotiations seem to be stuck says questioner.  Is the IMF concerned about a renewed extension of talks? 

Questioner is asking a similar question.  Are we concerned about the process between, you know, Argentina and its creditors?  Questioner is asking a similar question.  The talks between Argentina and bond holders seem stuck, what's the IMF's comment.  And questioner is asking, did the Argentine government ask for a disbursement under the current IMF program to make a payment to its creditors and by so doing, unblock the negotiations?

So, let me start with that last question from Liliana on a disbursement being asked by the Argentine authorities under the current IMF standby arrangement.  The answer is no.  No such request has been made.  I want to be clear about that.

With regards to the other questions and the current negotiations.  As we have said before, the negotiations between the Argentine authorities and its creditors are a matter for Argentina and those bondholders.  We are, of course, following developments very closely.  We hope that all parties involved will continue to remain engaged and pursue negotiations with a view to reaching an agreement. 

I’m going to take a last question, staying in Latin America.  On Bolivia, questioner asks, what is the IMF's response that the Bolivian parliament has voted to reject a $327 million loan from the IMF that was earmarked to help the country tackle the pandemic. According to State News, Matthew says the interim government denounced the parliaments rejection of the loan.

To which I would say, indeed the Fund has provided emergency assistance to Bolivia.  It's one of those about 70 countries that I mentioned at the top of the briefing.  So, we're trying to support Bolivia's efforts to combat the pandemic.  We're doing this through our rapid financing instrument.  No conditionality attached to that again, as I mentioned earlier.

The Bolivian authorities are acting to strengthen the country's ability to improve the healthcare system to confront the crisis and have quickly adopted social spending measures to support affected firms and households, particularly the most vulnerable people.  So, our emergency assistance is aimed at supporting that effort and to strengthen required spending on medical and relief measures, that's the objective.  The Bolivian authorities have published the full details of the loan.  They're available in the staff report that was issued back on May 29th.  So, you can read all about it if you're interested there.  It's online on IMF.org and it's all transparent. 

I'm going to leave it there.  I want to thank you again for your patience in bearing with me and with us in this virtual format.  I hope it's useful.  It's certainly useful for us to stay in touch with you.  And we'll see you in a few weeks' time.  Look out for the WEO and the GFSR next Wednesday and Thursday.  And our best wishes to everyone to safe and stay well.  See you next time.