Transcript

Transcript of IMF Press Briefing

March 11, 2021

MR. RICE: Good morning everyone, and welcome to this press briefing on behalf of the International Monetary Fund. 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. Wishing everyone well. Hope you're staying safe. And especially in this week of International Women's Day, which we are celebrating here at the IMF and all around the world, of course. If you haven't had a chance to look at the conversation that the Managing Director, Kristalina Georgieva had with U.S. Treasury Secretary Janet Yellen the other day, to mark International Women's Day, it's well worth taking a look.

Let me make just a couple of other announcements and then we'll get straight to the questions. Good to see so many online today. So, on Monday morning, we will be releasing a staff paper. One of our discussion notes on the issue of rising corporate market power. And that will be an event jointly organized with the Brookings Institution. And Kristalina Georgieva will be participating in that managing director. The EU Commissioner, Margrethe Vestager will be participating, and U.S. Senator Amy Klobuchar will be a participating in that event, which will be moderated by David Wessel of the Brookings Institution. That's this coming Monday morning.

Also, next week, Thursday, March 18th, the managing director will be in a one-on-one conversation with Brad Smith, President of Microsoft. And there, they will be talking all things digital. The changing nature of employment; cyber security, impact on financial stability; and so on. That's Thursday, March 18th, Kristalina Georgieva and Brad Smith, President of Microsoft. That will be open to all of you, to all of us, and maybe just the last I'll mention is next Saturday, the 20th our first Deputy Managing Director, Geoffrey Okamoto. Geoffrey will participate in the session on the global economy at the China Development Forum. That's next weekend, the 20th.

Hard to believe that the Spring Meetings are actually coming into view. Not too far away now. At the end of this month, March 30th, our so-called Curtain Raiser event for the Spring Meetings will be held and Kristalina Georgieva will be from making that Curtain Raiser speech at the Council to Foreign Relations March 30th, not too far away. And then we roll into the Spring Meetings with all the full blown documents, and reports, and events that we have. The World Economic Outlook, which I know many of you pay great attention to. That's coming April 6th.We will have a lot more detail on the Spring Meetings the next time I'm here and available to you from colleagues here at the Fund and on imf.org.

With that, let me wish you all a good morning and again, and come to questions on line. .

QUESTIONER: Hi, Gerry, so my question is regarding to review China on a specific perspective. The New Government Work Report just released highlights that China in the next five-year plan pay a lot of attention to Green development that includes the reduction of energy consumption per the GDP and also a reduction of carbon dioxide. My question is, how does the IMF see this effort of China trying to shift its development to more environmentally friendly model. And on a more general perspective, where are we right now in terms of global economy evidence versus Green development to mitigate climate change. Thank you very much.

MR. RICE: Okay. We've been following the so-called two sessions taking place right now in Beijing. And we'll be taking a close look at the five-year plan when it's finalized. China's continued commitment to medium-term reform to strengthen high quality, more consumption driven growth as well as the confirmation of China's efforts in tackling climate change and reach carbon neutrality by 2060 are some of the things that we've noticed coming out from the meetings there. We do welcome this greater focus on quality rather than the quantify of growth is something we've been commenting on for some time. And we think this should help reinforce China's quest to rebalance this growth model toward greener and more consumption-oriented growth.

On the specific Green aspect that you mentioned, again, the five-year plan reconfirms China's 2060 carbon neutrality goal and going forward, of course, the focus will turn to implementation of that goal and in this context, investment into non-fossil fuels combined with continued curbing of carbon emissions and energy intensities represent important steps towards slowing global warming. It will be important to set China's carbon emission on that downward trajectory that is commensurate with the scale of the global climate challenge.

On that more general note that you asked about Gabriel, how's the global economy doing, all countries, including China need to set their carbon emissions on downward plats consistent with global climate targets. And as we have said for some time here at the IMF, carbon pricing designed with an increasing trajectory that is scaled to meet those international emissions targets, can be particularly useful. So, that's what I would say on that. Thank you for your questions, Gabriel. We'll come back if you have anything further later.

QUESTIONER : Good morning, Gerry. I wanted to ask you if you would give any further comment on Myanmar and the potential fiscal problems there, bank runs and other impact and what if the situation continues to escalate, what would the IMF do about that, number one. Number two, we've spoken to some people who see a the potential silver lining in an Argentina negotiation happening later this year versus in the next couple of months and I was wondering if you might speak to that as to the discussions within the [Fund] and the thinking within the [Fund] about the political timing with a deal with Argentina given the upcoming visit by Martin Guzman? Thank you.

MR. RICE : Thanks very much. So, on Myanmar, we are very concerned about the escalating tensions and their impact on the people of the country and the economy, as you mentioned. So, we are watching events carefully. A key immediate concern is ensuring that efforts continue to combat the COVID crisis and support the most vulnerable.

In terms of IMF, consistent with our long-standing policy, the Fund is refraining from engagement with the new regime until the views of our membership are clarified. I talked about that before in terms of us being guided by the international community and our membership in terms of recognition of the regime there. And only low-level engagement such as fact finding is taking place during this period of uncertainty. Again, this treatment is consistent with past practice and precedence. And we are continuing to monitor developments very closely and keeping the situation under review. I won't speculate, as to the state of the economy. That's something we'll be able to say more about based on data and analysis at the time of the World Economic Outlook. So, that's on Myanmar.

Gerry Rice: On Argentina, maybe just give you a status report and I'll take further questions from colleagues that I see online. Well, we continue to actively, constructively engage with the Argentine authorities as they work on laying out their economic plan that could be supported by a Fund program and building broad support for the policies that would underpin such a program. As part of this engagement, Minister Guzmán, has indicated that he will come to Washington for meetings with IMF staff, and, indeed with the Managing Director, Kristalina Georgieva, and that's going to be on March 23rd and 24th. I believe that visit of the Minister to the IMF. And I would expect those meetings again, to focus on how the IMF can help the government put in place those policies that can help foster stability; be the basis for more sustainable, inclusive private-sector led growth with a strong emphasis, as I've said here before, on protecting Argentina's most vulnerable people. I don't have anything further on the timing of the program. I've laid out what we see as the objectives. That's where we are on the status on Argentina, but I'm -- well, I'm guessing there will be other questions on Argentina.

QUESTIONER: Yes, I have a question on Argentina. President Fernandez announced in Congress that his Government will pursue a criminal complaint against President Macri alleging a fraudulent use of the IMF loan. And he later said again, that the IMF bears responsibility for the happening in Argentina. What's the IMF's view on the launch of this investigation from the Fernandez Administration and how do you this can affect, might affect the ongoing negotiations with the Argentine Government?

MR. RICE: Well, as those of you who know the IMF and follow us, we don't comment on judicial proceedings as a standard practice. But what I would say, just answer to your question, look, our objective is and has always been very clear and that's to help the people of Argentina as much as we can. We believe an IMF supported program could help Argentina strengthen its economy and pave the way, as I said, for more sustainable and inclusive growth. That's the maxim, that's the principle that we follow and that we are following, that we have followed as we continue to engage with the authorities over a new IMF supported program and that has not changed.

QUESTIONER: My question is: In Argentina, there is much talk about the possibility of increasing the amount of the SDR. Eventually, when could Argentina receive this SDR eventually?

MR. RICE: On the SDR issue, maybe just a reminder where we ae, a couple of weeks ago, at the G20 meeting, there was broad‑based support expressed for a new SDR allocation. And the IMF was asked/requested by the G20 to formulate a proposal on a possible SDR allocation. So that work is now underway, and we will be coming forward in due course with that proposal for an SDR allocation. So, if and when that goes ahead, we would be in more a position to talk about specifics of what an SDR allocation, a new SDR allocation might mean to Argentina and indeed to the other countries of the membership. Because, as you probably know, the SDR allocations are quota based and allocated on the basis of a member's shareholding in the IMF. But it's premature to talk about that. There are a few steps that have to be taken before we get to talking about specifics on the SDR.

QUESTIONER : I was wondering is there a possibility to extend negotiations with the IMF still after the elections this year? Is that part of the conversations? And also, Minister Guzman requested a lower cost to rates for extended programs in the G20 meeting. Is there any conversation regarding that lower rate?

MR. RICE : On the timing issue, as I said, the discussions are underway. They're active. They're constructive. And, you know, it's going to take time for those discussions to take place and leading to eventually the programs. I really don't have anything more specific on that nor do I have anything further on the requests, or the reported requests that you mentioned. I don't have anything further on that. As I said, Minister Guzman is coming to Washington for discussions with the Fund and with the managing director later this month. So let's stay tuned for that.

QUESTIONER : I want to ask about Sri Lanka and also about Honduras. I have a Ukraine question but someone else may want to ask it. But, as I'm sure you have seen, Sri Lanka has made a $1.5 billion currency swap with China. And I wanted to ask what you think of that. It's portrayed as a way of Sri Lankan is resistant to IMF programs. ‑‑ India was requiring an IMF program of sort in order to go forward with them. Just what's your sense of that?

The Honduras one, I don't know if you'll have an answer. But I have been covering, in the Southern District of New York courthouse, there is a case about ‑‑ it goes to the very top of the government. It seems although there has yet to be a verdict, so you may not answer it on that ground. There seems to be a sense that to the top of the government that is intertwined with narco-traffickers. If you will comment on that, how does the IMF monitor judicial proceedings such as these in terms of how it relates to their interactions with the government and how ‑‑ what safeguards should perhaps be in place?

MR. RICE: I mean just on your last question relating to Honduras, as I just said, in answering the previous questions, we don't comment on judicial proceedings. So I don't really have much to add on that. I can talk to you about Sri Lanka and you mentioned Ukraine. I see a question from Reuters also on Ukraine, so let me take those.

On Sri Lanka, just a reminder, the extended Fund program with the IMF was approved in 2016. That expired last year, June 2020. We did receive a request (in April 2020) from the Sri Lankan authorities for emergency financial support to help fight the COVID pandemic.

The assessment of that support has taken longer than for other countries due to Sri Lanka's daunting economic challenges and high public debt. So we have sought, but not reached understanding, on how to fulfill the key requirements for what could be a rapid financing instrument which would include policies to continue ensuring debt sustainability to address the balance of payment challenges including from the COVID‑19 impact on tourism and to preserve international reserves. Indeed, Sri Lanka has relied on import restrictions since last year and recently introduced additional measures such as a requirement to convert 25 percent of export proceeds. We continue to closely monitor these economic policy financial developments in Sri Lanka including the recent agreement on a swap line with the People's Bank of China.

QUESTIONER : On Ukraine, there is a controversy in which the deputy head of the Central Bank has said publicly that he was, in a way, censored by the Central Bank. He did an interview and that he was then told to retract a statement with the due policy of not speaking. And although, obviously ‑‑ I don't know if this will also be something you won't comment on. But what does mean in terms of the independence of the Central Bank if they need to ‑‑ if it's true that they are censoring their own deputy head of the Bank?

MR. RICE: I think it's essentially the same question from Reuters, who is asking, how concerned are you about the prospects for Central Bank independence?

You know, just the independence of Central Banks is a vitally important principle for the IMF, for all countries. So, you know, again, by saying that, the independence of the National Bank of Ukraine is one of the areas we are monitoring very closely. Because, again, the independence of the Central Bank is key to micro‑economic stability, to investor confidence, financial stability, protection of the financial system, and so on. So, again, it's an issue of vital importance for us.

I would add equally that preserving the integrity, the independence and effectiveness of Ukraine's anti‑corruption institutions are also a crucial preconditions for investment in growth and the requirement under the current IMF support program on which the status of which discussions continue.

Mr. RICE : AFP is asking about the American rescue plan passed yesterday. The COVID situation has improved in the U.S. Could you update your outlook for the U.S.? What's the impact expected for the global economy?

MR. RICE : I'll take that question. Does anybody got a U.S. question that they would want to .

QUESTIONER: Hi, Gerry, good morning. So, yeah, I'm just wondering also, the rescue plan, if you anticipate that this will indeed raise your forecasts. I mean it seems to, by logic, it would seem to do so for the U.S. Also, I wanted to ask you about the comments made by the managing director last week, where she said that she had gotten a green light from the Treasury for an SDR allocation of 500 billion. She didn't add a currency value to that statement. Was that a slip of the tongue, or is she really zeroing in on a $500 billion SDR allocation? As you know, the limit for doing this without U.S. Congressional approval is, you know, the total quota which would be around 680 billion at the current exchange rate. Is that under consideration as well? I was wondering if you could kind of clarify those remarks and, you know, talk about any parameters that might be put on the allocation.

MR. RICE : Let me come in on those questions. So on the U.S. rescue package, our preliminary estimate is that recently passed legislation would increase the U.S. GDP by five to six percent over three years. I would, however, just caveat that saying, we do have the world economic outlook coming up ion three or four weeks' time and the legislation was just completed yesterday. So there is further analysis to be done and you will hear a lot more about that with more specificity at the time of the World Economic Outlook.

But our preliminary estimate is that increase of U.S. GDP by five to six percent over three years. In terms of the global outlook, again, we'll hear more at the time of the WEO. But most countries should benefit from stronger U.S. demand for both commodities and goods and services, imports. So this will help global growth and recovery. At the same time, the current exceptionally low U.S. dollar funding costs environment suggests that the risks of a sudden tightening in financial conditions should be carefully managed for the Federal Reserve and other Central Banks in advanced economies. This means continuing to communicate clearly, as they have been doing about their assessment of the economy and the revolving views on asset purchases and interest rate/industry policy to avoid any unwarranted tightening of financial market conditions. Many emerging market and developing economies, particularly those with financial vulnerabilities and weak trade ties to the U.S. should be ready with contingent policies to potential downside risks and again possible tightening of financial conditions. So, bottom line on the impact is we see potentially significant positive spillovers in terms of global growth. But as always, keeping a watchful eye, at the same time, on potential risks. So, that's where we are on the U.S.

QUESTIONER : Just a clarification point, Gerry, so the 5 to 6 percent increase in growth, in U.S. growth over 3 years, That's -- that's an absolute you know, GDP would be that much higher over the -- over the period? That's not an annual figure, is that correct?

MR. RICE : That's over three years. Over three years.

QUESTIONER : And on the tightening comments, there, is that a reference to I mean, we've seen U.S. long bond rates rise up, you know, the tenure is you know, it's a full percentage point higher. Is that a reference to that activity in the market, that that's a concern for the IMF, that you know, that would spillover to emerging markets?

MR. RICE: You know, David, I'd really probably just leave it the way that I -- I said it. You know, it's -- it's just good to be alert to potential downside risks, and you know, I'll just leave it there for the time being. Perhaps, just turning to your other question, David, on SDRs. And again, just recapping what I said before, at the G20 meeting a couple of weeks ago, there was broad-based support expressed for a new SDR allocation from the IMF. AND the IMF was asked by the G20 to formulate a proposal along -- along those lines. So that's the work now under way. That's ongoing. The allocation's size, which you talked about, David, will be based on our assessment of long-term global reserve needs. And you know, we would be coming forward with that analysis in the period ahead.

In terms of the process, which -- or the parameters, you also asked about, David. The way, the way this works is that staff are working on this analysis of the reserve needs, we will make that assessment. That will be put to our Executive Board for discussion. And then, assuming Board approval of such a proposal, that it would then get submitted to our Board of Governors for the final approval. Approval by the Board of Governors, again, just in terms of the parameters, requires a majority vote of at least 85 percent of the total voting power of the IMF. I don’t have any specifics in terms of the timing of how fast that proposal could move forward. But for reference, you might remember this, David, in 2009, during the global financial crisis, when that was the last time that there was a request for an SDR allocation made by the G20 in April 2009. It was then discussed by the Executive Board of the IMF in April, and June. And the Board of Governors approved the Executive Board's recommendation, and the allocation became effective in August 2009. So, parameters, I'm not saying that's exactly how it will work this time around. But in terms of parameters, that might be useful.

QUESTIONER: Could we see it, could we see it before the -- you know, in time for the Spring Meetings, which are just a month away. Can we see their proposal by then?

MR. RICE: I don’t want to speculate or preempt the work that is underway by staff, David, and preparing the proposal. What I would say is that I would expect the SDR to be an issue for discussion at the Spring Meetings by the IMF's membership. But I won't speculate on the specific timeline around the proposal, but that's how the process works.

Maybe just a final comment on your question about the other parameters. There was a request that as the IMF prepares, formulates this proposal on the new SDR allocation, that we also explore how to improve transparency and accountability relating to SDRs. Which of course is something we totally support, we are all about transparency and accountability. So, that is something that we will be including and working towards as we formulate this proposal. And particularly transparency and accountability on how SDRs are traded and -- and used. We will have more on that in the period ahead.

MR. RICE: I am going to return to Argentina for a minute because there is a question about the timeline for the Board to discuss the ex-post evaluation of the previous IMF program to Argentina and I'm realizing also that I didn’t quite respond to the question, which I think was about IMF surcharges, and I am going to comment on that. So let me, let me talk about that a little bit.

MR. RICE : On, first of all, so we are on Argentina, on the previous program, and the timeline for the ex-post evaluation, I talked about that the last time we were here. Here is where we are. There is an ex-post evaluation being undertaken by IMF staff of the previous IMF program supporting Argentina. This is something that is done in all cases of exceptional access programs. It is not unique to Argentina. It is done in all cases of exceptional access programs. It is a study and an evaluation undertaken by staff. It's presented to our Executive Board for discussion, and it is published. It will be made public. It will be completely open. I do not have the timing on that. The staff evaluation is underway, and I will keep you posted as to timing as we go forward. But that's basically where we are on that one.

On the question about IMF surcharges, they are of course, as those of you that follow the IMF you know, that this is a part of the Fund's risk-management framework. Surcharges allow the Fund to continue to play a role as the global lender of last resort in times of crisis. Something we have seen in full display during the COVID-19 pandemic. So, they help to strengthen the IMF's financial capacity. Particularly, enabling us to provide resources to members at affordable interest rates, often when they are locked out of private debt markets, or facing interest rates at unsustainably high levels. They enable us to help our low-income members in particular, by strengthening our financial capacity. Maybe just to add there, they are only paid surcharges when the outstanding credit of a member country is high and prolonged. And you know, maybe I'll just leave it there. There is a lot more information in this readily available on IMF.org. But again, surcharges are important to strengthen the IMF financial capacity, particularly enabling us to help our lower-income, more vulnerable country members. And you know, it's important to note in that regard, most IMF lending to low-income countries is under our poverty reduction and growth trust facility, which is provided on highly concessional terms, often at zero interest rate, and without surcharges.

So, that's where we are on that issue.

QUESTIONER: I just wanted to follow-up with the U.S. relief package. What is your take on the potential rates that the U.S. relief packaging could trigger a reversal of capital flows from emerging markets to the United States? And secondly, China has set its earlier GDP target at over 6 percent for this year are lower than the IMF forecast of 8 percent. Could you also comment on that? Thanks.

MR. RICE : Okay, so let me wrap up by taking these two questions. On the U.S., I don’t have much more to add beyond what I've said because -- because I did talk about what I characterized as you know, we believe there will be significant positive spillovers to the rest of the global economy from the U.S. rescue package. At the same time, we should be watchful of risks, and countries should of course be vigilant, and alert to any possible risks, including potential financial tightening. I don’t really have much to say beyond that.

On your China question, and the growth targets, again, repeating a bit, what I said earlier, but we welcome the fact that you know, there's not an emphasis on specific targets in the -- in the plans forthcoming. This should look a lot -- a greater emphasis on quality, rather than quantity of growth, and reinforce China's quest to rebalance its growth model.

You know, we had in our January WEO forecast on China, we had projected 8.1 percent growth for this year. And that suggests that the above 6 percent that has been mentioned should be easily reached, given China's fast recovery, and the large base effects from the impact of the pandemic on growth last year. But again, the absence of a specific range for a growth target in 2021 is welcome. And should reinforce this focus in high-quality growth, and rebalancing, which is a discussion we've been engaged in with the Chinese Authorities quite constructively for the last several years.

Thanks, to you all, for these questions. I am going to wrap here, and we will see you in a couple of weeks. Until then, stay safe, and stay well. And I look forward to seeing you again soon.

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