Transcript

Transcript of a Press Briefing by Thomas Dawson, Director, IMF External Relations Department

October 12, 2000

MR. DAWSON: I’m Thomas Dawson, Director of External Relations at the IMF.

I have a couple of brief announcements at the beginning. First, I know there’s interest with regard to recent events concerning the Federal Republic of Yugoslavia. In recent days, members of the new team in the FRY have indicated publicly their interest in joining all international financial institutions, including the Fund. As the Yugoslav Government is not formally yet in place, we have not yet been contacted. However, we welcome the new team’s intention to join the Fund and other international institutions, and the Fund is ready to send a mission to the FRY, either alone or as part of a joint initiative, possibly including the European Commission and the World Bank. The timing will depend on when the Yugoslav authorities indicate their readiness to receive a mission.

Once the FRY has met the requirements for membership, the Fund would welcome them as a member. In order to succeed to membership in the Fund, there needs to be first a clear agreement on how to clear the arrears of about US$128 million to the Fund. Number two, the FRY needs to notify the Fund that it agrees to succeed to the membership of the Socialist Federal Republic of Yugoslavia in the Fund in accordance with the terms and conditions prescribed in the 1992 decision by the Executive Board. And finally, it has to be determined by the Executive Board of the Fund to be able to meet the obligations under the Articles of Agreement.

Secondly, I believe we have a press release on the five-yearly review of the SDR valuation which goes through both changes in the weighting—the currency composition because of the introduction of the euro, the weighting of the currencies, as well as some changes in terms of the interest rates that are used for the calculation of the SDR rate. And I think the release is reasonably self-explanatory.

So, with that, I’d be happy to turn to your questions.

QUESTIONER: The Philippines has raised interest rates quite substantially overnight to basically restore some faith in the currency, but also to address other areas. What’s the IMF’s reaction to that? Does it support the timing of fiscal policy at a time when the economy basically risks sliding back into recession?

MR. DAWSON: The Philippines is obviously in a difficult situation, and the central bank is trying to deal with the situation. A Fund mission is currently in Manila and is in touch with the authorities and assessing the situation. I don’t have much beyond that, but we are obviously following it quite closely and, as I say, we do have a mission there.

QUESTIONER: You did mention there is a mission on the ground there, so is there anything you can add in terms of whether or not the Fund consulted with the government about this rate increase? And this is coming only a month after the Philippines was pretty much rebuffed by the Fund in terms of its program. I was wondering if their situation now merits a program more than it did a month ago.

MR. DAWSON: As I say, we recognize that they’re in a difficult position. I’m not sure I would accept the characterization of events of a month ago, but the mission is in more or less continuous contact with the authorities, which is, of course, easier since they’re there. But I don’t have anything more than that.

QUESTIONER: On Yugoslavia, when you say the U.S. seems to believe that one of the issues that needs to be dealt with is Mr. Milosevic’s status and what he might do with assets that he has, is that one of the issues that the IMF will be considering on renewing the membership?

MR. DAWSON: I think you started by saying “you say” and then you went into your question. I didn’t say anything about the U.S.

No, I’m not aware that that is an issue with us at this point. I mean, ours is a question of membership, and obviously issues like that we are concerned with, but I think we are at a point now of trying to establish contact with the new authorities once they are in place. So, I think that question is better directed toward the various authorities that are interested in that. I mean, we are interested as well, but as this point we’re trying to establish contact.

QUESTIONER: During last night’s presidential debate, Mr. Bush took the opportunity to refer to money from the IMF finding its way into Mr. Chernomyrdin’s pockets and he criticized its operations. Mr. Gore jumped on it and said the World Bank is doing a better job of reforming itself than is the IMF. Any thoughts on that?

MR. DAWSON: Yes. We certainly did take note that there was quite an extensive discussion of Fund issues. I think that both men indicated a fundamental support for the institution and a belief that the IMF reform process that has been underway for some time needs to be pursued. And I think that is quite appropriate, and I think we understand that and we viewed their comments as recognizing, as Governor Bush’s comments, the importance of the Fund and the role that it should play.

A number of issues came up, including the question of safeguarding Fund resources, the issues of corruption, the issues of private sector involvement. And those are all issues that are part of the reform agenda, and we are working on all of those subjects. So I think that does show that the Fund continues to be in the spotlight in terms of the international financial issues, although I have to say we were perhaps somewhat impressed with the amount of attention that it received last night.

QUESTIONER: In Prague, the Governor of the Central Bank of Iraq, I believe, asked the Fund to raise its voice against the sanctions, suggesting that the sanctions violate one of the Articles of the Fund, and I wonder what impact his remarks had. Has there been any substantive discussion about criticizing the sanctions or calling for their lifting?

MR. DAWSON: I am not aware of any further discussion on that issue. I think the sanctions being referred to are U.N. sanctions, though I’m not entirely certain quite the context in which they are violating the Articles of Agreement. But this is an issue that comes up on occasion on sanctions, but these particular sanctions are not bilateral sanctions. These are U.N. sanctions.

QUESTIONER: As I understand the weight of the euro in the SDR basket, it had until now 32 percent, 21 of Deutsche mark and 11 of French franc. And from January next year, it has 29. It’s going down, the rate?

MR. DAWSON: That’s correct.

QUESTIONER: Concerning Yugoslavia, the date of mid-December is mentioned by the economists next to advising the new President. Tell us more about that date. Is there, in fact, a regular six-month period in which you every six months review the Yugoslav membership status? And is that an achievable date? Is that something that is the target?

MR. DAWSON: There is, in fact, an established six-month review of the status of this issue. However, it is not in any sense of the word a target in that the Fund Board, should the authorities be in such a position, could take a look at the status of Yugoslavia and the potential reactivation of their membership at any particular time. There is just simply a requirement to review the situation every six months.

So, yes, there is an expectation of and a requirement for discussion at that point, but should issues be resolved prior to that, then they could be. And should December 15th pass and it winds up being January, you do not have to wait until June.

QUESTIONER: There was the resignation of Argentina’s Vice President, a major problem in the governing coalition. I don’t ask you to comment on the political situation, but I was wondering whether in a country which failed to meet their targets, their regional targets, and where there seemed to be no growth either, are you in any way concerned by the impact of the political crisis on the economic development?

MR. DAWSON: Obviously, political developments can get to a point where they concern programs, relations, and so on in any country. But I would simply note at this point that our relations with Argentina remain unaffected by these developments, and regarding the program itself, I would note that on the basis of the information that we have to date—and I think the authorities have announced this—that end-September targets were, in fact, met.

That is an issue we’ve already adjusted to and moved on from. So at this point the program does seem to be on track.

QUESTIONER: The obligatory question on Russia. Basically, it’s a classic question on the CIS, in general. Any news on that? And on Russia, in particular, in Moscow people say that they are expecting a mission from the IMF around November 7th. So can you give us any dates and any other pieces of news on that? And the CIS countries, Ukraine, for instance, might be one that you might have something on.

MR. DAWSON: Yes, indeed, we do have a mission to Russia tentatively scheduled to take place in November, but with a technical mission arriving on November 7^th, and its purpose will be to continue discussions for a program that could be supported by what at this point would look to be a precautionary stand-by arrangement.

I actually don’t think I do have anything new on Ukraine.

QUESTIONER: Is there some sort of expectation among the Fund that political things aside, how quickly you could get Yugoslavia to rejoin, sort of a ball park? You know, you could do it in three months, you could do it in five months, six months?

MR. DAWSON: It’s speculative to say that, but it should not take long. I don’t think this should be viewed as a protracted way—there are not any fancy hoops or jumps that are needed to be made. I indicated the three sort of basic conditions. We have some experience with reactivating relations with other countries, and I think it’s not something that should be time-consuming. That’s why I want to steer people away from the idea that there’s something six-monthly about this. It is clearly something that can be done much more quickly than that, but it really requires having contact with the authorities.

And that’s why we want to make it clear that the December deadline, while it is something that exists, and then there’s a six-month review thereafter, if things are not resolved by December, they could easily be resolved well prior to the next deadline. And I’m also implying that it’s possible they could be resolved by December as well.

They have to basically acknowledge the situation and then, for a program to be established, we would need to figure out how the arrears process would be taken care of.

QUESTIONER: I would like to ask a supplementary question on that. That sounds like it could all be—the membership issue—resolved within weeks, not months.

MR. DAWSON: I think months is probably more likely than weeks. It depends how many weeks you count until you start saying months.

QUESTIONER: I’m hoping you could turn to North Korea and perhaps update us on the situation that there has been considerable easing of tension between North Korea and the United States. And I was wondering how that is reflected in the IMF’s assessment of the country.

MR. DAWSON: This issue came up at the time of the Prague meetings, because indeed the North Koreans were invited by the Bank and Fund to attend the meetings as special guests. They did, however, inform the Fund and the Bank that while they were grateful for the invitation, they didn’t believe they had enough time to prepare. But they did emphasize their interest in the activities of the Fund and Bank, and we expect to be exploring other opportunities to have a dialogue with officials in the future.

I think you all, of course, know of the visit here in Washington this week of a senior Korean official to the United States, visiting the United States, and I think that’s where we have it. I’m not aware, to put it directly, of developments since the Annual Meetings, but we certainly expect to be hearing from them and are prepared to talk with them.

To my knowledge, they are not visiting with the Fund, and I think I would know in that regard. It seems to be more on the bilateral side.

QUESTION: I have a follow-up question on the euro. Let’s make the wild proposition that it goes up in value. Will you have to wait for another quinquennial revision or could it be changed in the meantime?

MR. DAWSON: No, it’s established that the formula is reviewed every five years. If you really would like to be confused on that subject, you can go back into reading the report to figure out how we get from here until January 1st and how we signal the markets how the weightings get actually put into effect. But, no, it gets changed every five years.

QUESTIONER: Could you just go over a couple of basic things on Yugoslavia for those who are ignorant as to some of the background? When was Yugoslavia taken—or removed from the Fund before, or suspended, if that’s the word you use? Have other states that have broken off from Yugoslavia become members? Would the new—the existing Yugoslavia assume the former full country’s position in the Fund? Obviously, there’s a big difference between Yugoslavia today and in ’92. And I didn’t quite understand on the hundred-odd million dollars that’s outstanding...

MR. DAWSON: US$128 million. That’s their portion.

QUESTIONER: They need to get that taken care of before entering or before any kind of program would be—

MR. DAWSON: No, they need to acknowledge the debt prior to resuming membership, and then we work with them on how the debt could be cleared.

The historical date to keep in mind is December 15, 1992, which is when the Fund found that the Socialist Federal Republic of Yugoslavia has ceased to exist and, therefore, ceased to be a member of the Fund. At that point in time, the five elements were basically allotted shares in the assets and liabilities, so that, in effect, the quotas were determined at that point in time, and the other four constituents have rejoined or assumed membership in the Fund.

QUESTIONER: To follow up on that, what was the process of distributing those quotas? And why do you think was Belgrade not ready to accept its apportioned quota?

MR. DAWSON: The allocation of assets and liabilities was done by a formula, and I don’t believe the percentage allocation was particularly controversial at that time. I believe that sanctions had a good deal to do with that at the time, but I’m not sure what else was involved.

I can remember this was an issue on the Bank side as well on allocations, because in their case it deals with projects that may be in a particular republic. I think if you go through the press release from then, I think it goes into a fair amount of detail as to how it was determined.

QUESTIONER: I have a follow-up on debt relief. The follow-up is: Can you address the concerns that Chernomyrdin ended up with IMF money in his pockets that Bush made last night? I think it deserves its own response. And then on debt relief, where are you right now with the goal of getting 20 countries through the process by the end of the year? And what will it mean to the debt relief program for those 20 countries if the permission from the U.S. Congress to use the remaining proceeds, the profits from the gold sales, does not come through in the final days of the budget process?

MR. DAWSON: With regard to the first question regarding possible misuse of Fund resources in Russia, we do take seriously all allegations in that regard and look at them and examine them, and that’s a process that has continued, and we will look at specific allegations made.

We’re not aware of any particular allegation at this point, although there obviously have been concerns about governance issues and misuse of Fund resources, which is why we have taken substantial measures in terms of safeguarding Fund resources, reporting requirements, tracking the use of central bank resources and so on, not only in Russia but also in other countries.

I mean, we don’t dismiss these issues, and when we do hear these allegations, which come up fairly regularly, we take them quite seriously.

With regard to the status on debt relief of the goal for 20 countries to qualify under the Enhanced HIPC Initiative by the end of the year, we and our colleagues at the World Bank are working very, very hard at that, and we remain hopeful, cautiously optimistic that we will, in fact, achieve that goal of 20 countries. There are quite literally meetings going on virtually every day on this issue, and I think we continue to make good progress toward that goal. But it will, of course, require a lot of work.

With regard to congressional action to approve the remaining 5/14 of the release of the proceeds of the transaction in gold, that is obviously at this point in front of the Congress as they are approaching recess, whenever they’re approaching recess, and we are hopeful that the Congress will act. I think that question is actually best directed toward the Treasury. The U.S. Treasury will have that responsibility.

We would note that it is necessary for us to be able to provide the full funding for these 20 countries for that relief to be provided by the end of this calendar year.

QUESTIONER: I’d like to go back to Russia just for a minute. I want to be very clear. You’re saying that the Fund has no evidence that any of its money ended up in Mr. Chernomyrdin’s pocket.

MR. DAWSON: That’s correct.

QUESTIONER: Could I ask, there’s a G-20 meeting coming up in Montreal. Who will be representing the IMF at that meeting, and can you give any sense of what you expect as far as whether there’d be any outcomes rather than just a review of the financial architecture and where you are?

MR. DAWSON: I certainly know those issues are the subject of the discussion of the G-20 meeting in Canada. The Managing Director will be attending that meeting. But I think that questions about the meeting itself are probably best addressed to the Canadian authorities who are the hosts of it. But I think you describe correctly that architecture-related issues are the focus there.