Transcript Of IMF Press Briefing Thursday, February 23, 2017
February 23, 2017
MR. RICE: Well, good morning, everyone. And welcome to this Press Briefing on behalf of the International Monetary Fund. I'm Gerry Rice, the Director of Communications here at the Fund.
As usual, this morning our briefing will be embargoed until 10:30 a.m., that’s Washington, D.C. time. Let me make a few announcements, and then we'll turn to your questions here in the room, and to our colleagues online who are already plugging in, I can see.
Yesterday, as you may have seen in some press reports, Managing Director Christine Lagarde, was in Berlin for meetings with the authorities, including with Chancellor Merkel. Today the Managing Director is in Vienna to meet with the authorities.
Our Deputy Managing Director Mitsuhiro Furusawa, will be in Asia over the next couple of weeks, including in Bangladesh, Malaysia, Singapore, and finally to Japan, where, in the latter stop he will be making remarks at the joint seminar hosted by our office there in Tokyo, and Hitotsubashi University, and that will be on March 8th. I can give you the specifics of Mr. Furusawa's dates, if you would like them as a follow up.
A couple of other things, you can pre-register for the Spring Meetings now. And we have been fairly active on the IMF blog front recently, I would just want to bring to your attention a blog that we issued yesterday, I know it's a topic many of you are interested in, The Issue of Inequality, written by my colleagues Jonathan Ostry and Prakash Loungani.
I think it's interesting because it, in particular, shows how the IMF is now beginning to concretely operationalize this work that we have been doing on the research that we've been undertaking in the recent past on the issue of inequality and how it relates to growth.
And I can tell you that today we'll be publishing another blog, so you can look out for that. And, again, I know it's a topic of interest to many of you. It's on the issue of sovereign debt, it's called Dealing with Sovereign Debt: The IMF Perspective; and it is co-authored by Sean Hagan, our General Counsel; Maury Obstfeld, our Economic Counselor; and Poul Thomsen, who is our Director for the European Department. So you can look out for that blog a little bit later today, dealing sovereign debt. I think it's a useful explainer.
Okay. With that, let me turn to your questions in the room. Good morning.
QUESTIONER: Good morning. I’m with Greek Public TV. I have a question on Greece, of course. So, Gerry, what happened in the Eurogroup is that the Greek Government, actually agreed to implement difficult pension and tax reforms in order for one of your requirements to be fulfilled. So, that’s the one leg. And my question is, what's happening with the second leg, which is equally important, and I'm referring of course to debt relief. Because the MD said yesterday that the volume and the level of the debt relief will be discussed at the end of the program. How can you participate in the program if only one of your two requirements is satisfied? Thank you.
MR. RICE: Okay. Any other questions on Greece? And I can package them and come back.
QUESTIONER: Mrs. Lagarde spoke with the US secretary of treasury two days ago. Can you tell us if they discussed the Greek issue? And also we know that Mrs. Lagarde spoke with the prime minister of Greece. If you can give us a readout for both of these conversations? And also I have another question, Gerry. Are you afraid that possible delays in the decision-making process for your Executive Board, will lead to the economic suffocation of Greece, because this is what some Europeans, and of course the Greeks, are believing.
MR. RICE: I didn’t quite -- sorry -- I didn’t quite catch. Would lead to the "something" on Greece.
QUESTIONER: Economic suffocation of Greece. And I'm wondering if this is an issue that Madam Lagarde discussed with Mrs. Merkel. Thank you very much.
MR. RICE: Okay. Is there anything else on Greece? Okay.
QUESTIONER: If you can confirm that the mission will go back to Athens on Tuesday, and also if you can give us some more details about the meeting -- yesterday's meeting in Berlin.
MR. RICE: Okay. Then, let me take one from you, on Greece.
QUESTIONER: Hi. I’m with Bloomberg News. There was report, I believe, that the Fund was considering a new loan to Greece of about $5 billion. I'm wondering if you can comment on that, and basically provide us an update on any possible financial contribution by the Fund.
MR. RICE: Okay. So, let me take those, and we can pick up on things that may be remaining. So, let me just step back a bit then, for those who may not have followed every step of the way over the last week or so.
So, on Monday, there was a Eurogroup meeting, and the issue of Greece was discussed, and after that meeting we issued a statement, the IMF issued a statement, essentially saying that we welcomed the progress made by the Greek authorities to meet the requirements of the institutions in key areas. And we said, on that basis, we have agreed to send back the mission to Athens. We also said in that statement, after the Eurogroup, more progress will be needed to bridge differences on other important issues, and it's too early to speculate about prospect for reaching staff-level agreement during this mission. So that was on Monday.
And then, as you have just mentioned here, Managing Director Christine Lagarde, met with Chancellor Merkel yesterday, in Berlin, and they discussed a variety of topics of course but -- including Greece. And on Greece they, too, welcomed the agreement of the institutions, and the Greek authorities to resume program discussions in Athens, and reiterated the importance of an early conclusion of the second review of the ESM program, based on a comprehensive set of policies.
The managing director reiterated the IMF's willingness to support the ESM program with a financing arrangement, once agreement is reached on a credible package of policies and debt relief.
So, coming to some of your specific questions, I think, you know, what we've been reiterating, including the managing director yesterday, was the Fund's long-standing approach, which we discussed here, many, many times, the two-leg approach to Greece. Reforms and debt relieve. And there is no change in that position.
So, again, just to try and respond to your question. We need an upfront, credible commitment to specific debt relief measures. The implementation of those measures can take place at a later stage, but we need the specific upfront commitment. Okay? And of course, that’s all contingent on implementation of the program.
So, the mission, which will return to Athens early next week, will be focusing on the reforms that Greece needs to undertake to credibly attain its fiscal targets and return to sustainable growth.
And again, let me just reiterate. For the IMF to come on board with a financing arrangement, that debt relief is equally important as the agreement on the strong policies. We thus expect a discussion on debt to take place following the discussion on policies, but both of those discussions to take place before we can recommend a program to our Board. Okay?
MR. RICE: So, before we can recommend IMF participation to our Board, we need the discussion on both policies and debt relief. Two legs. Okay? I'm just trying to be clear.
MR. RICE: We've said this many times. Absolutely right. We've said this many times. Absolutely right. We've said this many times. I'm just trying to restate and to clarify.
On the question of delay and so on, and the implications that it may have, you know, I think the good news is the progress that was made this week. I think the good news is that the mission is going back, the good news is there's going to be the discussions, and we have to let those discussions play out. And I think everyone is entering into these discussions with the best will possible to try and do, you know, what is in the best interest of Greece and the Greek people. I think everyone shares that same commitment, and that means trying to do it as quickly as possible and with as little delay as possible.
On what the exact IMF participation might be, I think we have to, as I've just sort of indicated, we need to wait for the discussions of both legs, policies, debt relief, and IMF participation will be contingent on all of that and, again, remains to be discussed.
A couple of other things that you asked about. I can confirm that Prime Minister Tsipras and Madame Lagarde have been in contact, including very recently, and they talked about the prospects for the resumption of the negotiations. And, as I said, that's now expected to start early next week. And someone asked about the call with Secretary Mnuchin, U.S. Treasury Secretary Mnuchin. Again, I can confirm Madame Lagarde had the wide ranging telephone conversation with the Secretary. I believe that Greece was one of the issues discussed. I do not have the specifics on that item, but again, wide-ranging discussion covering many issues, and we gave a brief readout on that conversation, as did Secretary Mnuchin.
Are we still on Greece?
QUESTIONER: Gerry, help me to understand how the IMF weighs a member country's interests, economic interests when it is in a monetary union, when the interests may be that it be out of a monetary union. I haven't seen any analysis by the IMF about the pros and cons, economic pros and cons of Greece exiting the euro. And it seems to me that Madame Lagarde has expressed herself as a pro euro and a pro EU advocate. So help me to understand, one, why we haven't seen any economic analysis to defend the IMF's position to not counsel Greece for exiting the euro or -- and two, how it weighs this decision when obviously other member countries who are not in a program want Greece to stay in the euro. Do you understand where I'm getting at? I just haven't seen any analysis from the IMF to defend or argue either case.
MR. RICE: You know, the amount of economic analysis that we've undertaken on Greece over the last seven years, you probably know as well as anyone, is voluminous. So, you know, I think there's plenty out there to analyze and digest.
QUESTIONER: But, respectfully, if I may --
MR. RICE: Well, I'm coming to your question.
QUESTIONER: -- the IMF hasn't done that.
MR. RICE: I'm coming to your question.
QUESTIONER: Okay, I apologize.
MR. RICE: So, you know, on the question of Greece being a member of the eurozone and the monetary union, you know, it's been Greece's explicit objective to retain its membership of the eurozone. It's been one of its priority objectives since the very beginning. It's been also a priority objective of the other eurozone members. So, you know, in terms of how we weigh our service and support to a member country, you know, these are obviously important factors that we take into account, and we have taken those into account and are trying to support and service the member as best we can in that context.
QUESTIONER: But, if I may follow up, Gerry. There are cases in which a member country is explicitly -- to use your language -- has an explicit objective to do for economic policies that the IMF believes to not be in that member country's economic interests or in the global economic interest. And it speaks truth to power, and yet there has been no analysis to argue why Greece should remain part of the euro or why it shouldn't. And to me that's a fundamental economic argument, since you're talking about internal devaluation versus a nominal exchange rate devaluation. I mean, that's at the heart of the problem. So can you tell me why the IMF hasn't at least published its analysis or any analysis on why Greece should remain in the euro or should exit as a part of its truth-telling economic advice to a member country?
MR. RICE: Well, you know, again I think there's been plenty of analysis of Greece's economic situation and how the IMF assesses what is in Greece's best interests. And, you know, I just think there's voluminous information on that. And --
QUESTIONER: If you can point me to the -- and respectfully, I appreciate your patience and me interrupting you -- but if you can point me to the voluminous analysis of Greece -- which I admit is voluminous, it will probably fill several volumes in fact, several history books, but I have seen in none of it that I am aware of any analysis of the pros and cons of Greece staying or existing the eurozone.
MR. RICE: Yes, well --
QUESTIONER: And if you can point me to that direction I'd happily close my mouth.
MR. RICE: I'm going to hold you to that.
QUESTIONER: Okay.
MR. RICE: But more seriously and respectfully, I'll come back to you, but I do believe there is actually a lot of analysis where you can clearly distill what the IMF's view is as being in Greece's best economic interest. I would include in that the many staff reports and, in particular, these ex post evaluation studies that we have done that, again, I can point you to some of this material afterwards. But I do think there's plenty of material.
QUESTIONER: I just want to follow up on Ian's question and maybe have another question if you don't mind. Maybe you can clarify do you think -- does the IMF think that it's in Greece's best interest to retain its membership in the eurozone?
And the second question has to do with the timeline entry, because you mentioned the fact that the discussion on the debt will take place following the discussion on reforms. So should we assume that this discussion on the debt relief won't start before the second review is completed?
MR. RICE: Yes, I don't have the timing on the completion of the second review. Again, I want to revert to my formulation. Before we would be able -- we, the IMF -- would be able to, you know, make a commitment on our participation in the program, we would need to have the discussion of both policies and debt relief, and beyond the discussion, credible commitments in which we have confidence. So that's the way I would like to formulate that.
QUESTIONER: But you just said before we expect the discussion on debt to take place following the discussion on the reform. So that's why I'm asking that question.
MR. RICE: Yes. So there's going to be a discussion on the reforms. And, you know, corollary to that is a discussion on the debt relief. Obviously the level of debt relief and the modalities of the debt relief, all of that depend on the reforms. You know, there's a correlation between the two. We need the discussion of both and specific commitments on both before we'd be in a position to make a recommendation to our Board on IMF participation.
QUESTIONER: And on the first question, I mean, does the IMF still think that it's in Greece's best interest to retain its membership in the eurozone?
MR. RICE: Yes. So we're going to move on from -- are you on Greece? Okay.
QUESTIONER: I’m from TASS. It's actually interesting to look at the discussion. It brings back memories. My question is also familiar to you, it's about Ukraine. Do you have the date for the next Board review for the program for that country? And also, I understand they have their finance minister visiting. So if you have any updates on who's meeting with him and why the visit is necessary, all of that.
MR. RICE: I don't have confirmation on that visit of the finance minister. I just don't have that. Also I don't have a great deal more to say to you on Ukraine than I did a couple of weeks ago, which is, in summary, you know, good progress on the policies needed to complete the third review under the program, close discussions with the authorities continuing, and, again, assuming all remaining issues can be resolved soon we expect to propose the completion of the review to the Board in the coming weeks. And I know that's pretty much what I said to you the last time, but that's about as much as I have right now.
QUESTIONER: All right. Since you keep telling us that there is progress but the date keeps being pushed back, it seems like a contradiction. Even at that point a few weeks ago you did say that there were just a few remaining issues. And if there is progress then what's holding back the Board?
MR. RICE: Yes. I don't have the specifics of that, because it's, you know, part of the discussions. But look, it's not unusual, okay, it's not unusual in programs that sometimes it takes a little bit of time to address the issues. And Board dates sometimes are adjusted accordingly. It's really not unusual.
QUESTIONER: I understand that, and especially in the Ukrainian context. We all know that a few previous programs were also like developing in fits and starts. So it's just that this time it seemed like you were confident that progress was being made. Do you now have a feeling that this is going to happen say in March, at least?
MR. RICE: It’s going to be in the coming weeks. I want to just clarify that our position is yes, good progress has been made, so it’s just discussion around some remaining issues.
QUESTIONER: Okay. Thank you.
MR. RICE: Are we on Ukraine?
MR. RICE: Let me stay on Ukraine, and then I will come to you.
QUESTIONER: Ukraine News Agency. Could you please clarify what issues are remaining to be resolved? Recently, the Ukrainian media noted the IMF needs additional negotiations. Can you confirm it? Also, on this question, could you clarify who you stay in contact with in the Ukraine, is it the Finance Ministry, Office of prime minister, or National Bank? Thank you.
MR. RICE: On your latter question, I would say it’s all of the above. We are in contact with all of those key interlocutors.
Again, I don’t have the details for you on the remaining issues. The authorities have agreed on the need for comprehensive reforms, including pensions, including on governance, corruption issues. There are a number of areas where the discussions have been ongoing.
Again, good progress has been made. We are expecting completion of the review soon. We hope to be able to do that with the Board in the coming weeks. Sorry I don’t have much more for you on that today.
QUESTIONER: Thanks, Gerry. Secretary Mnuchin in an interview with us this morning commented on the value of the renminbi. I am wondering if you can update us on the Fund’s view of the value of the RMB. I know in August of last year, the Fund’s view was that the RMB was broadly in line with fundamentals. Is that still your position? What is the Fund’s view?
MR. RICE: Yes, I haven’t seen the comments that you’re referring to, but separate from that, as you all know, the broad issue of the Fund’s assessment of exchange rates is one of our core functions.
That is something that we do in the context of the Article IV consultations with our members, and in the context of what we call our External Sector Report, which we publish on an annual basis, and last summer, and our assessment, of course, is in the context of globally consistent balance of payments and exchange rate developments.
So, to answer your question, in the latest ESR, the External Sector Report, and Article IV consultation with China, we assessed that China’s currency was broadly in line with fundamentals, and as usual, an updated assessment of China’s exchange rate will be forthcoming in the summer of this year as part of the next ESR and Article IV consultation with China.
Just to set that in context, as you know, more broadly, we have been encouraging China’s efforts to transform and rebalance its economy for many years. This effort has made major progress on many fronts, including the external sector where the large current account surplus of a decade ago has been much reduced.
That said, the effort is by no means finished. There remain a number of reform areas where more needs to be done, including China’s external trading capital flows, which remain some distance from a sustainable balance.
So, I guess what I’m trying to say in summary is it is a wide ranging interlinked complex task, you know, transforming and rebalancing China’s economy, and that’s the focus of our work, and we will be updating our assessment this summer.
QUESTIONER: This is a quick follow-up. Would it be fair to say -- Secretary Mnuchin said today he’s not prepared at this point to declare China is a currency manipulator? The central bank there has been intervening to actually prop up, not devalue it.
Would you share the view at this point that China is not a currency manipulator?
MR. RICE: You know, I’m just going to stand by what I’ve said, and I would just be repeating it again, our latest assessment and our forthcoming assessment will be coming in the summer of this year.
QUESTIONER: Secretary Mnuchin actually -- following the conversation he had with Mrs. Lagarde, the Treasury issued a readout and he used some pretty strong language saying that he was expecting the Fund to be candid and frank about the exchange rate policies of its member states. So is it a way of suggesting that the IMF is not frank enough currently? And do you think that -- do you expect the relations with the U.S. Treasury to be more confrontation than it was before?
MR. RICE: Let me perhaps say a couple of things in response. You're right, there was the readout on the telephone conversation. It was a very constructive discussion between Madame Lagarde and Secretary Mnuchin, as I mentioned earlier, on a wide range of issues of interest to our entire membership. The Managing Director congratulated the Treasury Secretary on his appointment and expressed her desire, the IMF's desire, to continue a close and productive engagement with the U.S. authorities. I would also note that during the conversation Secretary Mnuchin welcomed the key role that the IMF plays in promoting global economic growth and stability and in preventing and responding to economic crisis. So, again, very productive discussion, and I think the Secretary actually referenced that discussion himself this morning in some of his remarks and the positive nature of that discussion.
On your question about exchange rates, you know, as I just said earlier here, and as we've said previously, we are committed to providing a multilateral consistent assessment of our members’ external sector, including their current account positions, reserves, capital flows, and currency. This is done comprehensively in each Article IV report, as well as in the External Sector Report that I just mentioned.
This is what we have done in the past, and what we plan to continue to do going forward. So, I think the call from any member country for frank and candid assessment of exchange rates is something we fully agree with. We see that as the IMF’s job. We think we have been doing that, and we are going to continue doing that.
QUESTIONER: And what about the fear that the relations could be more confrontational with the new administration?
MR. RICE: Again, I saw Secretary Mnuchin’s characterization of the terrific conversations that he said he had with Madam Lagarde, and I would refer you to the read-out on his take on the discussions that had taken place, which I think indicate the promise, the expectation, of a very constructive and productive relationship.
The United States is our major shareholder. We have historically for more than 70 years had a very strong and productive relationship with the United States, and we fully expect that to continue.
I am going to take a couple of questions online, and then I will come back to the room briefly. There is a question on Brazil - how does the IMF see the economic evolution in Brazil in recent months?
On Brazil, clearly it is coming out of its longest recorded recession, but it is still facing a challenging situation. GDP continued to contract in the third quarter of 2016, and NGO activity indicators point to a delay in the recovery as private spending remains weak.
Our January WEO update forecast is real GDP will return to positive growth in 2017, although elevated unemployment and high private sector debt will continue to be a drag on demand.
I can tell you that we will be updating our forecast in the April World Economic Outlook, which will incorporate information on growth in the last quarter of 2016, and more information on potentially positive factors in 2017, notably the bumper crop that is expected this year.
There is a question on the U.N. appeal for the humanitarian crisis that is affecting a number of countries. He is asking what is the IMF doing, what can the IMF do.
We have obviously taken note of these developments with concern for the human tragedy that may be taking place. It’s clear the ongoing conflict in places like South Sudan has already exacted a huge toll on people’s livelihoods, and the outbreak of famine would exacerbate conditions immeasurably.
So, in terms of the IMF, we are in contact with the authorities to discuss how we can be as supportive as possible.
I’ll take one more online, and that is on Nigeria. The question is the Finance Minister, Kemi Adeosun, has said the country will not apply for an IMF program. What does this say about Nigeria and the U.N. appeal, which we just mentioned, or the IMF?
You know, Nigeria is clearly facing a challenging outlook, as we have said before. The authorities have initiated some measures, but more remains to be done. Urgency is needed in implementing a coherent and credible package of monetary, fiscal, and structural policies, as the window for bold reforms is closing, as the 2019 elections are approaching fast.
The IMF staff concluded the 2017 Article IV consultation with the authorities earlier this year, and the Board discussion is scheduled for later in March.
It’s true the Nigerian authorities have not approached the IMF for a program, have not. As such, there are no discussions or negotiations going on regarding a program with Nigeria.
However, and again, as we have said before, the Fund continues to provide technical assistance and have a productive dialogue with the authorities, and we stand ready to help should the country make a request for financial assistance.
I am going to give you the last question.
QUESTIONER: Given the differences in the projections between the Fund and the Europeans, and better data that are coming out from Greece lately, are you planning to update your projections earlier than the spring meetings?
MR. RICE: I have no information that we are expecting to publish new forecasts before then.
QUESTIONER: The reports in the German press, and they always give a tone, as you know, are Ms. Lagarde agreed to be part of the program, to give 5 billion euros. When you say no change in policy, you mean these reports are not correct?
MR. RICE: Those reports are not correct.
See you next time. Thanks a lot.
