London, February 13, 2020 (PPI-OT):RICE: Good morning everyone and welcome to this press briefing on behalf of the International Monetary Fund. I’m Gerry Rice with the Communication Department. And as usual, this briefing will be embargoed until 10:30 a.m. and that’s Washington time. I’ll make a few quick announcements and then come to your questions in the room and take a few online as well.
So, let me begin with the travel of the Managing Director, Kristalina Georgieva. Tomorrow, Friday the 14th, the Managing Director will attend the Munich Security Conference where she will be participating in various sessions. Including one that is, I think, live and open to the press on the global trading system. A few days later, she will be traveling to Dubai to attend the second global women’s forum being held there. And again, a number of those events are public and being live webcast and so on.
And then next week, Monday to Thursday, February 17th till the 20th, the Managing Director will visit Morocco to discuss the preparations for the IMF, World Bank Annual Meetings to be held in Marrakech in October 2021. So, this will be her first visit to Morocco to start to pave the way to that annual meeting. And she’ll be meeting with the head of government, central bank governor, finance minister as well with civil society organizations, students, young people and participating in a roundtable on governance.
And after that, Kristalina Georgieva will be moving to Riyadh Saudi Arabia where, as many of you know, the G-20 meeting of finance ministers and central bank governors will be held in Riyadh February 21 to 23. And there will be some public events around that for the IMF amongst other things.
The Managing Director will have a conversation with the head of the Institute for International Finance Tim Adams on the sidelines of the G-20. That will be public and that will be televised. That’s it in terms of announcements. Let me come to you in the room and I’ll take a few things that are popping up online. Good morning everyone. Good morning, Delphine.
QUESTIONER: Good morning Gerry. I have a couple of questions regarding Lebanon. So, we saw your statement yesterday. But we would like to know if you can provide your assessment about the economic situation there. I mean, is Lebanon beyond the rescue? Could you compare with other countries which were in the kind of same situation like Greece? And would the IMF be ready to provide financial help if requested? So, if you can elaborate a little bit about this situation on the economy there and your view on the situation of the country will be great. Thank you.
- RICE: Okay sure. So, as you said, Delphine, we issued a statement yesterday. Maybe just a little bit of backdrop is that on February 12, the Lebanese authorities requested technical assistance from the IMF to help them face the economic challenges that have arisen there. I would want to stress, this is technical assistance. The Lebanese authorities have not requested financial assistance.
In terms of what our sense is of the kinds of policies and actions that the Lebanese authorities need to take, it’s a package of economic and structural reforms that would help address the sharp deterioration and confidence that would restore stability in financing, trading and payment systems. And would help to contain inflation and resume economic growth.
There are some longstanding structural problems in many sectors of the economy that need to be addressed. And we believe these steps would help improve conditions for everyone. Most notably, the poor and the middle class. So, our statement yesterday was in that context that we are ready to help, to offer advice and technical assistance at this stage.
As those of you who follow the Fund know, we have various instruments to help countries, including financial assistance. But as I said, at this stage, what has been requested from the Lebanese authorities is our technical assistance and advice to help them with the reforms that they want to put in place to restore stability and growth. So, that’s kind of where we are on Lebanon. Does that help you?
QUESTIONER: Maybe you can elaborate on the technical assistance. And yesterday, you referred to the debt and you said that you won’t provide specific advice on that. Could you clarify the reason why? Because actually the debt is the main issue over there, so…
- RICE: So, well two points, Delphine. On the nature of the advice and the technical assistance, it really is across a broad range of macroeconomic issues and structural reforms. We’ll be able to tell you a bit more about that in the period ahead but it’s a range of issues.
On your second question about the debt. This is not particular to Lebanon. But, you know, any decisions on debt restructuring are really the prerogative of the authorities of the government. And those are decisions and negotiations that they undertake in consultation with their own legal advisors and financial advisors.
So, it’s really, again, this is not particular to Lebanon, this is true in every case that the decisions on debt restructuring are between the government and the creditors. And they rely on their own advisors for that, so the IMF does not have a role there. Good morning.
QUESTIONER: Good morning, Gerry, thanks. I have two questions on Argentina. Yesterday, Minister of Economy Martin Guzman went to Congress and he said that Argentina would not be able to achieve a fiscal surplus until 2023. I wanted to know if the IMF supports that fiscal goal. That’s my first question.
And the second one is Minister Guzman said that the IMF is responsible for the economic crisis. And last weekend from Cuba, Vice President Cristina Kirchner called the agreement between the IMF and Argentina illegal. She said that the IMF violated its rules with the Argentine program. She also said that, you know, the IMF should take a haircut in its renegotiation with Argentina.
Do you see this, you know, harsh rhetoric from the Argentine authorities, do you think they could complicate the negotiations with the IMF, or do you think it’s just like noise meets the talks between, you know, the IMF and the finance administration. Thanks.
- RICE: So, maybe just a little bit of context and then, you know, come to your questions. So, there’s a very active, I’d characterize it as a very active dialogue ongoing between IMF staff and the Argentine authorities. We’ve characterized that dialogue in the past as constructive. I would continue to characterize it that way today.
We’ve said, and just to reiterate, we share the Argentine government’s objective of putting in place policies that stabilize the economy, protect societies most vulnerable and pave the way for sustainable and inclusive growth. We share that objective.
For those of you who don’t follow Argentina so closely, an IMF staff mission is currently in Buenos Aires to continue that dialogue and to discuss further with the Argentine government their plans. Their ideas around the economic direction for the country and their strategy to address Argentina’s debt situation as well as the overall economic outlook.
So, we have, as I said, a team in Argentina lead by Julie Kozack who is our deputy director for the Western Hemisphere Department and Luis Cubeddu who is head of the IMF mission for Argentina. That mission will be from February 12 to 19 and we’ll be meeting with a broad array of officials in the economy ministry, central bank and other government agencies.
In the context of this mission, the Fund staff team will be looking at and discussing with the authorities their debt sustainability analysis. So, having said that, you know, I wouldn’t want to go into further detail on that topic given the mission is actively discussing it.
So, on your specific questions, Raphael, I mean, I’d just like to make maybe two points having said that context about the shared objectives and the active dialogue. The two points I’d like to make in response to your question are one, I can absolutely assure everyone that there was no violation of IMF rules. So, just to be clear on that point.
And the second point I’d like to make is that, you know, on the question of debt, the capacity of the IMF to restructure its debt to postpone repayments, repurchases is constrained by our legal and policy frameworks. So, that’s not news. I think everyone knows that position.
We’ve said it before and not just in the context of Argentina, it’s a general application. So, that’s where we stand, you know, active engagement, active discussions. IMF has staff team on the ground and looking to engage constructively. Does that help?
QUESTIONER: Yeah, I mean, so you don’t think that, you know, everything that we’re hearing could complicate negotiations? That’s your position?
- RICE: You know, we are absolutely committed to help and support the Argentine government and the Argentine people as much as possible. We think we see the discussions thus far as having been constructive. That’s the adjective I would use right now. Good morning.
QUESTIONER: Good morning, Gerry. So, my question is about Ukraine. As we see, the land reform in Ukraine has been delayed by estimates for several months. Do you consider that the land reform in Ukraine to get a new EFF program or the IMF is flexible on this issue. And what are in other key conditions for the new program for now?
- RICE: So I’d actually use some of the same phraseology for Ukraine that I just used in the sense that very active dialogue is ongoing right now.
This is in the context of the IMF program agreed with Ukraine last December for $5.5 billion. And what we have said and continues to be the case is that this agreement is subject to approval by our Board and implementation of a set of prior actions which, you know, speak to your question a little bit.
The main focus of this program, maybe three or four points. Strengthening the rule of law and tackling corruption, enhancing competition, opening up markets, reducing the role of the state and oligarchs. Continuing with prudent fiscal policies to ensure medium term sustainability and ensuring central bank independence and financial stability. So those are the main areas that are under discussion.
The discussions are active, they are progressing. The Managing Director met with President Zelensky as you probably know, a few weeks ago in Davos and at that time, she welcomed progress in Ukraine’s reform agenda and they both agreed on the importance of advancing some of those issues that I’ve just described.
So that’s where we are at the moment. The discussions are active, they’re constructive and we hope to keep pushing forward the progress.
QUESTIONER: Do you have any estimated time for this decision of the Board?
- RICE: I don’t have a date for you today. Jeff. Morning. I’m going to take just at the back and then I’ll come to China Daily. Jeff.
QUESTIONER: Thanks, Gerry. Just a quick question in terms of the statement yesterday from the Managing Director.
- RICE: Sorry, Jeff, could you speak up just a bit?
QUESTIONER: I’m sorry. Just a quick question on the statement yesterday from the Managing Director. She said that she expects to have numbers to release at the G-20 meeting in Riyadh and there will be more data, looks like it will be mainly concerned with manufacturing.
Can you talk about what does that mean economic projections or what kind of things are being monitored and maybe do you have a day or some more timing information on when that might be coming out? Thank you.
- RICE: Yeah. You know, you’re right, the Managing Director spoke about the coronavirus yesterday and, you know, we are all looking at the news today. Obviously, this is a fast moving situation. And again, as she said yesterday, the first concern is the human concern and concern for people affected and sympathies to them of course.
Clearly, and I think this is something that Kristalina Georgieva was stressing yesterday, clearly uncertainty is still the prevalent theme. There is a great deal of uncertainty. And she said yesterday that, you know, given that uncertainty, it’s too early to speak in terms of firm predictions or numbers.
She characterized it and I would also stress today that it’s probably more useful to think in terms of scenarios right now, rather than specific projections. And one possible scenario, the one that we would hope for is that we would see a sudden but brief interruption of economic activity, as we are seeing now, followed by a period of sudden catch up to growth as well driven by pent up demand.
This is what the economists call the V shaped recovery, you know, a sharp decline and a sharp rebound. That’s the scenario that we would hope for and that’s what the Managing Director talked about yesterday.
However, she also said and emphasized that there are other scenarios, clearly. And again, we are, you know, looking at the news today, under which the virus could have a larger impact depending on what we don’t know at this stage, the timing and the shape of the virus, how quickly it spreads, how far it spreads, how quickly it can be contained, and then the shape of the recovery that would follow that.
You know, under any scenario and we have said this before, the impact of course will be felt most immediately, the economic impact will be felt most immediately in China. And given China’s growing footprint in the global economy, it will also affect other countries, especially neighbouring countries in Asia.
I want to add, because we have said this too, that we strongly support the efforts China has made to contain the spread of the virus and mitigate its impact. Including, you know, obviously there has been the health measures, but there has also been economic measures and the recent fiscal monetary and financial actions over the medium to long term.
We remain confident that China’s economy is resilient and it’s a large economy, China has the resources and the resolve to meet this challenge. Again, we are supportive, we think it’s helpful that the Chinese authorities are working closely with the WHO, World Health Organization and others, including sharing information and the measures taken. So, we stand ready to help in any way we can.
But that’s kind of what the Managing Director was saying yesterday. She added and, you know, this was yesterday and again it’s fast moving. There’s a bit more news today. I think everybody understands. She had said yesterday that we would hope to have some firmer data and information by the time of the G-20 meeting in Riyadh which I mentioned, you know, earlier on. So that’s not coming this weekend, but the weekend after next.
We are running as fast as we can in terms of gathering the data and the information and we would hope to have something a bit more specific to say at the time of the G-20 meeting in Riyadh.
But again, I think everyone appreciates this. There is a lot of uncertainty. It’s fast moving and, you know, we just need to be very vigilant and try and monitor this as best as we can. Good morning.
QUESTIONER: My question is also about coronavirus. Because we know the stock market in the U.S. and the Europe seems quite react mostly to the outbreak but there is more concern about the impact on the supply chain.
So, do you think the outbreak will accelerate a supply change shift out of China and will IMF assess the impact of the supply chain in your overall assessment about the coronavirus economic impact? Thank you.
- RICE: Thank you for your question. Again, I just don’t think we have enough information at this point to say anything definitive on economic impact or on impact on supply chains. The region affected as we all know, is a very important hub for supply chain networks.
And as I said, China is a very important player in the global economy, so were the more negative scenarios to play out, then it’s possible that there could be these effects on supply chains and otherwise. But again, we just don’t know yet and there are a number of scenarios that could play out and we need to watch this on a daily basis and gather as much information and data as we can.
And once we have, you know, a nucleus of information we will try to come forward with something a bit more specific on the economics. Good morning.
QUESTIONER: I just wanted to ask a follow up question on the coronavirus discussion. It sounds to me like the new information that we have all heard this morning about the sort of change in the criteria and also the larger number of people affected, quite large, has given you pause both in terms of that sort of hope for an easier scenario or the best-case scenario.
Can you be more specific about what the thinking is in terms of the numbers? Whether, and then I wondered if you have done comparative looks at previous, you know, epidemics and what, you know, the previous information, you know, what the experience has been and how you compare this with the information that we have so far. I understand it’s still emerging.
I just want to be very precise about your statement, because a couple times you’ve said we have learned today. So, I just, I want to ask you to be very specific about how that affects the assessment that the Managing Director sort of talked about yesterday.
- RICE: Yeah, I don’t think it’s much different actually from what she said yesterday and what we’ve, what we have been saying. So, you know, there is breaking news today about increased levels of infection and unfortunately, mortality rates, that’s what I was referring to. I don’t have any particular information on that, you know, we are looking at the news along with everyone else.
Again, I don’t think it changes the fundamental position that the Managing Director articulated yesterday and what we have been saying which is that the uncertainty is just too large at the moment. The uncertainty is too big to make any specific forecasts or projections. So, the best we can do is try to look at various possible scenarios and how they play out and that’s what the Managing Director talked about yesterday.
She talked about the V shape scenario which we, again, we would all hope for where that’s not a prediction, it’s not a forecast. What we would hope for because that’s the best, that would be the best possible outcome in terms of the economies.
That was the V shape we saw in the case of the SARS outbreak which is now going back, you know, 2003, 2004, it’s going back quite a long way. And on that, I would say it’s even difficult to compare what’s happening now with the SARS outbreak. It’s very different. China is a very different place today. It’s a much larger proportion of the global economy, than it was —
QUESTIONER: Is it 16 percent?
- RICE: It’s in PPP measures, we think it’s about 19 percent, right now, and, you know, the world is different. At the time of the SARS outbreak, the world economy was in a more robust shape. You’ve heard us speak of where we think the global economy is today, with its sluggish recovery. We’ve put out some information on that, quite recently. So, all of that, to say that, you know, it wouldn’t be prudent to say, well, this is what happened with SARS or with previous outbreaks. Therefore, that’s what will happen this time around because they are quite different. So, all of that, to say I don’t have specifics for you, today. We are looking at it on a, as I said, a daily basis, and we hope that, by the time of the G20 meeting, we’ll be in a position to say a bit more.
Okay. Thank you for the questions in the room. I’m going to take a few online. I’m going to start with India, from PTI News Agency, which is asking about our view on the Indian budget, I can say that we think that, given the weaker economic environment in India, which, again, we’ve talked about recently – the environment is weaker than we had forecast earlier – that a more accommodative fiscal stance, this year is appropriate, so that more accommodative fiscal stance in the budget, we think, is appropriate. That said, while the budget touches on ongoing sectoral efforts, there remains an urgent need for more ambitious structural and financial sector reform measures and a medium-term fiscal consolidation strategy, anchored in tangible revenue and expenditure measures, especially given rising debt levels. So, again, we think the more accumulative fiscal stance in the budget is appropriate, but, over the medium term, to be looking at a fiscal consolidation strategy. That’s on India.
There’s a question from Matthew Lee, on Somalia, saying it’s reported that Bangladesh has agreed to partially pay to the IMF, as debt relief for Somalia, under the HIPC Initiative. Can you explain that? And I’ll try to. So, we’ve talked about Somalia, here, before. It’s an important case. The IMF is trying to help by working with other partners, trying to help Somalia be in a position to receive substantial debt relief. Yesterday, our Board met, and discussed the preliminary assessment of Somalia’s eligibility for debt relief, under the Highly Indebted Poor Country Initiative, the HIPC Initiative. The World Bank Board is discussing that, today, and there will be a joint press release from both institutions, we expect, later today, assuming those discussions conclude.
So, just to try and respond to Matthew’s question, this financing plan that we have will help mobilize the resources that Somalia needs, for the IMF to cover its share of debt relief. This financing plan relies on a broad global effort. Matthew talked about Bangladesh. It’s, actually a broader global effort, and it’s based on member contributions, of cash grants, and amounts that are, actually, derived from the IMF’s internal resources. These funds are set aside, over many years, just for purposes like this, to help very poor countries achieve debt relief. It’s something that’s been agreed by our membership.
So, this mechanism we are using involves distributing these funds from the IMF. We distribute the funds to our member countries, and then we ask them, on a voluntary basis, to return those funds, so that they can be used to help cover the share of debt relief for, in this case, Somalia. It’s a mechanism that’s been successful before. We’ve used it in the past, for example, with Liberia, and it’s a mechanism that, really, involves fair burden sharing, across the membership. So, it’s not that we’re asking one particular country. We’re not asking one particular country to cover this. It’s, really, the membership of the IMF, and it’s an agreement, among the membership, to carry that burden.
There’s a question on Egypt, also, from Matthew Lee. Now that fiscal and monetary forms have been done, we’re talking about structural reforms, said an Egyptian official. Can you give us the IMF’s thinking? So, the IMF had a program, a financial program, with Egypt, over the last several years. That program was effective in stabilizing the Egyptian economy. Growth has been restored, inflation has declined to single digits, the fiscal and current account deficits have come down, so, good momentum on the economic side, in Egypt, and, so, our thinking is Egypt needs a new wave of reforms to support further private sector development and job creation. I think that view is shared by the Egyptian authorities, themselves, and we stand ready to support that agenda, in any way that we can. As I said, we do not have a financing program with Egypt right now. That ended in November, and will be discussing with the authorities the type of engagement that they think would best suit Egypt, going forward, and we have an ongoing discussions with the Egyptian authorities on that, including an Article IV consultation, that’s coming up later this year.
There’s a question on Pakistan. That’s coming from Schweib Nizami, he’s the Senior Financial Correspondent with Dunya TV, in Pakistan. He’s asking about reforms in Pakistan, and the visit of the staff mission to Pakistan, which is ongoing, at the moment. So, the mission is there, right now. It’s the second review under the IMF financing program with Pakistan. It’s what we call a combined mission because, as well as reviewing the program, it’s also undertaking the Article IV, the broader Article IV economic health check consultation in Pakistan. The discussions are ongoing, with the authorities, and we’ll be able to update you on that mission’s outcome, when it concludes, and I think those are all the questions that I have, online, and, unless there’s any more questions in the room, I will take it.
QUESTIONER: On Somalia, are you expecting the decision point, is this the moment when the decision’s going to be made whether to move forward, or is this just a preliminary step toward another meeting?
- RICE: Very good question. No, it is not the decision point. So, you’ve made an important point. It’s not what we call the decision point. It’s the step before that, where we try to ensure that Somalia is eligible for the debt relief, and then we try to ensure, as I just explained, just now, we try to ensure that the financing is in place, to ensure that the debt relief can go forward, that the decision can be taken to move the debt relief forward. I would characterize the overall situation, though, as positive. It’s advancing well. So, we’re very hopeful this will happen.
QUESTIONER: Can you explain why that is not the case, and when will the decision be made?
- RICE: Yeah. No, I think, you know, we’re in close consultation with the Somalia authorities. I think they’re fully aware of what the sequencing is. So, they know the Board meeting, that took place at the Fund, yesterday, and the World Bank meeting, today. They know exactly what the process is, and how this works. We don’t have a date on the decision point because, as I said, we’re still in the process of lining up the necessary financing. The Somali authorities are aware of the sequencing, the timing, the phasing, and they know that they have the full support of the IMF, here.
QUESTIONER: Thank you.
- RICE: Thanks very much, everyone. I wish you all the best, over the next two weeks, and I’ll see you here, in two weeks’ time, after the G20 meeting. Thanks a lot.
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