This post will have a video from the IMF as well as an update on the Zimbabwe currency and the bonds that were issued. If you own Zimbabwe Dollars, please read this post below as it concerns your currency:
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June 2, 2016
MR. MURRAY: Hi, good day. I’m William Murray from the Communications Department here at the International Monetary Fund in Washington. This is one of our regular press briefings. It will be embargoed until 10:30 a.m. Washington time, that’s 14:30 GMT. As usual I’m going to go through a few housekeeping items, some announcements, and then I’m going to take questions from the journalists here in the room. I would encourage you on line to submit your questions as soon as possible.
This is roughly chronological order.
I’m just going to start. Deputy Managing Director Mitsuhiro Furusawa will be in Tokyo on June 7 — most of these events are next week — Mr. Furusawa will be in Tokyo on June 7 to give the keynote address at the Tokyo Fiscal Forum. That’s an event hosted each year by the IMF’s Asia Pacific Office and the Fiscal Affairs Department. After the Tokyo Fiscal Forum Mr. Furusawa will travel to Mongolia to participate in the ASEM Ministers Meeting. It’s the Asia Europe meeting of finance ministers. That’s on June 9 and 10 in Mongolia. On June 8 Deputy Managing Director Min Zhu will give a presentation at Johns Hopkins School of Advanced International Studies here in Washington on Learning to Live with Cheaper Oil: Policy Adjustment in Middle Eastern and Central Asian Oil Exporting Countries. Mr. Min Zhu will then speak at the inaugural session of the 22nd Conference of Montreal on Shaping a New Era of Prosperity. That’s on Monday, June 13 in Montreal, Canada. First Deputy Managing Director David Lipton is traveling later this week to Kiev for a meeting of the Dutch constituency on Saturday. The Dutch Executive Director hosts a constituency meeting [of the Executive Board]; this weekend in Kiev. They discuss recent economic developments within the constituency. That will not be — that’s a closed event, but I just wanted to flag that he will be in Kiev in case you hear about that.
The following week David Lipton will travel to China. He’ll be in Shenzhen to speak on June 11 to the Chinese Economist Society on Rebalancing China: International Lessons in Corporate Debt. Mr. Lipton will then travel to Beijing to participate in the latest Article IV Consultations with the Chinese government. There will be a concluding press conference by Mr. Lipton and the mission team on June 14 in Beijing. Following Beijing the First Deputy Managing Director goes to Tokyo for the Annual Article IV Consultation with the Japanese government. I would expect there will be a concluding press event of some sort of there. Media relations will get back to you with details. That is on — June 16 through 20 is the Consultation.
Finally — and this is not management travel — on June 9 we’ll be publishing a paper on Policies and Reform Priorities in the Area of Government Compensation and Employment. This paper includes case studies from a whole host of countries on their experiences with managing the government wage bill and wage bill pressures. The paper will be made available to you under embargo and my understanding is the authors will do a conference call with the press prior to publication.
So that’s basically some of the housekeeping items. Coming up we’ll have the Semi-Annual Work Program of the Executive Board. I think we’ll be briefing on that at the next bi-weekly Press Briefing, so two weeks from now we’ll brief on the Executive Board Work Program.
With that let me turn the floor over to questions.
QUESTIONER: On the housekeeping, who is in the Dutch constituency?
MR. MURRAY: It’s hosted by the Executive Director to the Fund, so Ukraine is a member of the Dutch constituency and all the countries in the Dutch constituency.
QUESTIONER: And do you expect all the countries to be represented at the meeting?
MR. MURRAY: Correct. It’s a constituency meeting. It just happens to be in Kiev this year.
MR. MURRAY: Correct. Okay, thanks.
QUESTIONER: Can you please give us a timetable of your next moves on Greece? I mean how you plan to deal with the Greek issue until the end of the year when as Poul Thomsen said, he might go to the Board?
MR. MURRAY: Okay, thanks. Let me preface my remarks on Greece to say I really don’t have anything fresh since you were briefed last week following the Eurogroup meeting. I mean it’s really — things are where they stand, so I don’t have a specific timeline to offer at the moment beyond what we indicated last week was a possible timeline. Just want to make these points though, we remain fully and actively engaged with our European partners and with Greece, and I just want to remind you of basically the following points, and this is what we mentioned last week following the Eurogroup meeting in Brussels. Debt relief is firmly on the agenda now. Debt relief, we have agreed would be contingent on Greece meeting targets during its three economic programs with Europe, and that it should be fully delivered by the end of the program period. We are not yet in a position where we can say the IMF is ready to go ahead with a Fund financed program, but we are hopeful that we will get to that point by the end of the year. Bottom line overall, significant progress has been made.
QUESTIONER: As an IMF official mentioned one week ago the debt measures will be finally approved with the last review. I mean that’s in the best case scenario but it means in two years from now. Are you satisfied with that?
MR. MURRAY: You know, as I mentioned, debt relief is firmly on the agenda and that we agreed that it would be contingent on Greece meeting targets during its three-year program with Europe and that it would be delivered by the end of the program. So that’s where we stand.
QUESTIONER: (inaudible). On the details of the debt relief, the German Finance Minister said basically that the debt relief proposal of the IMF could fuel populist movements in the sense that it could undermine the trust that the population in Europe have placed in their governments because basically it would mean that maybe the Greek debt will never be repaid. How do you react to that and what does it say about the gap that still exists between the IMF and Germany on the debt relief proposals?
MR. MURRAY: Yeah, I don’t have anything specific on that. I’m not fully versed in what that comment may imply or might have been. You know, our bottom line is we published a DSA, we’re going to update that, you know that. We will update that at some point this year. But our debt sustainability analysis has been pretty clear on what we think about the sustainability of Greece’s debt and that it does need significant debt relief in some fashion. What form that takes, how it’s structured, all those things remain to be determined. That’s really between the Greek government and its European partners. That’s things that are being worked at as we speak. Beyond that I can’t really say. We’re fully engaged, we’re keeping an eye on the situation, we’re actively involved, but beyond that I can’t really comment on implications of things that aren’t settled yet.
QUESTIONER: Just to follow up — sorry — but are you at least concerned about the fact that Germany is still really far from your position on the debt relief?
MR. MURRAY: I don’t have a sense of that. Like I said, debt relief is firmly on the agenda now and that means on the agenda of everyone.
QUESTIONER: Are you confident that the debt measures that the debt measures of the Europeans will eventually come up with — will actually be consistent with what you’ve believe is needed for debt sustainability? That’s a most important issue.
MR. MURRAY: I can’t really comment on this. You’re asking me to speculate about an end product, but the end product should be Greece is in a sustainable position. So we’re confident that’s where we’ll end up.
QUESTIONER: (Inaudible) do have to ask that.
MR. MURRAY: Sure.
QUESTIONER: Do you want to address this report that Mr. Thomsen was against the agreement and Mrs. Lagarde in favor of the agreement? Are they on the same boat on the Greek program? Because according to some colleagues on Brussels, Mr. Thomsen was furious after the Eurogroup meeting.
MR. MURRAY: I’m not aware of anything on that. I can’t help you out. [On June 27 the IMF had issued this press line in response to a similar Reuters query: “The suggestion of ‘overruling’ is nonsense. The parameters of our negotiation positions are, as always, discussed and agreed in advance. Of course, Poul [Thomsen] consulted with the Managing Director before reaching final agreement with the Eurogroup–as is typical in such cases. The Managing Director fully backed Poul’s position.”]
Let’s not do too much on Greece because as I said we don’t really have anything fresh today to offer you beyond what we said last week following the Eurogroup. I’ll give one more — please — two more Greek questions? Okay. Let’s go with the lady here and then we’ll go to you, sir. Thank you.
QUESTIONER: I do have two questions actually. So one is the exceptional access that Greece is under at the moment is projected to fall below that line with the period up to the end of the year. So would you expect that the Greek program in order for you to sign off to that might not need — if you don’t need the exception access debt restructuring at all? Could you envision such a scenario?
That’s one question.
MR. MURRAY: Okay. You want to hit me with the other question or do you want me to take that one first? Okay, I’ll take this one first.
You’re correct that the current trajectory will get it below the threshold. You mentioned beyond that, I don’t really have anything. I can’t give you any steer on what that will mean by year end. What we said last week, just to remind what I just said, is that if everything falls into place we could be in a position to have a Fund program brought to the Board by the end of the year, but beyond that — that’s the only end of year feature I can touch on right now.
Second question, sure.
QUESTIONER: As far as I understand the IMF at the Eurogroup signed off basically to the completion of the review based on what the Greek authorities had brought to the table and promised to do, but not on the debt relief. So basically that the Europeans were proposing. So is it true, is it correct kind of get from that that no further measures are needed from the Greek side and nothing more is needed by the IMF that is not currently at the Eurogroup agreed in order for this review to be completed?
MR. MURRAY: I really — that’s — no, I think right now what we’re working on is the European partners and Greece is working on its program, finalizing the details of its program. So until that’s done you really should talk to the Europeans, I mean first of all about the nitty gritty of the program that they’re working on. I don’t have blow-by-blow on that. It’s really up the Europeans to elaborate on where things stand.
Once we get through that process that gives you part of the calculus and will help determine our relationship, the Fund’s specific relationship with the Greeks going forward. But we have to get through this process right now, which is really pretty much European focused. Beyond that I can’t elaborate.
The gentleman in the back.
QUESTIONER: We learned a couple of months ago that Greece is the big receiver of technical support of the IMF and especially regarding tax collecting. So what did we learn from your report a couple of weeks ago, that there hasn’t been any progress in tax collecting in Greece. What went wrong? That’s the first question.
The second question is I’m looking at the interview Obstfeld gave and there is one sentence that crossed my mind, like curiosity, and it says, and I quote, “Of course there are limits” — it’s regarding austerity — “Of course there are limits to the pain economies can or should sustain. So in special difficult cases we recommend debt re-profiling. And that is an approach we are currently recommending Greece.” Does that mean that poor people in Greece are worse off than a lot of other poor people in countries with higher debt problems?
MR. MURRAY: Okay. Your first — this is the interview in which newspaper? It’s a German newspaper, correct? Is that –
QUESTIONER: No, the one where he gave to –
MR. MURRAY: I just want it for the record just so everybody knows which interview we’re talking about.
QUESTIONER: What you are spreading today.
MR. MURRAY: Oh, you’re talking about the IMF survey interview today?
QUESTIONER: Survey, yes.
MR. MURRAY: Okay. Sorry. Let me step back a second on that. Thank you very much. For viewers, we are releasing today a brief IMF survey. It’s going to be released publicly at 10:30 a.m. our time, 14:30 GMT.
So I really am not going to try to elaborate upon what our Chief Economist states in this interview. I mean, look, we can get back to you with more detail, but I’m not prepared to give you comparatives between Greece and other countries and the state of poor in the various European countries. I’m sorry I’m not prepared to offer you a comment on that.
Remind me of your first question.
QUESTIONER: Tax collection.
MR. MURRAY: Tax collection, yeah. I’m going to have to look at the TA reports, but tax collection technical assistance is something that we do worldwide, so it’s not just in Greece. That’s one of the things we specialize in, working with taxing authorities and revenue authorities in our member countries and how to improve their systems and their tax collection mechanisms. It’s not the policy, it’s the actual physical way they collect taxes, how they collect them and how they are made more efficient in terms of their tax collection. So our TA is not a reflection — you can’t connect our TA with the quality of tax revenues just yet in Greece. It’s a building block process, it’s underway. Beyond that I really don’t have anything to offer you on the quality of tax collection in Greece. There’s a lot of challenges. We’ve been clear on that since we engaged in a formal program relationship with the Greek authorities. We don’t have a program right now, but TA is something that we have with non-program countries as well and something — the fact that they’re seeking technical assistance from us is indicative of their hope to improve tax collection. So I think it’s positive that they’re engaged with us in that respect.
I think that’s all I can get into on Greece at the moment.
QUESTIONER: One question on Japan and one question on Zambia.
MR. MURRAY: Okay.
QUESTIONER: If you want to throw in a comment on Greece, feel free to do so. On Japan, the yen has recently strengthened again, is up about 10 percent this year if I’m not mistaken. There is a lot of discussion at the G7 as you know whether the movements have been orderly or disorderly, and therefore if Japan would be justified in intervening to weaken the yen or to prevent its further rise. What is the Fund’s position on this?
MR. MURRAY: In terms — repeat the last bit?
QUESTIONER: Well, first of all, does the Fund think that the movements have been orderly? And then secondly, would Japan be justified with intervening?
MR. MURRAY: Okay. As a matter of practice we don’t look at market movements, you know, comment on market movements, intraday, kind of stuff. We take a longer-term view. So I’m not going to say whether the recent exchange rate movements are appropriate or not.
We do have the Article IV Consultation that will get underway as I mentioned at the top of the briefing. The exchange rates obviously will figure in there. Our staff report will come out with a finding regarding the valuation of the yen. And also in mid-summer we’ll be producing our External Sector Report, which is an annual report that looks at a host of issues on the external aspects of economies. Exchange rates figure prominently in that report, and you’ll see what we have to say about the yen’s valuation there.
By and large we have taken the view in the context of speculation about Plaza type accords and things of that nature in the broad brush of exchange — the spectrum of exchange rate discussions in recent months. We don’t see conditions for some coordinated exchange rate policy program among the big countries that by and large exchange rates of the major economies are moving in a constellation that’s appropriate to current micro-economic developments. Specifically, on the yen, I don’t have any guidance to say that it’s under or overvalued, and I ignore many comments on whether or not they should be intervening; but I don’t have any guidance to suggest that volatility is viewed as significant at the moment.
QUESTIONER: This is a follow-up on Zambia.
MR. MURRAY: Sure.
QUESTIONER: I believe the Fund has been in discussions with the authorities there on potential program with that country. Can you provide us with an update? I mean, I think the Finance Ministry has said that a program is inevitable. Does the Fund share that view? I mean, can you just bring us up-to-speed on that.
MR. MURRAY: Sure.
QUESTIONER: Thank you.
MR. MURRAY: Okay. I’m happy to. I got some guidance from the African Department. Just want to backtrack a little bit. During the Spring Meetings in April here in Washington, there were discussions with the Zambian authorities, preliminary discussions, with the government about an IMF program in Zambia. So, there’s been ongoing discussions with the Zambian authorities. For those who haven’t filled this closely, there are national elections in Zambia in August, and the discussions that we have had with the authorities are to lay the groundwork for rapid action toward a Fund program following the August elections. So, that’s really where we’re at, at the moment. How quickly then post-election negotiations go will depend on various factors and most importantly the strength of the policies of the new government that comes out of the elections is really to implement. From our standpoint, in particular, the government will need, the post-election government, will need to present and implement measures that can credibly be expected to reduce the Zambian fiscal deficit. And our mutual goal is to move as quickly as possible after the elections with the hope of presenting a program to the IMF Executive Board before the end of 2016. That’s where things stand right now in Zambia.
SPEAKER: Is this Zambia-related? Let me give the gentleman behind you, and then I’ll come back to you; and then I’m going to take a few questions. I do have some questions online I’d like to get to.
SPEAKER: It’s another zed or zee.
SPEAKER: Another zed. Okay.
QUESTIONER: Zimbabwe has been talking about printing U.S. Dollar bonds, commentators in the field are suggesting this might be a move back towards a currency and the temptation to print lots of money and the resultant eye-popping inflation that we previously saw with the Zimbabwe authorities and the system there. Is this a concern of the IMF at the moment? Are you talking to the Zimbabwe authorities about this issue?
MR. MURRAY: I know we are in discussions all the time with Zimbabwe. This particular topic I don’t have any guidance for you on. We will follow up and, actually, if we get something fresh today, we will let everybody here know or put it in the transcript. We’ll follow-up with you.
QUESTIONER: Okay. Thank you.
MR. MURRAY: So, it’s a good question. I don’t know the answer. Questioner: I was just reminded about a bond issue in Russia. Does the IMF do any evaluations of such market moves by countries? Can you share anything about how important, and successful, and not successful the issue was?
MR. MURRAY: I don’t have any bond issues specific guidance to offer. I’m sure, our resident representative in Moscow looks at market developments pretty carefully and reports back to headquarters, but I don’t have anything on that.
Questioner: Is this a question that can be taken –
MR. MURRAY: We’ll follow-up. It’s not something that jumps out at me, but we’ll follow up and get back to you.
Questioner: And I actually want to ask about Mr. Lipton’s statement –
MR. MURRAY: Sure.
Questioner: Do I understand correctly that it will not be a meeting devoted specifically to Ukraine, to the Ukrainian economy?
MR. MURRAY: Yeah, that’s my understanding. I mean, they’re in Ukraine, Ukraine has got significant challenges at the moment, and the Dutch constituency is involved in advocating at the Executive Board level for Ukraine. So, I can’t imagine it won’t come up; but this is not just, this is not happening just because of Ukraine.
Questioner: And on such meetings, are held annually, or how old?
MR. MURRAY: You know, I’ll have to check — some constituencies are more active than others, some just meet during the Spring and Annual Meetings, others convene special sessions around. I know the Dutch have been very active over the years in convening meetings outside of Washington within their constituency. So, it’s not unusual for them.
Questioner: And the venues?
MR. MURRAY: The venues are not always fixed, they move around.
Questioner: The venues rotate?
MR. MURRAY: They rotate.
Questioner: Okay, and then specifically, on Ukraine?
MR. MURRAY: Sure.
Questioner: There was recently some comptrollers here in Kiev, around a call from one of the leading Ukrainian politician, Ms. Tymoshenko, for a public release of a new letter of intent. She claimed that she had the document. She claimed that the document was “anti-social”; that there were draconian restrictions in the documents. So, I’m asking you to comment on those allegations.
MR. MURRAY: Okay. Thanks. I’m not going to comment on those allegations in the sense I haven’t seen the memorandum of understanding. I can confirm that the memorandum of understanding is being drafted currently. It is not finalized. When it is finalized, it’s been very standard practice in the context the Ukraine to publish the memorandum of understanding. I don’t have a date yet, but, you know, don’t forget, we’re looking at a July, ostensibly, a July board meeting on Ukraine, the latest review of the Ukrainian program. So, something will happen soon; but, it’s certainly true that a memorandum is being drafted, but whatever’s out there can’t possibly be the final draft.
Okay, I’m going to pop over to the online briefing center here. I’ve got another Japan question. The question is how do you evaluate the decision of Japan to postpone their consumption tax hike? I’m going to repeat a statement that we issued last night. Basically, not verbatim, but this is essentially what I’m prepared to give you. The consumption tax hike delay reduces the risk of aggravating already weak growth in Japan. At the same time there is still a need for a comprehensive policy upgrade consisting of a well-coordinated package of structure reforms, income policies, credible medium-term fiscal consolidation, and additional near-term demand support. These issues, the consumption tax and what I just mentioned, will be discussed in much more detail in the context of the 2016 Article IV Consultation that will get underway next week, June 6th, in Tokyo; and we expect to conclude on June 20th at the staff level. Obviously, the formal conclusion of the Article IV Consultation takes the form of Executive Board discussion. So, that’s Japan.
I have gotten some guidance on Zimbabwe, if you want to, here we go, it just came in from my team here. Thank you very much.
The IMF staff understands that the Zimbabwe and authorities have introduced a number of measures to deal with ongoing cash shortages. The shortages are mainly the result of weak external inflows and a decline in prices of commodity exports. More recently the situation’s been aggravated by the drought afflicting Zimbabwe. The governments had to increase its food imports to mitigate the impact of crop failures on its people and the strengthening of the multi-currency system through the conversion of export earnings to euro and rand. We are current assessing the implications of the measures on the economy, including the more recently announced issuance of bond notes; and we’ll engage in further discussions with the authorities with regard to their strategies. So, we’re going to have more discussions with the Zimbabweans on this strategy.
Second, I’m going to cut it there. That’s what I can offer you on Zimbabwe. We can follow up a little bit. If you any further questions come back, and we can elaborate a little more on Zimbabwe.
I’ve got a question here on Sri Lanka. What is the status of the EFF for Sri Lanka? You will notice from the public calendar, the Executive Board calendar, that tomorrow Sri Lanka’s request for a three-year extended fund facility will be taken up by the Executive Board tomorrow. So, they’ll be, as is standard in my expectation, that following the Executive Board decision on this request, we’ll issue a press release that will elaborate on the three-year program with Sri Lanka. I’d recommend you dial-in on that tomorrow and I’m sure you’ll receive it under embargo from either relation.
I have another question on Brazil. It’s on the Brazil article from when the IMF published the Brazil Article IV report. Thanks for the question on that. I don’t really have a firm date for the Brazil Article IV. We still have to conduct the consultations. There’s been, obviously, significant events unfolding in Brazil in recent weeks. Once we have a firm date for conducting and concluding the Article IV Consultation, and we’ll let everybody know. Thanks for asking.
Any other? With that I think we’re covered. I’m going to try to wrap this up. You guys got a file on Maury’s interview. Yeah, go ahead.
QUESTIONER: Hi, Bill. Just wondering if you can comment on the Fed. There’s a lot of anticipation over what they’ll decide at their next meeting. Do you know there’s an increasing probability of, I guess, lift-off 2, if you will. You know, the Fund has weighed in on this before, so what’s the Fund’s position on a second potential interest rate hike?
MR. MURRAY: Okay. Thank you for this. We are, our general view is that, we continue to believe that the federal open market committee’s decisions should be data-dependent, and future increases in the federal funds rates should be based on a firm indication that inflation is set to rise steadily toward the Federal Reserve’s two percent medium term objective. Regardless of when the next rate hike would be, data continues to suggest that the pace of subsequent rate increases should be gradual. Continued effective monetary policy communications also remains essential.
Okay. I think that’ll do it. We have some follow-up for media relations. We’ll get back to you on some of these, and if you have any follow up, let us know. Again, we are in embargo until 10:30 a.m., Washington time. That’s 14:30 GMT. We’ll be back here in two weeks.
Thank you very much, and enjoy the day.