OREANDA-NEWS. January 18, 2016.

MR. RICE: Well, good morning everyone and welcome to this briefing on behalf of the International Monetary Fund. I’m Gerry Rice of the Communications Department. Nice to see everyone here this morning. I want to wish you a happy new year, those colleagues in the room and also online. We had a very interesting 2015 and we look forward to an equally interesting 2016.

Let me begin with some announcements about travels and events and then I’ll turn to your questions in the room and, if there are any, online also. As usual we are embargoed until 10:30 that’s Washington time, 10:30 a.m.

So what’s upcoming? A few things. Next week we will release our World Economic Outlook Update. So that will be next Tuesday, January 19 and this will be lead of course by our Economic Counselor and Director of Research Maury Obstfeld, and there will be a press conference. We are launching from London - the Bank of England actually, and that’s going to be 10:00 a.m. GMT. Unfortunately it’s early in the morning here for those of you in Washington. It’s 5:00 a.m. but you’ll have the material under embargo in the usual way and anything else you need on the wheel and if of great interest to you, media relations would be able to help you with that. That’s on the 19th.

On the 20th the Managing Director Christine Lagarde will be in Davos for the World Economic Forum, and on that day in Davos, she will speak on the economic impact of migration at a panel discussion that morning. Then later that same day, she will speak on another panel on the transformation of finance. Just in terms of her very public appearances on January 23rd she will speak on the global economic outlook panel which is a bit of a tradition in Davos. That’s on Saturday. That’s the Wednesday and the Saturday of the big public events of the Managing Director.

I mentioned them in particular because relatedly we’ll be publishing two research papers next week. One will be on that issue of migration and one will be on the interesting and emerging issue of virtual currencies which I know some of you have an interest in. They’ll both be published also on January 20, and we will get those to you in advance under embargo in the usual way. So that’s for Christine Lagarde.

Our Deputy Managing Director Min Zhu will also be in Davos as usual, and he’s speaking on several panels also. Min will then travel to Botswana and Ghana speaking at a conference in Botswana and then to Ghana for a conference on enhanced data for better macro policies. As you know the Managing Director just came from Africa as of last weekend. She was visiting Nigeria and Cameroon and I’m sure you saw some of the news items related to that.

So with that let me turn to questions in the room and let’s start the new year with Greece.

QUESTIONER: Thank you. When will the Fund mission goes back to Athens? What the objective of this mission will be? Will it be the first review or discussion on the proposed pension reform? Also, how do you comment on the reports that say that the IMF rejects this proposal?

MR. RICE: There’s a bundle of questions there. Let me try and answer them. We don’t have exact timing of the mission. It’s still being discussed with the authorities. The team would expect to discuss the recent economic and policy developments and the authority’s plans to ensure that the Greek economy can return to growth and sustainable public finances over the medium and long run. This includes the authority’s plans to reach their ambitious medium term fiscal targets not least the pension reforms that you mentioned, as well as structural reforms to support the fiscal effort and long term growth.

We have said in 2015 that in addition to a comprehensive policy package, Greece also requires debt relief from the European partners to ensure that sustainability, so that message continues into 2016. Both policies and debt relief are critical components for a program that the fund could support and the conclusion of discussions with us will depend on progress on both of these fronts.

QUESTIONER: I asked you about the proposal for the pension reform I guess that your received a couple of weeks ago. Do you agree with that?

MR. RICE: Yes, we have received the authorities draft proposals for pension reform. The team is in the process of assessing those proposals carefully and has not yet completed its evaluation. We would expect to discuss this in more detail with the authorities and with the partners during the upcoming first review of the ESM program. Why the emphasis on pension reforms? I think we’ve discussed this here before. Greece’s pension system is unaffordable. As it stands the contributions are not sufficient to finance the generous level of benefits requiring transfers of the state of close to 10 percent of GDP each year. Addressing the imbalance in the system through pension reform is essential to the sustainability of public finances that I mentioned, and the credibility of the authority’s ambitious fiscal targets.

MR. RICE: We’ll stay on Greece for a minute.

QUESTIONER: The Prime Minister and his ministers ask you many times to leave Greece and the Greek problem. Why do you insist to stay?

MR. RICE: Maybe just as a first order of business. Just to remind you, Greece has requested a program from the IMF. And beyond that the context is as you know that Greece faces a number of challenges. Some of them I just mentioned, the unsustainable public finances, the vulnerable banking sector, the structural impediments to growth and we have said as I said many times now -- it was a big message of 2015 continuing into 2016 -- that the program needs to walk on those two legs that we’ve talked about, the policy package, the debt relief. And it’s the IMF that has been I think most vocal in pushing for that package of policy response and debt relief. And you know both of those are essential.

QUESTIONER: There are a lot of rumors about Mr. Thompson’s whereabouts. Can you tell us where is he these days? Berlin? Can you tell us if he met with the finance minister of Germany and the finance minister of France?

MR. RICE: I don’t have the details of who Paul met with, but it’s not unusual for the Director of the European department to meet with finance ministers in various countries, that’s not at all unusual. Where is Paul? Paul is at the Euro group meeting today. No mystery about that. And again he’ll probably almost certainly meet a number of finance ministers there. Are we on Greece?

QUESTIONER: Yes.

MR. RICE: Okay, then I’ll come to you. Good morning.
QUESTIONER: Good morning. On the debt relief issue does the IMF go hand in hand with the Europeans or are you guys standing on opposite sides regarding a new program?

MR. RICE: We work closely with the Greek authorities, we work closely with our European partners and as I mentioned the issue of debt relief, debt sustainability and the linkage with the policy package is something that will be discussed with the authorities and with the European partners in the context of the upcoming review.

QUESTIONER: Which is to be completed when?

MR. RICE: Well as I mentioned earlier I don’t have the date for you yet on that.

QUESTIONER: But it will not be before the program expires in March right?

MR. RICE: I don’t have a date for the discussions. You know, we’re already in the process of thinking about what the new program would look like. It’s not so much about the old program. So that’s not really a major consideration.

QUESTIONER: Hi, thank you, so if I understood correctly you still don’t know? You cannot tell us when the IMF will decide whether or not it will join the bailout program, right?

MR. RICE: Don’t have a date for the discussions of the review, and that’s where that discussion would take place.

QUESTIONER: Is it really considerable for the IMF not to join the program given the consequences that could result from this decision? You know that the Germans are insisting on the IMF to be involved in the program, otherwise they could maybe back up. Is it really considerable for the IMF not to join the bailout?

MR. RICE: I think what you are touching on, there’s been a lot of speculation about the IMF’s role in the program or nonrole. Maybe there’s been reporting that the IMF wants to quit the program. I think that’s what you’re touching on. I just want to say quite clearly there’s no truth to that. There’s no truth to this. We’ve remained engaged in policy discussions with the Greek authorities on a continuous basis since the summer and then looking forward. We stand ready to support Greece not only with advice, not only with technical assistance but also with financing. Once -- and again going back to what I said -- once a comprehensive set of policies and credible debt relief are in place. The two legs. But maybe just one other comment. Ultimately this is not all about the IMF. This is about Greece, about putting in place the necessary policies and delivering on the needed debt relief to put Greece on the path of sustainable public finances and growth. That’s what this is all about and that’s what the IMF has been trying to do. That’s our objective.

So I’m going to take maybe two more on Greece and then I’m going to move off Greece. A stranger from foreign shores has returned to our midst.

QUESTIONER: (inaudible) from Athens come back to you, but I missed you as you missed me I hope.

MR. RICE: No comment. (Laughter)

QUESTIONER: Yes, no comment, correct. Let me tell you something. “The start of the IMF in the process of negotiations with Greece cannot be called constructive. The IMF must decide if it wants to compromise. If it doesn’t it should say so publicly.” This is one of the recent statements of the Greek Prime Minister Mr. Tsipras in Financial Times if I’m right three weeks ago. Was such a statement pleasant for you?

MR. RICE: I just answered that question. I don’t really have that much more to say.

QUESTIONER: Let me ask you more openly something like are you satisfied by the way of the Greek government cooperating with the IMF in the negotiations?

MR. RICE: We’re fully engaged with the authorities as I mentioned in the discussions.

QUESTIONER: Are you satisfied also?

MR. RICE: The discussion are ongoing - they’re productive, they are moving forward and we are fully engaged and our objective is to support Greece as best we can.

QUESTIONER: One more last question please, what is your position about the opposition of parties in Greece? They say that are not going to support structural reform measures. What is the message that you would like to send to the political system in Greece right now given the fact that they voted for this bailout program a few months ago?

MR. RICE: I don’t have any message for the political parties in Greece. I just reiterate what I’ve said that we think there needs to be a program that’s standing on two legs--strong policy package and strong debt relief, and that’s very important for the future of Greece, and that’s what we are working with the authorities -- we are working toward that. You are going to have the last word on Greece.

QUESTIONER: Okay, that’s the last one. Is the Managing Director planning the Prime Minister Tsipras next week in Davos?

MR. RICE: Yes, it’s planned that they would meet.

QUESTIONER: They would meet at the 21st?

MR. RICE: I don’t have the date or the time, but they are planning to meet.

QUESTIONER: Thank you.

MR. RICE: You know, in Davos a number of you have been there but many, many meetings take place, planned and spontaneously. Even at head of state level. But, yes it’s planned that they would meet. So can we move off Greece?

QUESTIONER: I think we may be interested in the same subject. I’m obviously going to ask you about the Ukrainian debt. Now, Ukraine is officially in default as you know, so my question is how you intend to proceed in this new situation with the program if indeed you are planning to proceed.

MR. RICE: Just a reminder, the mission for the second review was in Kiev the latter part of November, and since then the staff discussion with the authorities have been continuing. They’ve been constructive. Significant work at the technical level has helped to advance mutual understandings and also has allowed for the adoption of the 2016 budget and that was in late December last year so we remain engaged to finalize the policy framework for 2016 that would then pave the way for the completion of the second review.

I do not have a board date for you today when the second review would take place. It depends on resolving some outstanding issues which we hope would be soon. The outstanding issues I can tell you revolve around structural fiscal measure needed to ensure medium term sustainability. I mentioned the budget adopted by Ukraine toward the end of the year which implies a deficit of about three and three quarter percent GDP and that is broadly consistent with the program’s objective. I think our Resident Representative in Kiev has also talked about that today.

On the debt issue our position is pretty much as we’ve discussed before that we continue to encourage the Ukraine and Russia to achieve a cooperative solution that contributes to the financing and the debt objectives of the program and the board would be assessing those efforts at the time of the second review but again I do not have the board date for you today on that.

QUESTIONER: And the Fund is just an observer? The Fund does not partake in part of the discussion. Have you communications from Moscow say this year?

MR. RICE: You’re right about the observer status on the debt negotiations and I’m not aware of any communications from Russia.

QUESTIONER: Okay, the new framework of lending into arrears involves potentially other countries. For instance, I’ve seen speculation that it is actually directed more at China because China is not a member of the Paris Club and the Chinese also are a very big donor, a very big lender to many of the same countries that the IMF is working. Are the Chinese debts secure in the new environment, will the IMF standby the obligations?

MR. RICE: I wouldn’t characterize the lending into arrears policy that was adopted toward the end of last year as being aimed at any particular country, because we think it’s in the best interest of the membership at large and that’s the rationale for the policy. I wouldn’t want to get into how it might or might not apply to individual countries in a speculative way.

QUESTIONER: That’s understandable but the change in rules came at this particular junction which definitely had a bearing on the Ukrainian situation and that’s why I was asking you about your contacts with the Russians about the situation because obviously this new situation where Ukraine is in arrears and where the new policy is undergoing, it’s the first test. I think it’s also a test for the IMF. From what you just said and please correct me if I’m wrong, you are saying that the first actual discussion of this new situation will happen at the second review -- at the conclusions of the second review for the Ukrainians.

MR. RICE: Yes, what I was saying was that the whole range of issues related to the Ukraine program will of course be discussed in the context of the second review and that will include the debt and profile and everything else. We’ve discussed it here before, as you know the change -- the revision and the lending into arrears policy is something that the staff of the IMF has been pushing for for quite some time and we’ve talked about this.

QUESTIONER: Are there any intermediate steps, intermediate procedures that you need to follow in this situation before the second review where -- you will require reports from departments on how to proceed in this situation of default?

MR. RICE: I’m not aware of any special reports or intermediate steps but of course they’ll be in the context of the second review, a staff report as always will be discussed by the Board, put to the Board, and then you get to see it, too, because we publish those staff reports. I think all that information would be there. I'm not trying to be evasive here.

QUESTIONER: Normally, I know what happens, which steps happen, in sequence. Here, I'm not sure I understand. Thank you.

MR. RICE: Okay. Are we on the Ukraine? Let's finish with Ukraine.

MR. TALLEY: Good morning. You talked about the second review. Given the distance from the last review, why are you not combining the second and third reviews into one, to a larger lump sum payment, and you mentioned no frustrations or delinquencies in terms of anti-corruption efforts. Is that still sand in the works?

I do have one question on Greece. Would a failure of either the two legs that you mentioned, credible policy or debt relief, have a consequence of Greece defaulting on its debt to the IMF once again? So, the IMF has to be involved in order to get its money back.

MR. RICE: You know, maybe just on the last one, I think it's prudent just for me to reiterate that we think we need both of the legs. We need the strong policy package and we need the debt relief. We think that's what is required for sustainable growth over the medium term.

You know, in terms of the IMF's role, we will play as constructive a role as we possibly can, and the nature of that role, and I think I was pretty clear on what the nature of that role could be, I think will depend on the discussions with the partners and the Greeks in the coming days.

On Ukraine, you were asking about the corruption, I think.

MR. TALLEY: Two things. Why are you not combining the two reviews, and how are anti-corruption efforts --

MR. RICE: I don't have any indication that the reviews are about to be combined. My information at the moment, is the second review that we are looking at. On the other issue, as you know, the program includes a number of measures to fight corruption, including the establishment of an anti-corruption bureau, strengthening asset disclosure requirements for high level officials, and enhancing the anti-money laundering framework in Ukraine.

The status is the authorities are working on the implementation of those measures, and the program reviews will, of course, be checking the progress. Again, as I mentioned, I think this is something that will be laid out in fuller detail in the staff report, which we will publish subsequent to the Board discussion.

QUESTIONER

MR. RICE: Good morning.

QUESTIONERQUESTIONER: Two questions for you on China. First of all, there has been a lot of turbulence emanating from China in the markets to start the new year. Wondering if you can comment specifically on how they have managed the currency? Obviously, the IMF approved the RMB being included in the SDR last year. Since then, there has been continued talk about them being too heavy handed in their interventions, whether they are trying to devalue the currency competitively. How comfortable is the IMF with how China is managing its currency?

MR. RICE: Well, maybe just stepping back a little bit, of course, China has embarked on this historic rebalancing of its growth model. As we said before, we think this is something that is good for China economically and good for the world.

Nonetheless, this shift to the new growth model is going to be bumpy, is bumpy, and the effects are being felt in various parts of the world.

The Managing Director said last week that this reinforces the need for more clarity on policies, especially exchange rate policy. I think we have seen in recent days some efforts by the Chinese authorities in that direction.

Our views on China's fundamentals remain unchanged. We think a focus of policies and communications on maintaining strong fundamentals and promoting continued rebalancing will be helpful. As I just mentioned, more clarity, communication around the exchange rate regime would be useful. Again, the authorities are working on this and have made recent communications to that effect.

On the macro fundamentals, you know, the authorities obviously should aim for an appropriate growth target, and if growth would risk slipping below that target, we have recommended the first line of defense should be fiscal stimulus.

We will have more to say on China on Tuesday in the context of the WEO Update, including on the forecast. I think we will have more details at that point.

QUESTIONER: Just a quick technical follow up. There seems to be a perception in the market that there are certain conditions placed on the RMB's inclusion in the SDR, in particular, that the spread between the offshore and onshore rate remain as narrow as possible.

I have not found that condition in any of your public documentation, but can you clarify? Does that condition exist?

MR. RICE: What I would say on that issue is we have noted the widening of the spread between the onshore and offshore exchange rates of the RMB. We are gathering the relevant information on that, and we will be discussing that with the authorities, the factors behind it, and possible policy responses.

In terms of the SDR process, clearly the decision has been made following the technical assessment by our Executive Board. That process is fully on track.

QUESTIONER: Do you have any comment on policy in Southern Africa?

MR. RICE: You know, clearly Southern Africa like other parts of Africa is affected by these changes in the global economy that are taking place right now. We just talked about China and the shift to the growth model. China is now, I believe, Africa's largest partner in terms of economic activity. Clearly, the relative slowdown in China has an effect for Africa and for Southern Africa as well.

The changes in commodity prices is another major factor obviously affecting these African countries, and the whole monetary policy environment is changing as well.

The effects, I think, from various parts of the world to Southern Africa are something that will have an impact. I don't have specifics for you on Southern Africa. It is again something that Maury Obstfeld can say more about on Tuesday.

In Western Africa, clearly the Managing Director -- the discussions were centering around these issues. To some extent, and every country is different, but to some extent, these broad shocks, and she spoke in particular about the double shock of the commodity price shock, and then in those countries, the security situation they are facing as well is another factor.

QUESTIONER: My comment perhaps in the question, you have had no approach from Zambia or South Africa about a possible program?

MR. RICE: The answer is no in both cases.

QUESTIONER: I have two questions. First, about the impact of the refugee crisis in Europe, and I’m not talking about the destination countries like Germany. I'm talking about countries like Greece, Macedonia, and Serbia.

Also, I know that next week there will be a press conference about your economic outlook for 2016, but can you tell us whether your outlook will be similar or not to the one published by the World Bank?

MR. RICE: Welcome. We won't give out the numbers from the forecast before it is launched. I think you would understand that.

I can tell you that the issues related to migration and the refugee crisis is something that has been taken into account in working towards the latest updates, so it is something that I think will be further discussed in that context, and as I mentioned at the top of the meeting, we will actually be publishing a paper next Wednesday, on the whole issue of migration and refugees, with a particular focus on Europe.

QUESTIONER: I have a question on the 2010 governance reforms. When are the reforms going to turn into application here at the Fund now that it's been approved by the U.S. Congress? Secondly, are you comfortable with the fact that Congress is willing to increase its oversight of the IMF? You know, they detailed that in the budgetary bill they passed in December.

MR. RICE: For those who haven't followed it as closely as you do, toward the end of December, the U.S. Congress approved the IMF 2010 governance reforms. We consider this a very important step for the Fund, for the membership. Once effective, the reforms will strengthen the IMF's resources and will support global financial stability and of course, the reforms also significantly help to strengthen the representation of dynamic emerging and developing countries in the membership of the IMF.

In terms of the next steps, what I can tell you is progress has been made in the reform implementation. I would expect things to fall into place very shortly to allow the reform to become effective, which technically requires the U.S. authorities to notify the Fund that the U.S. is fully accepting of the reforms. Again, we expect that soon, and that process is on track.

On the question of potential increased oversight by the Congress, that's something I think I would prefer you talk to the U.S. Treasury and the U.S. authorities about, exactly what that might mean. I'm not aware of any sort of added oversight/regulation that is related to this reform, but it is something that maybe the Treasury can elucidate.

QUESTIONER: I wanted to clarify one little point. You have a mission [to Ukraine], as I understand it, in late January. Do you expect the dates for the second review to be announced after that mission or does the mission have nothing to do with the review or the dates?

MR. RICE: I'm not aware of the mission. Let me check on that for you and get back to you.

QUESTIONER: (Inaudible)

MR. RICE: Again, I'm just not aware of it. We will confirm or not after this meeting.

QUESTIONER: (Inaudible)

MR. RICE: You know, we have technical missions and technical assistance missions going out all the time. I do not believe this is a review mission, but there could be some TA or capacity building. That's entirely possible. MR. TALLEY: Just one on quota and one clarifying Madam Lagarde's comments. Does the Board plan to vote on repeal of the systemic exemption any time in the very near future that you're aware of?

Two, the MD mentioned needs for better managing liquidity for emerging markets in a time of stress. She mentioned no specific proposal but there have been proposals put forward by the IMF before. Is this something that is clearly on the work schedule to get accomplished in this year or is this just a in-passing comment that yes, the world needs this?

MR. RICE: Thank you. On the systemic exemption, which you mentioned, I would just like to remind again for those -- I know you follow it closely -- for those that don't, that the revision to the systemic exemption is something that the staff of the IMF has been advocating for some time. It goes back at least to a May 2013 paper that marked the start of the latest round of policy reforms in the context of reform of our lending framework, particularly related to sovereign debt. Then there was a paper last year in 2015 proposing to repeal the systemic exemption.

There has been discussion for some time on eliminating the systemic risk exemption for some time. That's just the context of it. Yes, the Board meeting on that topic is going to be on January 20.

Your second question was on?

MR. TALLEY: (Inaudible)

MR. RICE: Oh, yes. You are right that Madam Lagarde made a fairly comprehensive speech on this topic just the other day, just on Tuesday, at the Banque de France conference. There she was talking broadly about the need to strengthen the global financial safety net in various ways. The fact that the quota legislation has been approved by the U.S. Congress, and that is about to come into effect, I think is one important element that helps in the strengthening of the global financial safety net because it doubles the IMF's resources, permanent resources, amongst other things.

That is part of it. She also pointed to, as you say, the need to strengthen that global financial safety net in other ways. At the moment, there is an asymmetry and imbalance in the financial safety net globally. We feel that more needs to be done to strengthen it with a view to the emerging markets in particular.

There have been a number of, I would say, ideas, rather than formal proposals going around. Again, you're right that this is an important part of the IMF's work program for this year in the context of our work on strengthening the international monetary system.

I don’t have specifics on that right now, but again, you're correct. This is a big issue for the coming year, and you can expect to hear more from the IMF on that issue in the period ahead.

I am going to take a couple of question online, and then I'm going to wrap up this briefing. He has a question on Nigeria, which I won't take, because we said a lot about Nigeria over the last several days. I think we said a lot.

You also have a question on Burundi. There is talk that the IMF recommended the inclusion of payments to the country for its peacekeeping in Somalia in order to be more transparent and make it part of the budget, what is the IMF's position on this.

On Burundi, I would refer to the March 2015 staff report, the completion of the sixth review, under the extended credit facility. In that report and in the spirit of enhancing fiscal transparency, the authorities had committed themselves to include the data related to revenues and costs concerning Burundi's participation in peacekeeping operations into their future budget. So, this was something that Burundi had committed to.

The context is that prior to the second quarter of 2015, the IMF supported arrangement was making progress. However, the program has deteriorated with the onset of the security challenges in the country, and the completion of the seventh and eighth reviews is not possible. As such, the program is off track at the moment. Staff is monitoring the situation and gathering information. Of course, the discussions continue. That is on Burundi.

There is a second question from Egypt. How do you see the decision of the Central Bank of Egypt to monitor the imports of Egypt, is it really a step needed to face the lack of dollar in Egypt.

On that import question, I can tell you we have not yet had the chance to discuss these proposals with the Egyptian authorities, so we look forward to that. We would like to stress the need to raise exports in order to promote growth and for exchange rate flexibility to support this, allowing the exchange rate to move to a market clearing rate where supply meets demand, would boost exports, and prevent foreign exchange shortages. I think that might help with that question.

I'm going to leave it there for today. Thank you for coming. Happy New Year. We will see you in a couple of weeks post the update. Thank you.