OREANDA-NEWS. May 20, 2016. MR. RICE: Good morning everyone, and welcome to this briefing on behalf of the International Monetary Fund. I'm Gerry Rice, of the Communications Department. As usual we are on the record this morning, and our briefing today is under embargo until 10:30 a.m., thats Washington Time.

A couple of housekeeping things; one, for those of you who are online, you may not be able to quite see it but we are in a new briefing room here at the IMF. For sometime our colleagues here have been working under, well, I have to say pretty difficult, cramped circumstances in another media room that we had. So this is the more expanded media room that we'll be using from now on for the briefings, and just to say I hope it's a bit better for you. A bit better working conditions a bit more elbow room.

I have a few announcements and then I'll turn to your questions. The Managing Director, Christine Lagarde, is in Japan participating in the G7 Finance Ministers, and Central Bank Governors, a meeting thats in Sendai, Japan. And thats going to take place, officially tomorrow, and over the weekend. Madam Lagarde will then attend the G7 Leaders Summit, again, in Japan that will be a week later, on May 27.

In between times, Christine Lagarde will visit Kazakhstan and, you know, she'll be doing some of the usual things there speech, participating in a regional forum. There will be press conference, press availability. We can give you more details of that.

Turning to our First Deputy Managing Director is David Lipton. Let me mention, David will be at the Peterson Institute next Tuesday, May 24th, thats in Washington, and David will be delivering the Institute's Annual Niarchos Lecture, with the interesting title: Can Globalization Still Deliver? It promises to be an interesting speech. Thats on Tuesday, you are welcome.

Our Deputy Managing Director Min Zhu, will be in Singapore for the Third Annual Asian Policy Forum where he will speak about financial risks and macro-prudential policy. Thats on May 27. And then Min will go on to Seoul on May 30th, 31st, to deliver the keynote address at the Bank of Korea's International Conference.

So, with that, let me turn to your questions, and in time, online. Can I make a suggestion, if you'll bear with me? I know there's a lot of interest in Greece, and we will come to Greece. But I want to suggest that if it's okay with you, that maybe we'll take a few other questions on other topics, and then we will come to Greece, and I promise you will have your opportunity. Is that okay with you? Okay then.

QUESTIONER: So the first question would be on Portugal. IMF returns in June to Portugal for a new evaluation of its post bailout package. What are the perspectives Portugal has been meeting the budget deficit target. So, that will be the first question.

The second one is, Portugal's Government announced this week, that you already have the permission to make the annually repay of IMF loans, so do you know when you are receiving this amount?

MR. RICE: Look, there is going to be an Article IV in Portugal just in a couple of weeks' time, where I think we'll taking on board all, you know, those issues plus more, so I dont have much for you on Portugal today, but stay tuned, and all your questions will be answered in just a couple of weeks. Do you have something else?

QUESTIONER: Yeah. I do have. So, in a couple of weeks you said.

MR. RICE: It's going to be in June.

QUESTIONER: In June?

MR. RICE: Yes.

QUESTIONER: Okay. I have for Africa, Angola. Have you defined the amount of financial aid for the next three years? Is it going to be a financial envelop? Until when, and will it be conditioned with the structural reforms, and of what kind? I have another one of Mozambique here? To what extent is IMF ready to resume its support to Mozambique? Depending on level of transparency or fiscal policy, or public expenditure control, and I wonder if the explanations given by the Government of Mozambique were positively considered by the IMF as a constructive way of reaching a solution, and avoiding like future similar cases, like the one of Ematum? Are you happy they gave you, they gave to the IMF?

MR. RICE: Yeah, good. Thank you for those questions. Let me just take Mozambique. Again, the context for others is that during the Spring Meetings, the Mozambican authorities confirmed the existence of a large amount of borrowing that had not been previously disclosed to the Fund. Since then the Mozambican authorities have been working closely with us to ascertain the facts.

You know, we've obviously been quite open about saying that any underscored debt-related transactions need to be reported transparently and publicly. So next steps, we continue to work with the authorities constructively, evaluating the macroeconomic implications of this disclosure, and a staff visit to Maputo is planned for June 2016. The mission that had been originally scheduled for April and May, and that was delayed because of the disclosure; so that will go forward now into June.

And what the team will be doing there is, you know, gathering, continuing to gather the facts, undertake the due diligence as needed; and as I said, asses the macroeconomic implications. In terms of a number or, you know, structural conditionalities and all of that, that will be something that theyll discuss in the course of the mission.

QUESTIONER: Is there going to be a bailout for Mozambique?

MR. RICE: Well, as you know there's a PSI review, so again, this will be something that is all for -- under discussion at the time of the mission. Let me turn to Angola briefly. The status again is that we received a formal request from the Angolan authorities to initiate discussions on an economic program that could be supported by a three-year extended arrangement. So those discussions, initial discussions were held during the Spring Meetings about a month ago.

The IMF Team is preparing to visit Luanda in the near future, to continue those discussions, and again, as in the previous case, I dont have the specific numbers for you, but in this case of course we have a formal request, which is distinguishing it from Mozambique.

QUESTIONER: Thank you. I just wonder if you could provide any more details on the standby agreement that was reached with Iraq today; \\$5.4 billion, any information on the term of the loan as well as the measures that Iraq will have to take to bring its budget deficit under control?

MR. RICE: I dont have too much more for you on Iraq other than has been communicated today, but let me just point you to that, and we'll see if we can help you out a bit more later on.

QUESTIONER: On Brazil. What does the IMF think about the new measures taken by the new government in Brazil? Are they in the correct path toward recovery, and do you think the uncertainty over Brazil, it's over? And a second question is on Spain. Are you worried there some kind of fatigue, reform fatigue in Spain after several years of consolidation? The new (inaudible) forecast proposed (inaudible) wait in years. So do you think after the elections in June, the new government has to push forward more forcefully with these reforms?

MR. RICE: As you mentioned Alfonso, Spain is in the middle of a general election campaign, so I won't, you know, obviously offer comments on recommendations to prospective government, other than to say, as in all cases, we are ready to work with any government that emerges. In terms of the economic situation, the outlook and the challenges; again, as you mentioned we highlighted this in our last wheel about a month ago.

What I would say is, Spain's strong recovery continues, helped by past reforms and external tailwinds, as well as the relaxation of fiscal policy last year. Growth reached 3.2 percent in 2015, it's projected at 2.6 percent this year, both well above the Euro Area average. But on the other hand, as we said in April, Spain's growth potential remains constrained, a still sizeable public and private debt overhang, weak productivity growth, and high structural unemployment.

Turning to Brazil, it's difficult to predict, obviously, how the political and economic environment will evolve, but we certainly hope that the much needed economic reforms can be promptly implemented to help Brazil overcome the current difficult juncture.

We think the announcements made by Finance Minister Meirelles, have been positive, you know, we've repeatedly said Brazil should strengthen the macroeconomic framework, that have served it well in the past, we think this is essential for a turnaround in confidence and investment, and this includes inflation targeting, exchange rate flexibility, fiscal responsibility. And as I said, we welcome in this regard, Minister Meirelles emphasis on the need to stabilize the trajectory of debt, and to preserve the social security system through reforms that ensure financial sustainability in the long run.

So we look forward to engaging with the Minister, and collaborating with his staff to help with policy advice and technical assistance, as again Brazil undertakes measures during this difficult period.

QUESTIONER: My question is about Ukraine. Yesterday the IMF made a clear statement on Ukraine after the mission completed its work in Kiev, and thank you for that. But could I ask you to clarify two points? First, why the IMF Executive Board's consideration of the review expected in July 2016? Usually the Fund meets not more than one month after returning of the mission. And the second question is what amount of the next tranche is going to be considered by the Board? Is it about one or more tranches in one? Thank you.

MR. RICE: As you are saying, just for the context of others, we issued a statement yesterday on staff level agreement reached with Ukraine on the review of the program. And it said Ukraine has made considerable progress, restoring macroeconomic stability over the past year under difficult circumstances. It also said that steadfast implementation, all structural and institutional reforms is not critical, and very important that the authorities boost their efforts to entrench fiscal and financial stability, decisively enhance transparency and the rule of law, and reform the large and inefficient state-owned enterprise sector.

And indeed we expect the Board to consider this in July 2016. So that, you know, there shouldnt be a problem with the timing of the mission coming back. It's not extraordinary in any way that the timing is fairly normal. Did you have another question?

QUESTIONER: About the amount of the tranche.

MR. RICE: On the amount, so far as I know, it's for the one tranche, not a bundling to the best of my knowledge.

QUESTIONER: About amount, how much -- how many dollars the IMF will send to Ukraine, if the Board consider this step?

MR. RICE: So, I believe the number is around \\$1.7 billion, but let me -- my team will verify that and check it with you.

MR. RICE: All right. Then let me come to Greece. What I do propose, because I can see the pent-up level of demand, as we might say here at the Fund. Why dont we just take a round of questions, and then I'll come back, and we can take up a bit more detail. Is that okay with you? Ladies first.

QUESTIONER: Okay. What I was going to say before, is that since we haven't heard anything from you about the last month or so, yes, thats true actually, you know that. How do you comment on all the latest developments after the Eurogroup's Agreement, and the Euro Working Group, where are we right now? Thank you.

QUESTIONER: I was going to say that it's more than obviously that the IMF and Greece's European partners are not on the same page in regards to debt relief, which is the crucial point for an agreement next week. Are you optimistic that you will find a common approach for the debt relief and the IMF will stay in the program? And also, will Madam Lagarde be at the Eurogroup on the 24th of May. Thank you.

QUESTIONER: Good morning. Did you have the chance to inform the Board about the Eurogroup, they think on Greece. And do you expect the meeting of the Washington Group on the (inaudible) construction on the sidelines of the Japan Meeting of the G7, on the Finance Minister, but also could it go even to the leaders? Thank you.

QUESTIONER: I have two questions. The first one would be: Can you clarify the IMF position on the debt relief? Are you advocating for solution in which the Greeks will have to repay the Europeans until 2040? And my second question actually, in the IMF Article of Agreement, there's a provision that allows the Fund to postpone repayments by a member state if such repayments would impose exceptional hardship to the country. Is it an option that you're considering in Greece, since that's the kind of effort that you are expecting from the Europeans?

QUESTIONER: Two questions. One, has the IMF made any specific debt relief proposals to the Euro area peers? And do you look at each debt instrument and propose what should be done for it to change the funding profile of Greece, or do you focus on the outcomes for Greece? And if I can just add one more to that, sorry. We've heard from European officials that the IMF is conducting its own DSA. If you can comment on anything about that, particularly if it's any different than the European DSA.

QUESTIONER: So are you working with the Europeans in order to present a common debt relief proposal in the next Euro Group meeting?

MR. RICE: Okay. Let me take that bunch of questions. And if I've missed a detail on something, I'll come back and we can follow-up, okay. It's been a little while since we've had a briefing, for various reasons, though the IMF has clearly been fairly public on many fronts. Anyway, you know, a bit of context. The discussions continue between Greece, its European partners, and the IMF. And this is in the context of the first review of Greece's program with its European partners under the European stability mechanism. So most recently, many of you in the room know this, but I'm speaking to the broader audience, most recently there was a Euro Group meeting on May 9, last week. And there was a communication out of that. The next meeting is scheduled for May the 24th, as was mentioned. So that's next week. So just to be clear, again for those who perhaps don't follow it so closely, Greece is not currently under a program with the IMF, though we have been and continue to be fully engaged in the discussions. And of course, many are interested, including in this room, in the IMF. And when a decision might be made on a further program, and that decision, of course I need to emphasize, would be taken by our executive board. And I can tell you, no proposal has been submitted to the board at this stage. So that's the broad context. Where do we stand? So the discussions are actively ongoing. So you'll understand that I won't be going into details, and numbers, or speculations, but let me try and help clarify the current situation from our perspective. So number one, on the recent discussions, we welcomed the recent progress made, by the Euro Group and the Greek authorities, toward agreeing on a package that could pave the way for the completion of that first review under the ESM Program. The discussions, as I said, are ongoing regarding key elements of the package, including the policies supporting the fiscal targets and debt relief. You know, as we have said many times before, it is paramount that the program walks on two legs, strong policies that underpin realistic targets and comprehensive debt relief. Both are essential to ensure that Greece can embark on a path of sustainable public finances and growth which is the shared goal, of course. On the debt relief issue, so again, the discussions are ongoing with our European partners. We very much welcome the start of these discussions on debt relief which are a critical component of the overall package for Greece. As you know, the IMF has put this issue on the table. It was almost a year ago. So we see, again, we welcome that the discussions on this have now begun on this issue. And so we see that as a positive development. On the DSA issue, we have not yet finalized our debt sustainability analysis, the DSA. I can tell you, we have exchanged preliminary views with our partners on general principles regarding debt relief objectives and modalities. As we have said in the past, we believe that it is possible to restore debt sustainability without upfront haircuts, although this would involve providing very concessional loan terms, including long grace and maturity periods, and very low interest rates. Again, there are many options possible on how to get to a debt relief package. And those discussions have now begun, and we welcome that. On the reforms, which is the other leg, right, as opposed to the debt relief, again, we have said that achieving a 3.5 percent primary surplus by 2018 is a very ambitious target. As we have previously indicated, we don't think it is realistic to sustain that level for many decades. Very few countries in history have achieved that. We believe that this would mean too much austerity. And as we have said, again, repeatedly, and the managing director said it a few days ago in London, again, we don't want more austerity for Greece. And we certainly don't want more of the burden to fall on the poor and the most vulnerable. So we have stated our view clearly. And in our view what would be needed to ensure that these ambitious ESM program fiscal targets are credible, are fundamental reforms to pensions and income taxes that address the currently very generous level of pension benefits and the large exemptions from taxation that are exceptional by European standards. And both of these issues, of course, are related to the point about the burden falling on the most vulnerable. And we've discussed these issues before, including at this podium. So that's kind of broadly where we are with the discussions ongoing. What about next steps? Well, we're looking ahead now to this Euro Group meeting on May 24th that some of you have mentioned. What might be the focus of those discussions? We would expect the Euro Group to discuss the legislation, the Greek legislation related to the prior actions in the ESM program as well as debt relief. So again, both issues. I can tell you the IMF has been invited to those discussions. I expect that Poul Thomsen will lead the IMF in that meeting. And again, we look forward to providing our views on both policies and proposals on debt relief. As we have stated before, for the IMF to participate in the program with financing, both credible policies and substantial debt relief will be needed. So maybe just, you know, a final word. The staff have indicated their readiness to present a program for the board's consideration. Once the program includes the necessary policies and the debt relief, that can make the program add up, as we've said before. And it has to be realistic. We see both these elements. We see both these elements as critical. Because, you know, they're going beyond Greece. You know, these ensure the uniformity of treatment among our member states, which is, you know, of paramount importance to us. We represent 189 countries. So this notion of having credible reforms and credible financing, in this case including debt relief, is not unique to Greece. Again, for those who don't follow it so closely, this is what the IMF does and what we do in our programs. Let me leave my -- sort of step back. I think I took onboard a number of your questions. But if I missed something, we can follow-up.

QUESTIONER: I just wanted to follow-up and just ask about the discussions that are ongoing. Have there been any discussions with the European partners about European institutions such as the ESM buying out IMF debt, or Greek debt to the IMF? And secondly, have there been any discussions with the European partners about the IMF not participating financially but taking a purely monitoring or advisory role going forward in the Greek program?

MR. RICE: I am not aware of discussions on either of those issues. So let's see what happens next week. What I can say on your first question is that broadly, you know, from a debt sustainability perspective, it would make sense to increase further the concessionality of official financing to Greece by exchanging more expansive debt for less expansive debt. I mean, just broadly speaking that would make sense. But ultimately, and again I'm not, you know, conveying here a sense of discussions, because I don't have that sense of specific discussions. But ultimately, any decision along those lines would be up to the Eurozone member states and Greece to determine. So again, what I mean by that is discussion, decisions on replacing more expansive debt with less expansive debt.

QUESTIONER: Can I just follow-up, just quickly? More broadly, you seem to be saying today that, although the Greek authorities and the European authorities seem to have agreed on a reform program, that's the statement that came out of the May 9th Euro Group meeting, that the IMF still doesn't think that that is a done deal on the reform side. Is that right?

MR. RICE: We are still, you know, assessing the reforms and expressing our view on the reforms.

QUESTIONER: As a follow-up to questions, Gerry, I hear you very well. But there is this sense in Europe that you've been difficult with the Europeans and the Greeks because you actually want to leave the Greek program. Do you want to comment on this?

MR. RICE: You know, I would just re-emphasize what I said, which is we've been fully engaged. And we are fully supportive, as we have been now for some time. As I said, we stand ready to, the staff stands ready to take a program to the board. But it would need to meet those objectives and principles that I described to you. You know, I think the IMF is flexible, but we have a job to do. And the membership looks to us to do that job. So, you know, we're objective, and we try to bring the hard-headed analysis to any program, any situation that we're involved in.

Is it all on Greece? So let me take another package. Maybe I missed a few things. So let me - and then we're going to move off, we're going to move off Greece.

QUESTIONER: So may I please repeat my questions? I asked you if the board had discussed, had been informed about what went on at the Euro Group and if you think that the debt will be discussed at the G7. And one follow-up on your answer. On the same proposal, could this swap of interest rates or the IMF buying out, the IMF, change your, the SA for Greece significantly and define the same considerations for you to actually participate? And in your own DSA, are you sticking to the primary surplus target of 1.5 percent of GDP for the decades to come? Thank you.

MR. RICE: The board has been kept regularly informed of where we are. I mentioned that we had shared our preliminary analysis of views on debt. And of course that was shared with our board, for example. So, you know, our board, we keep the board informed. The board has, as I said, the ultimate decision. So that's very important to us. On the G7, I'm not aware of any scheduled discussion of Greece. As you know Katerina, the G7 ministers are there. I'm sure that people meet and speak in the corridors and so on. But I'm not aware of any scheduled discussion at the G7. On the impact that, you know, a replacement of, some replacement of more expansive debt with less expansive debt, of course, that would have an impact on the debt sustainability analysis. But, you know, we don't have those numbers or that analysis right now. But, you know, potentially, yes. That would have an impact on the DSA. And, you know, I've expressed where we are on the fiscal targets and on the primary surplus. So I won't go beyond that.

QUESTIONER: So you mentioned the need of a very long grace period for the Greek repayments. Is 2040, does 2040 look like a reasonable debt to you, dates, not debt? And also you said in the past that the IMF would wait for the first review of the European Program to be concluded for -- to decide whether or not you would participate in the program. So should we expect, in the event, I mean, if there's an agreement next week between you and Greece, should we expect a decision from the IMF about whether or not it will participate in the bailout?

MR. RICE: Yes. I mean, I don't know what's going to come out of next week. So I can't, you know, I can't give you an expectation on that. I mean, I've tried to describe where the discussions are. There are clearly still a number of issues that need to be discussed and decided. So I can't give you an outcome on that.

MR. RICE: Yes. Again, as I said, I'm not going to get into various numbers and so on. That's a part of the discussions, but I think I've broadly outlined where we stand. You're going to get the last question.

QUESTIONER: So what is the feedback that you're getting from the Europeans regarding your program analysis?

MR. RICE: I think I want to say we have a very good relationship with our European partners. We are in constant touch with them as we are with the Greek authorities. The discussions are very active and we are fully engaged. I think we are all trying to achieve the same goal which is to benefit Greece and the Greek people.

Let me take a few things online because there is a question on Italy which is what is the IMF's view of the Italian Government announcement that it managed to secure some flexibility from the Commission on its budget rules and on that I can say we've taken note of that EC decision with regard to flexibility on the fiscal rules and we've said before that flexibility within the SGP that's the Stability and Growth Pact should be used as warranted under the circumstances. I can also say on Italy that the mission is on the ground in Rome for the 2016 Article IV consultation. We are in active discussion with the authorities. There will be a press conference on Monday afternoon in Rome.

There is a question on Suriname there have been protests about the IMF backed electricity price increases. What is your reaction, what is the status of the program? And what I can say on Suriname is the authorities have requested our assistance to support their comprehensive program to stabilize Suriname's economy and set the stage for its recovery.

On the electricity issue on the tariffs indeed the Fund supports the governments plan to gradually eliminate electricity subsidies because that will make space for better targeted social spanning and in addition improve the fiscal situation. We expect the Board to consider the request from the Surinamese authorities in the coming weeks.

There is a question on Malawi. What is the status of the IMF's programs particularly in light of the previously discovered irregularities referred to as cash gate. So on Malawi an IMF team visited Lilongwe in March. This is in the context of the seventh and eighth reviews under an ECF, an Extended Credit Facility and on program performance Malawi has demonstrated a concerted effort to get the program back on track.

Including on domestic financing and domestic assets on the structural side reforms in the financial sector were carried out as planned and improvements in public financial management in particular bank reconciliations are gaining momentum but this needs to be sustained. There was a press release that was issued at the end of the mission that has a bit more detail on that for Matthew. In addition I can say at the start of this week the IMF's Board approved an extension of Malawi's arrangement under that ECF until June 30, 2016 to provide additional time for authorities to implement structural measures under the program. There is a statement on this on our website.

Is there a last question in the room? If not I want to thank you for coming along today. Thanks for your patience and your cooperation on how we did this and we'll see you in two weeks time.