Pakistan and the IMF

Updated June 28, 2012

The last Article IV Executive Board Consultation was on February 03, 2012. Listed below are items
related to Pakistan, in reverse chronological order (you can also view items by category).
June 28, 2012 -- Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department,
International Monetary Fund

Transcript of a Press Briefing by Gerry Rice, Director, External Relations

Department, International Monetary Fund
Washington, D.C.
Thursday, June 28, 2012
Webcast of the press briefing

MR. RICE: Good morning everyone and welcome to this press briefing on behalf of the
IMF.As usual this briefing with be under embargo until 10:30 a.m., that is Washington time.
A couple of housekeeping things, and then we will get to your questions.
Monday, July 16th, we will have the update on our flagship publications. That is the World
Economic Outlook, the Global Financial Stability Report, and the Fiscal Monitor. In addition,
they will be released at 9:00 a.m. on that day, with a press conference with Olivier
Blanchard, Jos Vials, and Carlo Cottarelli. That is going to be here in Washington.
In terms of the Managing Director, Christine Lagarde will participate this week in the
concluding policy meetings with the U.S. authorities, in the context of the Annual Article IV
Consultation. I would like to bring to your attention, also, that she will participate in the
mission's concluding press conference on July 3rd -- that's next Tuesday -- at 10:00 a.m.,
here at the IMF.
Madame Lagarde will then be traveling, as I think I mentioned the last time I was here, to
Asia, and she will be going to three countries -- to Japan, Indonesia, and Thailand. On
Friday, July 6, she'll be in Tokyo to meet with senior officials, and she will give a keynote
speech at the Nikkei Special Forum. We expect a press conference that day also. The
following day, July 7, the Managing Director will participate in a town hall meeting with the
young students of Keio University in Tokyo.
She will then visit Jakarta, Indonesia. That's on July 8 to 10. And then, in Bangkok,
Thailand, on July 11 to 12. And in both these places, again, she will meet with the leaders
and senior officials, as well as with members of civil society. Of note -- in Bangkok, on July
12th, the Managing Director will participate in an Asian Development Bank-Bank of
Thailand-IMF seminar, entitled "Toward a More Stable Global Economic System."
Finally, then, in terms of our Deputy Managing Directors, Nemat Shafik, on July 12 and 13
will attend a conference in Vienna to celebrate the 20th anniversary of the Joint Vienna
Institute -- the JVI -- which, as I think you know, is a regional capacity-building and
training center, financed primarily by Austria and the IMF. So, with that, let me turn to the
room and take your questions.
QUESTIONER: As you know, Greece has a new finance minister. Can you tell us when Mr.
Thomsen and his team are going to Athens? What is the process? And can you tell us what
is the process after they go, and they meet with the prime minister and the new finance
minister?
MR. RICE: I can tell you that a fact-finding staff visit, led by Mission Chief Poul Thomsen, is
expected to go to Athens early next week as part of the joint mission with the European
Commission and European Central Bank. This mission will assess the recent economic
developments, and meet with the new authorities. This visit would then be followed by a

negotiating mission to discuss with the authorities the policies necessary to achieve the
program objectives.
QUESTIONER: So can you tell us when the negotiating team are going? As many people are
saying, Greece runs out of money the last days of July. Do you think there is time for the
review and the decision by the board?
MR. RICE: I don't have a date on the negotiating mission, as I was just explaining that next
is a fact-finding staff visit. And, on the basis of that, there would be a follow-up mission to
negotiate. And I don't have a date for you on that. In terms of your other question, the
authorities can manage the budget for some period of time, without the next loan
installment. And the upcoming discussions, as I mentioned, will help define what's required.
QUESTIONER: Before and after the Greek elections, there has been a debate about the
negotiation of the program. Can you clarify which part of the program are you willing to
renegotiate, and which part not?
MR. RICE: Well, I think we need to take it one step at a time here, as I mentioned in the
previous answer. We will have the initial fact-finding discussions next week. We want to
listen to the new government, to the new authorities and what they have to say. The
objectives of the program, as agreed, remain the basis for those discussions. But, as we've
said before, if the new government has ideas on how those program objectives can be
achieved, then, you know, we are open to those discussions -- as we are, indeed, in any of
our programs that we support. As I say, I think it's a step-by-step process here: first the
fact-finding, then followed by a negotiating team that will focus on the issues that have
been discussed with the new government. We want to wait for that before going much
further into specifics.
QUESTIONER: Twelve member countries, including China, announced their specific pledges
to help the IMF to increase its lending resources in Mexico. Would you comment on this?
And how can the IMF make sure those investments, lending programs, will be safe against
a background of a simmering euro zone debt crisis?
MR. RICE: As you say, during the G-20 leaders' meeting in Los Cabos recently, there was
the announcement by the additional 12 countries to the additional resources of the IMF.
These 12 countries are now part, actually, of a total of 37 IMF member countries,
representing, actually, about three-fifths of our total quota membership of the Fund who
have now committed to increase the Fund's resources by $456 billion, as was announced at
Los Cabos, and thus strengthening the overall global financial safety-net.
In terms of a comment, I'd say obviously we very much welcome this support. It
demonstrates the broad commitment of our membership to ensure that the IMF has the
resources it needs to carry out our mandate to help ensure global financial stability. We
very much welcome that all the BRIC, so-called "BRIC countries," committed, in Los Cabos,
to participating in the increase in Fund resources. As to China, again, we're very
appreciative for the Chinese contribution to these additional resources.
As you may know, Madame Lagarde had a bilateral meeting President Hu at the G-20,
during which he reiterated the determination of China to play a significant role, in solid
partnership with the IMF.
On the safety surrounding the use of these resources, well, maybe the first thing to say is a
reminder, this is a global firewall. These resources are being made available for crisis
prevention and resolution to meet the potential financing needs of all the membership.
They will be drawn only as needed, as a second line of defense, after resources already
available from quotas, and the existing NAB resources, after they are substantially used. If
drawn, they will be repaid with interest. As always, we are committed to assuring that our
members' interests and resources are safeguarded. This is done, first and foremost, as you
know, through our programs, which include conditionality, and quarterly reviews, and all of
that. A final point: on June 15th the board of the IMF discussed and adopted the borrowing

modalities, including adequate safeguards for the Fund's balance sheet. And these
modalities will be reflected in the borrowing agreements with our members. There was a
press release to that effect a couple of weeks ago, giving some more detail on that.
QUESTIONER: First, to follow up to what was just asked, the BRICs and, I guess, some
others have always said that their willingness to support the efforts is somewhat
conditional, or at least is tied in with the willingness of the organization itself to reform the
quota and voice, the representation system. So, is progress that you are seeing
commensurate with the increase of responsibilities that the Fund asks from these
countries?
MR. RICE: The Fund is a quota-based institution, and we believe it's very important that we
continue to make progress on the steps needed for making the quota increases under the
14th Review effective, and complete the 15th Review by January 2014. In terms of the
governance reforms and the completion of the 2010 agreement, management of the Fund,
and Christine Lagarde in particular, I think has been very clear that she wants to push for
as much progress as possible to meet the timeline that has been agreed by the
membership, which is, you know, by the time of the Tokyo annual meetings. And that
continues to be our determination, to push for that progress.
QUESTIONER: Are any plans being formulated to move beyond that initial stage of reform?
Even when I am asking this, and I'm saying "initial stage of reform," I'm not sure that this
is how the Fund viewed it. Maybe for the Fund, it was the final stage of reform. So, please
clarify that.
MR. RICE: At the moment the objective is completion of the 2010 reform, and to do that, to
get as close to that as possible, by the time that was agreed by the membership. I'm not
aware of further requests or plans. But there's a clear timetable here for completion of the
2010 reform, by the time of the Annual Meetings, as much as possible. There's the timeline
on the review of the quota formula, and then the dates for the next review of the quotas
themselves. That timeline is clearly laid out.
QUESTIONER: A question about Ukraine. The authorities met with Mr. Lipton yesterday. Can
you bring us up to date on what's happening there? What was discussed, what was agreed,
if anything? Is there any progress on the program with the Fund? And last but not least,
what's actually -- how do you see what's happening in their economy? What shape the
economy is in?
MR. RICE: Yes, Messrs. Kolobov and Lipton met recently and discussed the economic
developments in the Ukraine, and the near-term prospects and challenges facing the
Ukraine. They also discussed the recent Article IV mission to Ukraine, which was around the
end of May I refer you to that. They also discussed, of course, the status of the Stand-By
arrangement. On that topic, I can tell you Mr. Lipton confirmed that actions are necessary
to ensure that the program objectives are met, including fiscal consolidation, energy
reforms, and financial sector reforms. The review is on hold, pending implementation of the
measures agreed for completion of the second review.
Let me take a few questions online, and then I'll come back in the room, and I will come
back to you. On Egypt: "Do you see that the time is now right to deal with Egypt?" To which
I would say, the election of a new president is an important step forward in Egypt's
transition. As we have said before, we stand ready to support Egypt during the transition,
and look forward to working closely with the authorities.
QUESTIONER: Could you please give us some modality on the IMF representation in the
Cyprus mission? Who is going to participate, when they plan to start the talks, what's the
expected duration of the mission?
MR. RICE: As the Managing Director said in a statement yesterday, the IMF has received an
invitation to participate in the external financial assistance to contain the risks to the
Cypriot economy. This follows the Cypriot authorities' request for financial support from the

euro area member states, through the EFSF and the ESM. We stand ready to join the
efforts of our European partners to help Cyprus return to stable and sustainable economic
growth and a solid financial sector. We expect to send an IMF team to Cyprus to evaluate
the situation in the field next week in preparation for discussions on an economic program
to help Cyprus address the economic challenges it faces. And this would likely be a mission
jointly with our European partners.
In terms of the staffing of that mission, I can tell you that the Mission Chief for Cyprus is
Ms. Delia Velculescu.
QUESTIONER: Based on the needs of Cyprus, the stability of Europe, the patience of
financial markets and the IMF, do you have an idea of when the memorandum should be
signed, in order to safeguard the stability?
MR. RICE: I do not have a timeline on that. The process is as I described it. There will be a
team there next week. They will make a fact-finding assessment, and have discussions with
the authorities, and with our European partners. And that will prepare the way, then, for
discussions of a potential program a bit further down the line. It's just hard to say right
now what the specific timeline will be. And I think we should leave it to the joint mission of
the EC/ECB/IMF to evaluate the situation, and then come back to us.
QUESTIONER: One final question. Is there an institutionalized restriction to countries that
apply for [IMF loans] to seek loans from other countries, like China or Russia.
MR. RICE: Well, you know, it's the authorities' prerogative to seek financial support from,
you know, wherever they might deem it useful. So, wouldn't want to go further than that.
QUESTIONER: In Cyprus, would the IMF be responsible for the loan, for the structural and
the economic changes, other than the banking stuff?
MR. RICE: We should wait for the team to get on the ground to discuss. I would only refer
to the Euro Group statement yesterday, which spoke of the framework of a comprehensive
adjustment program for Cyprus. That is framework into which we're entering these
discussions.
QUESTIONER: On Egypt, has the IMF been in touch with the new authorities there? Or are
you waiting for something specific to happen before, you know, you re-engage?
MR. RICE: I can tell you IMF staff has been in touch with Dr. Morsi's team, and we expect
the Managing Director to be in touch shortly. Our contacts are ongoing with all sides.
QUESTIONER: Have they indicated whether they are interested in resuming the
negotiations? Or is that off the table?
MR. RICE: I'd only repeat that we look forward to working with the authorities, as we've
said before.
QUESTIONER: Can you tell us how much money the Cypriots requested yesterday?
MR. RICE: I don't have a number. Again, sorry to repeat, but the fact-finding mission is
going to go out, have those discussions with the authorities and, you know, then there will
be a further negotiating mission. And I think it's at that point we would be able to get you
some more information in terms of specific numbers, and so on.
Let me go online again, and I'll come back to the room for a final round.
There is a question on Hungary."Has there ever been a formal request by the present
Hungarian government lodged with the IMF for any financial support? Can any kind of
substantial talks start before such a request is filed?" The request for financial support
actually was made by the Hungarian government in November of last year. What I can go
on to offer is that we welcome the recent legislative amendments and commitments to
strengthen the independence of the central bank, taken by the Hungarian authorities. And
just to try and answer the question, once these measures are adopted by parliament, the
IMF will be ready to start negotiations on a joint IMF-EU program.

There's one other question online, which I will take, and then come back in the room. It's
on Spain. "Can you explain what the role of the IMF in the Spanish bailout will be? Will the
IMF be able to stop funds from being disbursed if the right measures are not taken?" As
you know, the IMF was asked by the members of the Euro Group to help assess Spain's
request to the European partners for financial assistance, and to support its implementation
with regular monitoring. In terms of our current role, and in response to that request, the
IMF is currently participating as independent technical advisor in the discussions between
Spain and its European partners, regarding the terms of the EFSF-ESM financial assistance
to the country, and the modalities for monitoring. Looking forward -- as you may have
noted from the Euro Group statement yesterday on Spain -- it is expected that Spain will
request technical assistance from the IMF. That request has not yet been forthcoming. But
that would be, again, in the context of supporting the implementation and monitoring of the
European financial assistance.
QUESTIONER: I'm sorry, I don't understand what the "technical assistance" -- is that linked
to what the Fund is doing with the banks? Or is it economic monitoring? Is this similar to
what Italy asked for, and then, of course nobody took it up?
MR. RICE: Well, first of all, as I said, the Spanish authorities have not yet made that
request for technical assistance, but it was referred to in yesterday's Euro Group statement.
Specifically, this will be to support the implementation and monitoring of the European
financial assistance, which, as you know, is focused on the financial sector. We will be able
to tell you more, once the request has been received and assessed.
QUESTIONER: Right, so this isn't anything different from what was originally agreed, to
monitor the banking stuff. So this is not a separate technical mission, right?
MR. RICE: It is not separate from the original objective of supporting the monitoring of the
financial assistance in the financial sector.
QUESTIONER: Gerry, regarding Cyprus again, may I ask you again, and can you clarify for
us, in the event that Cyprus gets these loans from China and Russia, do IMF terms of
involvement change?
MR. RICE: Again, I'm sorry to not be able to offer you more, but I think we want to just get
on the ground next week, make the assessment -- including of the needs, and including the
financial needs. That will be followed, probably, by a negotiating program, and we'll be
looking at the overall financing in that context.
QUESTIONER: Is the IMF working against a deadline here, or a timeline, in Cyprus, and
Greece, of course.
MR. RICE: As usual we want to assist our member countries as speedily and as effectively
as possible. But I don't have a timeline on the assistance.
QUESTIONER: Well, you know, the issue with Greece is that it needs a payment, I believe
it's by the end of this month.
MR. RICE: I don't have much more than I said earlier on the financial needs of Greece. I'd
just refer to that.Let me go one more time online and come back for just one last question,
perhaps, in the room.
This question is on Argentina. "Since last year, the Argentine government has been placing
limits on the dollar exchange market, the amount of U.S. dollars Argentine citizens are able
to purchase on the country's institutions and also abroad. To the IMF, how could that affect
investment and credits?"
What I can say is that the Fund is monitoring the measures adopted by the government on
the local for foreign exchange market as well as the requirements prior to the importing of
goods and services. There is a question from Italy, Stefania Arcudi, of TM News. "Today and
tomorrow are crucial days for the euro zone, in terms of finding solutions for the debt crisis.
What outcome does the IMF expect? Do you have any comments on the summit?"

Since the summit is underway as we speak, , I wouldn't want to comment on that right
now. What I would say, though, is that we have been very clear, particularly in the
concluding statement issued last Thursday on the Euro Area Article IV consultation on the
measures that the IMF sees as being necessary for the euro area to take in the short and
medium term, to move towards a more complete monetary union, and overcome the crisis.
One more question online. "There's an impression in Pakistan that the IMF will not approve
a new program for Pakistan until the U.S. government gives the green signal. What is your
comment?
MR. RICE: In that, I'd just like to say that the Pakistani authorities have actually not
requested financial assistance from the Fund. But, of course, the staff remains in an active
policy dialogue with Pakistan.
QUESTIONER: A follow-up to the question on the euro zone. My understanding is, normally,
these things move from a political union to maybe a fiscal union, then maybe a banking
union. But we are not in normal times. So, in times of crisis like now, can this like "normal,"
or what I assume to be normal, chain of events be reversed? In other words, can the
countries in the euro zone try and do a banking union right now, without first going through
the previous stages?
MR. RICE: I wouldn't have a view on the phasing of the different elements you've
described, Andrei. But, again, I would refer you to what I think is a very succinct and clear
concluding statement from the euro area Article IV just a few days ago. It lays out very
specifically, in terms of longer-term and short-term measures that the IMF sees as being
necessary to complete the monetary union and, in the process, address the crisis
effectively.
QUESTIONER: Can you explain me what are the major expectations from the new Greek
government? The three major fields that you want to see progress, an immediate progress?
And if you agree with those saying that the recession in the country and the high
unemployment should be taken into account from the IMF mission, in order to maybe to
change or to review again the fiscal adjustment program in the country?
MR. RICE: The first thing I think we'd want to say is that of course the IMF is very
concerned about the recession and the high level of unemployment in Greece. And, in fact,
that's what we've been working with Greece and with our European partners to help Greece
overcome. In terms of going forward in the discussions, you can get the transcript, and
you'll see what we said. I'd described it as basically it's one step at a time here. We've got
a mission going next week, which I announced earlier, led by Mr. Thomsen. We will have
discussions with the new government. That will be followed, we would expect, then, by a
negotiating mission. Our priority is to listen to the new government and to hear their views.
And the basis for the discussions continues to be the program that has been agreed. But, of
course, if the new government has ideas on how those objectives can be achieved, we are
open to that discussion -- as we are in all the country programs we support.
In terms of priority -- again, growth, employment, reducing the public debt. I'm sure, you
know, these are going to remain major issues for Greece into the future.
QUESTIONER: Following up on the timeline, do the mission, and Mr. Thomsen, have any
idea how the implementation of the Greek program is going? Because you have your main
resident representative in Athens and I'm sure that he's reporting every day from Athens
about the program and the implementation. Did he report any progress lately?
MR. RICE: You're quite right that, of course, we have our res rep on the ground, and we are
in, you know, constant touch with the authorities in Greece. That said -- and I think, as you
know, undertaking a program mission is a much more elaborate process, it requires a
larger team to do the work. In this case -- again, as you well know -- there has been a bit
of a hiatus, given the election period in Greece. So the team needs to go out again and

assess what has happened in that period, establish the facts, and, then come back, we'll do
the analysis, and be in a better position then to proceed.

June 14, 2012 -- Transcript of a Press Briefing by Gerry Rice, Director, External Relations
Department, International Monetary Fund

Transcript of a Press Briefing by Gerry Rice, Director, External Relations

Department, International Monetary Fund
Washington, D.C.
Thursday, June 14, 2012
Webcast of the press briefing

MR. RICE: Well, good morning everyone and welcome to this press briefing on behalf of the
IMF. I am Gerry Rice of the External Relations Department. And as usual this briefing with
be under embargo until 10:30 a.m., that's Washington time.
Let me begin with a few events and upcoming travels for the management of the Fund and
then we'll turn to your questions here in the room and to our friends online. So let me
begin with the Managing Director Christine Lagarde and tell you that this upcoming
weekend, early next week, June 17 to 19 she will be in Los Cabos, Mexico for the G20
Summit and related events, including meetings with business leaders and labor leaders
ahead of the Summit. We will most likely hold a press conference at the end of the G20 so
that should be on Tuesday, June 19 and we'll come back to you with more precise details on
that.
Ahead of the Summit on June 17th, the managing director will participate in a panel
discussion on the global economy, organized by business leaders--the so called B20. She
will leave directly from Mexico to head for Rio and the Rio+20 Environmental Summit,
which is from June 20 through June 22nd, before she returns then to Washington.
A little bit further ahead the managing director will be traveling to Asia--to Japan, Indonesia
and Thailand in early July. More specifically, on Friday, July 6th, Madame Lagarde will be
visiting Tokyo to meet with the senior officials and she will give a key note speech at the
Nikkei Special Forum and hold a press conference later that day. And then following day,
that Saturday, July 7th, she will participate in a town hall meeting with students at Keio
University in Tokyo. And of course all of this is part of the prelude to the Annual Meetings
that will take place in Japan later this year.
Following Tokyo, Madame Lagarde will visit Indonesia. She'll be in Jakarta July 8 to 10 and
then she will be in Thailand in Bangkok July 11 to 12. And we'll be able to give you more
details on this in due course.
Finally, the First Deputy Managing Director David Lipton will also be in Los Cabos, Mexico
early next week and later next week David will be visiting Saint Petersburg, Russia for the
Saint Petersburg International Economic Forum. And with that, let me turn to your
questions in the room.

QUESTION: I know that you're not going to comment on the elections and I understand,
but some Greek political parties are against restrictions, are against the program and as
you know this party is asking the IMF and the Troika to leave Greece after the elections if
they win. What is your reaction to these cases?
MR. RICE: Well, I think, you know, we need to take this one step at a time. As you say,
Greece is having elections this weekend. I think we should respect the democratic process
in Greece and once there is a government the IMF will engage in a dialogue with the new
government.
QUESTION: Can you explain to us the case of Hungary, if I remember, what happened
when the Prime Minister of Hungary after his election short ran the mission? How did the
IMF react then?
MR. RICE: You're right that Hungary decided at one point not to draw upon the Fund's
resources under the program. And it's not unprecedented for that to happen.
QUESTION: What happens to that? I mean, the mission went to Hungary? You stop the
mission.
MR. RICE: Well, Hungary, as I mentioned, stopped drawing on the program. The program
eventually expired. I think that was around October 2010 and, you know, since then you
also may know the Hungarian authorities have requested further assistance from the Fund
and we're in touch with the Hungarian authorities having broad discussions with them.
QUESTION: Is the IMF open to renegotiating the Greece Program after the election?
Number two, was wondering with contagion now moving, well, borrowing costs are soaring
in Spain and it looks like new contagion to Italy, what kinds of things does the IMF want to
see from the G-20 to stabilize the situation?
MR. RICE: Well, on Greece, I don't have much to say beyond what I've just said, which is
that I think we need to just take this one step at a time. Respect the election. Respect the
democratic process and we will engage with the new government in Greece once that
process is complete.
In terms of the G-20 and, what we might expect this weekend, I think it's always healthy
that the global leaders come together and discuss the key global economic issues. We can
expect that they would focus on issues of growth and issues of jobs and employment. As
you suggest, I think the Eurozone debt crisis will be an important topic and the steps being
taken to address the crisis. I would imagine that there will be discussion on progress being
made, steps being taken by various countries under what has been called the Mutual
Assessment Process, which looks at how countries are different, are implementing their
various policies and we would also expect there to be some discussion relating to the IMF
on issues of boosting the Funds resources and on the issue of quota reform.
MR. TALLEY: The IMF said that it expected I believe at the G20 for the BRICS nations to
outline their specific commitments on resource -- Fund resources. Is the Fund expecting
that those commitments will be detailed at the G20? And there's been some concern that
the government's reform, not only the 2010 quota ratification, but also the quota formula
calculations are being delayed. Is that an accurate assessment? I'll follow up with
something else.
MR. RICE: On the resources issue, and just as a reminder, at the spring meetings there
were commitments made by the membership for more than $430 billion to boost the Funds
resources. I think what we would expect in Los Cabos is further update on that, for leaders
to discuss the status of where those commitments are. Hopefully a firming up of
commitments would be part of that discussion.
On the quota again, for everyone, you may have seen our press release yesterday where
the Fund continues to call for as much progress as possible, as quickly as possible on the
2010 reform. And again, I imagine that will be a point of discussion in Los Cabos. On your

question on the quota formula. Yes, discussions are underway on the quota formula and I
think the time table for that remains as it has been, which is we expect that to be
completed in January of next year.
QUESTION: Just to follow-up, if I may. So you're hoping for a firming up of commitments.
There was a clear expectation at the spring meetings that at the G-20, the members would
ratify their decisions. This sounds like there's a little bit of back tracking or delay on those
funding resource commitments. And secondly, does it really matter? I mean, why would not
having a few extra billion in the Fund's kitty really matter at this point in time if at all?
MR. RICE: Well, thanks. On your first question, just to be very clear, there has been no
back tracking or delay. I think there has been good progress made since the spring
meetings and leading up to this meeting in Los Cabos. Discussions have continued with the
various donors and it was never expected that the package would be completed with every
detail fixed by this time. So, progress has continued. And clearly the G-20 and other global
leaders, in fact, the IMF membership as a whole, feel that the strengthening of the global
firewall via the boosting of IMF resources is in fact an important part of the actions that
need to be taken given the current crisis that the world is facing.
QUESTION: I would like to know why did IMF bring forward the financial report last Friday.
And I also would like to know what was the role played by the managing director in the
Euro Group Conference on last Saturday also on Spain and the reputation of the banks?
MR. RICE: Well, we like to issue these reports is as timely a way as possible. The board
discussion took place last Friday. And we issued the FSAP--the Financial Sectors
Assessment Program as soon as the discussion was completed.
In terms of the Managing Directors role, she was indeed, as you say, a party to the
teleconference that took place over the weekend and as you could from the outcome in
terms of the statement from the Euro Group, the IMF is indeed being asked to play a role in
terms of the monitoring and reporting on the financial assistance.
QUESTION: Just to follow-up, what will be the conditions from IMF in this Spanish package?
Are there clear, are they weak, or are they still working on them?
MR. RICE: Well, just again, a reminder that there's no IMF financial assistance in this
package. There was no request for IMF financial assistance. In terms of the modalities
around the monitoring, those are still being discussed with the Euro Group and with the
Spanish authorities. So I don't have the details there for you. Let me also just mention as
part of the context that there is an IMF mission in Spain right now as part of the annual
assessment of the Spanish economy. We refer to it as our Article 4 Consultation. It's the
annual assessment. We expect that mission to complete its work tomorrow and we expect a
reporting on its findings then.
QUESTION: Could it be, just another follow-up, could it be that you bring forward also the
Article 4 assessment, or report?
MR. RICE: Well, as I said, we expect a report on its findings when it concludes tomorrow.
QUESTION: I just wanted to follow-up on Spain. So I know it's still being discussed, but is
there anything in the Fund's history where you had to monitor something where you were
not financially involved? Because what's not clear is, is the money going to be disbursed all
at once and then do you -- what's the point of monitoring something that's already been
disbursed, or this the spirit to every quarter there would be an installment like for a loan?
I have also a second question regarding Cyprus. There's increased concern about their
banking situation. Do you -- are you monitoring Cyprus closely? Have you received any
request for help? And that's it for now.
MR. RICE: Well, again on the modalities of monitoring, I really don't have much to add
beyond what I've said. It's under discussion. In terms of IMF monitoring and reporting, we

have arrangements with many countries on an ongoing basis where we monitor and assess
the economies more broadly without having financial support.
QUESTION: But there's no money involved in these cases?
MR. RICE: That's right. But as I say, in this particular case I don't have the details of the
modalities. They're still under discussion so we're going to have to wait for that.
QUESTION: But that means it's correct to say you've never done anything like this before,
like, monitoring somebody else's money
MR. RICE: I don't have the 65-year history in my head, but maybe we can come back to
you on that. On Cyprus I can tell you that there has been no request for financial support
from the IMF.
QUESTION: I have a follow-up on Cyprus, if I may. Is it true the Cypriots ask the IMF to
postpone its mission to Cyprus?
MR. RICE: No, I have no information to that effect.
MR. RICE: Let me just go online a bit and take a few questions here and then I'll come
inside the room.
There is a question on Spain: Saturday's bailout of Spain has not calmed the financial
markets with the Spanish bond over seven percent, is another bigger bailout needed? And
could Spain be under an IMF program?
We believe, as the managing director said in her statement over the weekend, that Spain
took the right step when deciding to secure a back stop for its financial sector. The scale of
the financing gives assurance that the financing needs for the Spanish banks will be fully
met. It's also important at the same time of course that the reform program that the
Spanish government has undertaken continues to be implemented, as they are doing. And
there has been no request for IMF financial assistance, nor are there any plans at the IMF
for such assistance.
There's another question on Spain: does the IMF support use of ESM funds to recapitalize
European banks? Are ESM funds sufficient to recapitalize the banks? Is there any
consideration of using IMF funds to bolster the size of the ESM for Euro-wide bank
recapitalization?
To repeat, we think that the decision Spain has taken to see assistance for the financial
sector is the right step. Spain has used the instruments available -- currently available to it
from the European partners. We have also said in the past that we think it would be
desirable for a further strengthening of the European crisis management instruments,
including a Pan-Euro facility that can take direct stakes in banks. And we welcome the
discussions under way in Europe along those lines.
Let me take one more online. The question is: what does the IMF expect to achieve in
terms of coordinated international efforts to help speed up the IMF's quota and governance
reform and bolster its lending capacity at the upcoming G20 Summit.
And I guess there I can reiterate a little bit what I said earlier that on the resources side we
expect the leaders to discuss the status of commitments to boost the IMF's lending capacity
and firming up of commitments. And on the quotas, again we expect progress made toward
the implementation of the 2010 quarter reforms.
QUESTION: Just to follow-up, you mentioned again -- reiterated the IMF view that you wish
that the European bailout funds would be able to take direct stakes in banks. And obviously
one of the reactions to the Spanish loan is that it's going through Madrid and adds to the
potential debt burden that's why yields are going up. Can you elaborate on given those two
points exactly why the IMF -- what at risk for directing the loans through Madrid, rather
than into the Spanish banks?

Secondly, is there any consideration or dialogue about using IMF funds, either existing
funds or the additional funds to giving that to, or loaning that to a Pan-European -- the
Pan-European bailout mechanism. And finally, Secretary Geithner yesterday said that
Europe needs to implement -- or at least agree to implement a banking -- a European
banking union, spur growth with a number of policies and to strengthen the bailout. And if
they don't do it in the next couple of weeks at the two Euro Summits, he indicated that
there won't be an opportunity for a fifth crisis escalation response. Basically saying, you
know, three strikes and you're out. Does IMF agree with that warning? That if Europe
doesnt take those measures in the next several weeks that basically times up? The bell
rings and Europe turns back into a pumpkin?
MR. RICE: A few questions there thank you. Just to be clear, no discussion of IMF funds for
Pan-European facility. And maybe just linking up your first and your third question, the IMF
has called for some time for a strengthening of the Europe-wide crisis management
instruments and indeed for a strengthening of the Eurozone architecture. I think we have
been clear, and as recently as Tuesday when the Managing Director spoke here in
Washington, that we continue to believe there's a need for a comprehensive action to be
taken. And we believe that that need is urgent.
QUESTION: I understand, but some economists say that we're on the verge of catastrophic
financial problems. And IMF is not -- you clearly right there in your response did not give
any sort of timeline. So to for all intents and purposes, the market's looking to the IMF,
which is supposed to be the world's economic advisory board in some of its capacity, is
saying, well, Europe has -- it's urgent, but urgent could be two weeks. It could be two
years. There's no timeline that IMF is giving to the markets or even to Europe about the,
you know, the time that Europe needs to act.
Secondly, if you could and I appreciate you allowing me to ask you these questions, could
you please tell me why IMF believes that Europe needs to invest directly into the banks and
not pass its bailout funds through the government as it is currently proposed?
MR. RICE: Well, this issue of a specific timelines, which I dont have for you unfortunately.
But I think you have seen, recent statements to speeches, major statements from the
Managing Director, amongst other things within the past week where she has laid out fairly
clearly what the IMF feels needs to be done. And the sense of urgency surrounding that.
So, beyond that I really don't have much for you. And I also don't have much beyond what
I said about the IMF has called for a strengthening of the Pan-Euro crisis management
instruments, including we said we think it would be desirable to have a Pan-Euro facility
that would take a direct stakes in the banks and we welcome the discussions underway to
that effect.
I'm going to take one online. It's a change of subject to Pakistan. The question is: please
let me know whether the IMF has approved a new program for Pakistan?
And to that I can say there has been no request for a new program from Pakistan. The
Fund however, remains closely engaged with Pakistan, including in the context of the
upcoming post program monitoring discussions.
QUESTION: what is the likelihood of the IMF getting the full 430 in resources at this
meeting? We know that leaders don't quibble about formulas and quota formulas and things
like that. They will want to look at a bigger picture scenario. So what do you think is the
likelihood of the IMF getting that money.
Second, when the IMF goes into the G20 usually you have a take on the current state of
the world economy, could you -- what is that take as we go into these meetings please?
MR. RICE: On the resources, I'm not in a position to predict or preempt what the leaders
might decide, but just to repeat that there were commitments made to actually more than
$430 billion at the spring meetings. We expect that issue to be on the table in Los Cabos.
There has been good progress made in the run up to Los Cabos in terms of our discussions

with bilateral contributors and we're looking forward to further progress at the summit. But
I don't have a prediction for you on what that's going to be.
And your second question again, I'm sorry was?
QUESTION: What is the IMF's current take on stages to the world economy right now?
Usually there is an assessment that you provide going into these.
MR. RICE: You're quite right. There is usually an assessment. There will be an assessment
and we will be releasing those documents as we normally do after the Summit. I think it's
clear that the IMF over the past several months has been warning on the potential
implications of the Eurozone crisis for the rest of the world with risks tilted to the downside.
And as you say, there will be some discussion of that in Los Cabos. And beyond that we will
have the update on our World Economic Outlook (WEO) in mid-July where we will have
more specifics to add.
QUESTION: And then results on the 17th is the Egypt elections, the Greek elections and the
French Parliamentary elections, three very important places. What is the status of the
discussions with the Egyptians? Is there some concern regarding oil prices the effect of the
outcome from Egypt on oil prices?
MR. RICE: I don't want to comment on the elections or anything related to the elections in
Egypt, Leslie, but what I would say as we've repeated before, we stand ready to support
Egypt during the transition. We have been having constructive discussions and look forward
to advancing those discussions once the elections are concluded.
QUESTION: How would IMF approach an anti-bailout Greek government if such a
government is the result of Sunday's elections?
MR. RICE: just to repeat what I said earlier, because I think in a way your question is a
repeat of the very first question, which is let's take this one step at a time. Let's respect the
process and the democratic process in Greece. And then the IMF will engage with, the new
government that the Greek people would elect.
Okay. I'm going to say thank you very much to our friends in the room. Good luck to those
of you heading for Los Cabos. And we'll see you in a couple of weeks' time. Thanks a lot.

May 24, 2012 -- Arab Oil Importers Under Strain, A Commentary by Masood Ahmed,
Director, Middle East and Central Asia Department, International Monetary Fund

Arab Oil Importers Under Strain

A Commentary by Masood Ahmed, Director, Middle East and Central Asia Department,
International Monetary Fund
Published in International Economic Bulletin, Carnegie Endowment for International Peace, May
24, 2012

The Middle East and North Africa region (MENA) is facing extraordinary challenges in
the wake of the Arab Spring. The Arab countries in transition (mostly oil importers)
are straining to manage political change, urgent social demands, and an adverse
external environmentfactors that have combined to increase the near-term risks to
macroeconomic stability. These risks were also present in 2011, but now many
governments have narrower margins for policy maneuver, having drawn down their
foreign exchange and fiscal buffers over the past year. To manage the risks, countries
in transition will need to rely on support from the international community.
Middle East oil exporters, meanwhile, are benefiting from high oil prices; it is
estimated that they grew twice as fast as the regions oil importers last year. Still,

many of them face fiscal sustainability and structural challenges, including the need to
create jobs for their growing working-age populations, further diversify their
economies, and develop their financial markets to better support economic growth.
Oil Importers Burdened by Multiple Pressures
The regions oil-importing countries had a difficult time in 2011.1Unparalleled domestic
pressures and a challenging external environmentnotably, the slowdown in global
growth and higher oil pricesweighed on economic performance. Growth faltered,
unemploymentalready chronically high across the regioncontinued to rise, and
government budgets stretched further. Although remittances and exports helped hold
up income in many countries, foreign investment and tourism declined sharply. In
addition, adverse movements in fundamentals and investor sentiment contributed to
a decline in stock market indices, wider sovereign spreads, credit rating downgrades,
and capital outflows from some countries.
As a result, growth for the regions oil importers, excluding Syria, fell by nearly half
from 4.3 percent in 2010 to 2.2 percent in 2011. The forecast for 2012 is only a
modest recovery to 2.7 percent (see Table 1).
Syria faces exceptional circumstancesthe worsening political and military conflict,
apart from its tragic human costs, is likely to result in a very large decline in economic
activity in 2012. Outside of the Arab countries in transition, drought in Afghanistan
and floods in Pakistan played a role in those countries downturns.
Table 1

The months ahead will be equally challenging. That is especially true because many
countries now have smaller policy buffers than they did in 2011. Last years policy
response increased spending, which pushed up fiscal deficits and diminished external
inflows. Accompanied by large current account deficits, the policies led to reserve
losses (see Chart 1). And as political transitions play out, private investors will likely
remain in wait-and-see mode; it will take some time for investment, tourists, and
capital to return.
Moreover, the international environment remains difficult. The European Unionan

important economic partner for many MENA oil importersis projected to post nearzero growth in 2012; oil prices are expected to remain high; and spillovers from Syria
could affect a number of countries in the region.

Oil Exporters Fare Well

The economies of MENA oil exporters,2 meanwhile, continue to post solid growth.
While growth for the group as a whole fell from 5 percent in 2010 to about 4 percent
last year (mainly due to the conflict in Libya), it reached 8 percent for the Gulf
Cooperation Council (GCC).3 Oil production in GCC states increased, particularly in
Saudi Arabia, to compensate for declines elsewhere (primarily in Libya). On the back
of higher oil prices, the oil exporters combined current account surpluses approached
$400 billion in 2011almost double the amount in 2010which helped lift their
reserve position above the $1 trillion mark, support a further increase in other foreign
assets, and enable stepped-up government spending.
Oil exporters growth in 2012 is expected to strengthen to 4.8 percent and to be more
evenly spread between the GCC countries and other oil exporters, as oil prices are
expected to average about $115 per barrel. In the GCC, oil and gas production is
expected to remain broadly flat: Qatars recent rapid hydrocarbon growth is likely to
tail off, pending a moratorium on capacity expansion. Saudi Arabias role as a swing
producer, moreover, will likely entail a smaller oil production increase than was
required in 2011 to keep global energy demand and supply in balance. And
government spending in the GCC will continue to support growth in the non-oil sector.
Despite an overall positive outlook for oil exporters, fiscal sustainability will be an
issueeven with high oil pricesfor those countries already running deficits, many of
which are expected to increase this year. In non-GCC countries, government spending
rose by one-third in dollar terms, leading to an average fiscal deficit of 1 percent of
GDP, though average oil prices exceeded $100 a barrel in 2011. GCC fiscal
expenditure also rose but only by about one-fifth in dollar terms, and the twin effects
of higher oil prices and large export volumes allowed GCC fiscal balances to improve.
Still, overall, oil exporters fiscal vulnerability has increased, as the fiscal breakeven
pricethat is, the oil price at which a countrys fiscal accounts are in balance for a
given level of spending and revenues from oilhas generally been rising over time
(see Chart 2).

In addition, a number of factors could pose risks to the oil exporters growth scenario.
The most immediate risk would be a euro-area-induced global slowdown, which would
reduce global oil demand and possibly lead to a sustained drop in oil prices. This
would make countries with fiscal deficits especially vulnerable.
Policy Implications
For the regions oil-importing countries, maintaining macroeconomic stability in the
current environment will be challenging. Corrective measures are needed to lessen
vulnerabilities, and some steps can be taken quickly. Governments must control
spending on untargeted subsidies, which predominantly benefit the wealthy, and
begin putting in place more effective social safety nets to protect the poor. Central
banks need to maintain external stability, which may require greater exchange rate
flexibility.
Ensuring adequate financing is also a key priority. The oil importers external financing
need will be an estimated $50 billion in 2012. Given that capital markets will not meet
all of that demand, it will be important to scale up the international response.
The IMF is doing its part. It has upgraded its lending toolkit in part to address the
needs of the region, approved a loan for Yemen in April, is in discussions with Egypt
on a possible IMF-supported program, and is in early talks with a few other countries
on financing needs and possible support. The IMF is also providing technical
assistance to many countries in the regionin Egypt, for example, on tax reform to
improve tax equity; in Jordan on fuel subsidy reform; in Tunisia and Morocco on
measures to strengthen the financial sector; and in Yemen on improving customs
administration.
But IMF support will not be enough. International and regional donors and institutions
will need to provide additional funds and expertise. Improved international market
access for MENA exports would also help counter the downturn in the region.
Looking further ahead, beyond macroeconomic stabilization, Arab countries in
transition will need to build their own paths toward economic transformation to
generate higher and more inclusive growth. Focusing on short-term macroeconomic
challenges is vital. For the regions oil-exporting countries, though there are no
immediate inflationary pressures, a key short-term priority is to watch for signs of
overheating in light of growing domestic demand. The quality of spending also needs
to be monitored to ensure value for money in rapidly expanding public-spending
programs. Reforming universal fuel price subsidies, in particular, would help contain

growing domestic energy consumption. Even with high oil prices, fiscal sustainability
is an issue that also needs immediate attention, especially for those countries already
running deficits.
But it is equally important not to lose sight of the medium-term challenges of
modernizing and diversifying the economies of the region, creating jobs outside the
public sector, and providing fair and equitable opportunities for all.
Masood Ahmed is the director of the IMFs Middle East and Central Asia Department.
This article is adapted from the IMFs Middle East and Central Asia April 2012
Regional Economic Outlook Update and has been published with permission.
1
Oil importers include Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania,
Morocco, Pakistan, Syria, and Tunisia. The IMFs Middle East and Central Asia
Department includes Afghanistan and Pakistan in its analysis.
2
Oil exporters include Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi
Arabia, Sudan, the United Arab Emirates, and Yemen.
3
The GCC includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab
Emirates.

April 21, 2012 -- IMFC Statement by Mohammed Laksaci, Governor, Bank of Algeria,
Algeria
On behalf of: Islamic Republic of Afghanistan, Algeria, Ghana, Islamic Republic of Iran,
Morocco, Pakistan, Tunisia. PDF File Size: 275Kb
Statement by Mohammed Laksaci
Governor, Bank of Algeria, Algeria
On behalf of Islamic Republic of Afghanistan, Algeria, Ghana, Islamic Republic of
Iran, Morocco, Pakistan, Tunisia Statement by the Hon. Mohammed Laksaci
Governor of the Bank of Algeria
to the International Monetary and Financial Committee
Speaking on behalf of Afghanistan, Algeria, Ghana,
Islamic Republic of Iran, Morocco, Pakistan, and Tunisia
Saturday, April 21, 2012
The recent relative improvement in the global economic and financial situation, as a result
of
notable actions in the euro area, improved activity in the United States, and still strong
growth in emerging market and developing countries (EMDCs), provides a welcome

breathing space following last years heightened tensions and uncertainties. However, the
recovery remains fragile and the global outlook is clouded by significant downside risks,
including from renewed stress in the euro area and a sharp increase in oil prices driven by
geopolitical tensions. It will be critical to address these risks and put the global recovery on
a
sustainable footing, which requires renewed commitment to coordinated actions and policies
and a broad range of reforms. The Consolidated Multilateral Surveillance Report and the
Managing Directors Action Plan offer useful directions to achieve these objectives.
We agree that adequate calibration of fiscal policies is needed in advanced countries to avoid
unduly constraining short-term growth and job creation while remaining strongly committed
to medium-term fiscal consolidation and debt sustainability to strengthen confidence.
Reforms of entitlement and tax systems, where needed, would provide key support to these
objectives. Monetary policy in these countries should generally remain accommodative, in
the current low inflation environment, to support demand, while remaining attentive to its
adverse effects on global liquidity and capital flow volatility. It is also crucial that financial
reforms are steadfastly pursued building on the progress thus far, including through
strengthening banks capital buffers and restructuring or resolving weak banks in the euro
area while safeguarding against excessive deleveraging through credit contraction. Repairing
households balance sheets and reviving the housing market in the US remain critical. We
also call for stronger momentum toward completion and implementation of the global
agenda
for financial regulation.
Although decelerating, growth in EMDCs remains strong. Policies should remain geared
toward sustaining high growth despite spillovers from advanced countries, while rebuilding
adequate buffers and mitigating the adverse impact of large and volatile capital flows. In
this
regard, the ongoing work on developing a comprehensive, balanced, and flexible approach
to

the management of capital flows should not compromise members ability to adopt policies
2
and tools which they deem appropriate to their specific circumstances, drawing on other
members experience.
In the Middle East and North Africa (MENA) region, while conditions vary among groups of
countries, the key challenge will be to achieve high, sustainable, and inclusive growth,
despite an unfavorable external environment, including by restoring macroeconomic stability
and investor confidence. The task is particularly arduous in Arab countries undergoing
political transition, in view of their large social and employment needs, which calls for
effective policies to foster investment and job-creating, equitable growth. Adequate
international support, including financial and technical assistance, will be critical, with the
Fund playing a key role. In particular, commitments under the Deauville Partnership
initiative in terms of financing and market access should be effectively and timely delivered.
In the same vein, in this difficult global environment, low-income countries (LICs) will need
enhanced international support, including from the Fund, to help address their substantial
development needs and mitigate the impact of the rise in energy costs and potential
additional price hikes. In this regard, we call on Fund members to agree to contribute their
share of the $0.7 billion gold profit distribution to increasing Fund concessional financing
capacity, and look forward to further actions toward achieving long-term sustainability of
PRGT financing, including from further donor pledges and gold profit distribution.

We take note and support the ongoing work in the Fund on enhancing surveillance. We look
forward to further progress in developing an integrated and more evenhanded and effective
bilateral and multilateral surveillance framework. We agree on the need for timely entry into
force of the 2010 quota and governance reform. We also stress the importance of
completing
the comprehensive review of the quota formula by January 2013 and the Fifteenth General
Review of Quotas by January 2014, which should result in a further realignment of quota

shares in favor of dynamic EMDCs, without such an alignment coming at the expense of
other EMDCs.

February 07, 2012 -- Pakistan: Staff Report for the 2011 Article IV Consultation and
Proposal for Post-Program Monitoring.
Series: Country Report No. 12/35

Pakistan: Staff Report for the 2011 Article IV Consultation and Proposal for
Post-Program Monitoring.

Date:

February 07, 2012

Electronic Access:

Free Full text (PDF file size is 1,586KB).

Use the free Adobe Acrobat Reader to view this PDF file

Series:

Country Report No. 12/35

Subject(s):

Article IV consultation reports | Economic indicators |Fiscal

policy | Fiscal reforms | Flexible exchange rate
policy | Inflation | Monetary policy | Political economy |Postprogram monitoring | Public information notices |Staff
Reports | Pakistan

English

Published:

Stock No:
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Please address any questions about this title to publications@imf.org

February 06, 2012 -- Public Information Notice: IMF Executive Board Concludes 2011
Article IV Consultation and Proposal for Post-Program Monitoring with Pakistan

IMF Executive Board Concludes 2011 Article IV Consultation and

Proposal for Post-Program Monitoring with Pakistan
Public Information Notice (PIN) No. 12/10
February 6, 2012

Public Information Notices (PINs) form part of the

IMF's efforts to promote transparency of the IMF's views
and analysis of economic developments and policies.
With the consent of the country (or countries) concerned,
PINs are issued after Executive Board discussions of
Article IV consultations with member countries, of its
surveillance of developments at the regional level, of
post-program monitoring, and of ex post assessments of
member countries with longer-term program
engagements. PINs are also issued after Executive
Board discussions of general policy matters, unless
otherwise decided by the Executive Board in a particular
case.
On February 3, 2012, the Executive Board of the International Monetary Fund (IMF)
concluded the Article IV consultation and Proposal for Post-Program Monitoring with

Pakistan.1
Background
Pakistan has faced difficult challenges in the past few years, including external and
domestic economic shocks, political uncertainty, and security problems. Despite these
challenges, the economic policymakers have taken policy actions and implemented
several reforms, including those under the recently expired Stand-By Arrangement,
which helped the economy avoid a full-blown crisis in 2008/09. These actions and
reforms include establishment of an interest rate corridor, implementation of a more
market-based exchange rate regime, and a strengthening of the enforcement powers
of the State Bank of Pakistan (SBP). In addition, the authorities substantially raised
electricity tariffs and domestic prices of the main petroleum products, and the Benazir
Income Support Program (BISP) provided basic income support to the poor during the
various shocks that have hit Pakistan.
More recently, however, unresolved structural problems (especially in the energy
sector), two major floods, difficulties in implementing key policy reforms, and a more
challenging global environment have combined to limit growth and employment
creation and made the economy highly vulnerable, with few buffers to absorb shocks.
Indeed, economic performance has weakened and external pressures are mounting.
In 2010/11,2 real GDP expanded by 2.4 percentfar below the estimated 7 percent
required to absorb the two million new labor market entrants annuallywith inflation
persistently in double digits. Unemployment is high when underemployment and
unpaid employment are taken into account, while poverty incidence and measures of
human development are at worrisome levels. Efforts to boost revenue mobilization
were once again frustrated by a lack of political support, and the fiscal deficit widened
to 6.6 percent of GDP in 2010/11. Monetary policy has become more accommodative,
with the SBP directly or indirectly (through liquidity injections via open market
operations) financing fiscal deficits. While the economy is recovering from the floods,
the external position, until recently a source of strength on booming exports and
workers remittances, is deteriorating. The rupee has come under some pressure,
prompting SBP exchange market intervention. The SBPs foreign exchange reserves
have declined by about $2 billion in the last six months.
On current policies, Pakistans near- and medium-term prospects are challenging.
Growth would remain too low to absorb the large number of new entrants into the
labor force, inflation would remain high, and the external position would weaken
further. In 2011/12, real GDP growth is projected at 3.4 percent and average CPI
inflation at 12 percent. A deterioration in the current account balance due to lower
cotton/textile prices and a sharp slowdown in remittances growth, continued
difficulties in attracting external financing, and the beginning of repayments to the IMF
will likely put further pressure on the balance of payments this year, with reserves
projected at $12.1 billion by end 2011/12. In the absence of corrective measures, the
fiscal deficit is likely to reach 7 percent of GDP, much higher than the governments
revised budget target of 4.7 percent. Moreover, there are considerable downside risks
to this already difficult baseline, particularly in the context of an increasingly difficult
global environment and concerns about policy weakening ahead of senate elections in
2012 and parliamentary elections in 2013.
Executive Board Assessment
Executive Directors noted that Pakistan continues to fall short of its economic
potential, and called for a reorientation of macroeconomic and structural policies to
stem near-term risks to macroeconomic stability, and to lay the foundation for durable
and inclusive growth over the medium term.
Directors welcomed the authorities intention to reduce the fiscal deficit in order to

preserve macroeconomic stability and reconstitute policy buffers. They encouraged the
authorities to take more resolute action to mobilize revenues and rationalize public
expenditure. In particular, Directors saw merit in further broadening the tax base,
restructuring public enterprises, eliminating poorly targeted subsidies, and phasing out
commodity procurement operations. They also recommended strengthening the
framework for fiscal devolution and the incentives for provincial governments to raise
revenue.
Directors stressed that monetary and exchange rate policies need to better focus on
containing inflation and external risks. Monetary policy is now too accommodative, and
should be tightened if inflation or external pressures increase. Central bank financing
of the budget needs to be curtailed, and greater operational independence of the
central bank needs to be secured. Directors also called for more exchange rate
flexibility to facilitate external adjustment and safeguard foreign reserves.
Directors noted the adequate capitalization of banks, but considered that rising nonperforming loan ratios and other weaknesses in banks balance sheets present risks to
financial stability. Accordingly, they called for stronger supervisory oversight, improved
mechanisms for resolving problem banks, and the prompt establishment of a bankfinanced deposit insurance scheme. Directors also urged the authorities to address
long-standing deficiencies in the regulatory regimes against money laundering and
terrorism financing.
Directors welcomed the recent adoption of the New Growth Strategy to guide
structural and institutional reforms on a variety of fronts. They endorsed the
authorities objective of further developing private sectors participation in the
economy. They attached high priority to improving the business environment, boosting
external competitiveness, and upgrading the power sector to remove its burden on the
public finances and provide a reliable electricity supply to support growth. Directors
welcomed the authorities decision to subscribe to the Funds Special Data
Dissemination Standard.
Pakistan: Selected Economic Indicators, 2008/092011/12 1/

(Population: 173.5 million (2010/11))

(Per capita GDP: US$1,179 (2010/11))
(Poverty rate: 17.2 percent (2007/08))

EstimateProjection
2008/09

2009/10

2010/11

2011/12

1.7

3.8

2.4

3.4

GDP deflator at factor cost

20.0

11.9

18.8

12.0

Consumer prices (period average) 2/

17.6

10.1

13.7

12.0

9.6

11.8

13.3

11.0

25.8

6.7

2.3

(Annual percentage change)Output and prices

Real GDP at factor cost

Consumer prices (end of period) 2/

Pakistani rupees per U.S. dollar (period average)

(In percent of
GDP)
Saving and investment
12.5

Gross saving

13.1

13.6

11.4

Government

-2.1

-2.4

-3.6

-3.6

Nongovernment (including public sector enterprises)

14.5

15.5

17.2

15.0

Gross capital formation 3/

18.2

15.4

13.4

13.4

3.1

3.5

2.6

3.1

15.1

11.9

10.8

10.3

Revenue and grants

14.7

14.4

12.8

12.7

Expenditure (including statistical discrepancy)

19.9

20.3

18.9

19.5

Budget balance (including grants)

-5.2

-5.9

-6.1

-6.7

Budget balance (excluding grants)

-5.3

-6.2

-6.6

-6.9

Primary balance

-0.2

-1.6

-2.3

-2.9

Total general government debt 4/

60.7

61.5

60.1

61.7

External general government debt

30.4

30.1

26.8

24.9

Domestic general government debt

30.3

31.4

33.3

36.9

Government
Nongovernment (including public sector enterprises)
Public finances

(Annual changes in
percent of initial
stock of broad
money, unless
otherwise indicated
Monetary sector
Net foreign assets

-3.2

0.5

4.1

-3.3

Net domestic assets

12.8

11.9

11.8

18.2

Broad money

9.6

12.5

15.9

14.9

Reserve Money

1.9

11.4

17.1

13.3

Private credit (percentage change)

0.7

3.9

4.0

3.4

13.1

12.2

13.7

Merchandise exports, U.S. dollars (percentage change)

-6.4

2.9

29.3

-1.8

Merchandise imports, U.S. dollars (percentage change)

-10.3

-1.7

14.5

9.2

-5.7

-2.2

0.2

-2.0

Six-month treasury bill rate (period average, in percent)

External sector

Current account balance (in percent of GDP)

(In percent of
exports of goods
and services,
unless otherwise
indicated)

158.5External public and publicly guaranteed debt

Debt service177.3153.4
Gross reserves (in millions of U.S. dollars) 5/
In months of next year's imports of goods and services

182.2
21.6

23.0

13.8

18.3

9,110

12,958

14,784

12,086

2.9

3.6

3.7

2.9

-2.1

1.0

6.1

Memorandum items:
Real effective exchange rate (annual average, percentage
change)

Terms of trade (percentage change)

Real per capita GDP (percentage change)
GDP at market prices (in billions of Pakistani rupees)
GDP at market prices (in billions of U.S. dollars)

1.9

4.5

-3.2

-2.6

1.6

0.3

1.3

12,724

14,837

18,063

20,918

161.8

176.9

210.6

233.5

Sources: Pakistani authorities; and IMF staff estimates and projections.

1/ Fiscal year ends June 30.
2/ Inflation after 2009/10 based on new CPI weights, recalculated in September 2011.
3/ Including changes in inventories. Investment data recorded by the Pakistan Federal Bureau of Statistics are said
to underreport true activity.
4/ Excludes military debt, and commercial loans.
5/ Excluding gold and foreign currency deposits of commercial banks held with the State Bank of Pakistan.

Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral
discussions with members, usually every year. A staff team visits the country, collects
economic and financial information, and discusses with officials the country's economic
developments and policies. On return to headquarters, the staff prepares a report,
which forms the basis for discussion by the Executive Board. At the conclusion of the
discussion, the Managing Director, as Chairman of the Board, summarizes the views of
Executive Directors, and this summary is transmitted to the country's authorities. An
explanation of any qualifiers used in summings up can be found
here:http://www.imf.org/external/np/sec/misc/qualifiers.htm.
2
The fiscal year runs from July 1 to June 30.
February 06, 2012 -- Transcript of a Conference Call on Pakistan
1

Transcript of a Conference Call on Pakistan

Washington, D.C.
Monday, February 6, 2012

MR. ANSPACH: Good morning, everybody and thanks you for joining this teleconference.
This is Raphael Anspach, with the External Relations Department of the International
Monetary Fund, in D.C.
Joining us today for this conference call on Pakistan is Mr. Adnan Mazarei, who is the IMF
Mission Chief for Pakistan. And two of his colleagues who are senior desks for Pakistan, as
well.
Now, before we start, let me remind you that this call and the PIN to which you have access
today are embargoed until 9:45 am D.C. time.
With that, I'd like to now turn it over to Mr. Mazarei, who will have short introductory
remarks, and then will be happy to take your questions. Thank you. Mr. Mazarei.
MR. MAZAREI: Thank you very much. Good morning, ladies and gentlemen. Thank you very
much for taking the time to listen to our views on Pakistan.
As you may be aware, we had a Board meeting on Friday, on Article IV discussions with
Pakistan. Directors were very much in sympathy with the experience of the Pakistani people
in recent years, expressed their dismay about the populations experience of the floods,
security problems, and the general economic difficulties.
The IMFs Executive Board indicated that Pakistani policy-makers have taken important
actions, and implemented several reforms in the wake of the crisis in 2008. These actions
have included establishment of an interest rate corridor, a more market-oriented exchange
rate system, and an improvement in enforcement powers of the central bank.

In addition, the authorities have substantially raised electricity tariffs and domestic prices of
the main petroleum products, but at the same time have taken some steps to support the
most vulnerable segments of the population through the Benazir income support program.
More recently, however, with unresolved structural problems, especially in the energy
sector, vulnerabilities have increased. And, of course, these vulnerabilities should be
understood in the context of a much more difficult global environment. Real GDP this year
is expected to grow at 3-1/2 percent -- well below the 7 percent that is needed to absorb
the two million new labor market entrants that join the labor force annually. Additionally,
inflation is persistently in double digits.
Last year, the fiscal deficit widened to 6.6 percent of GDP. And monetary policy was
accommodative.
This year, while the economy is recovering from the floods, the external position which,
until recently, was a source of strength on the back of booming exports and workers'
remittances, is deteriorating somewhat, and there have been some pressures on the
Pakistan rupee.
In 2011/12, we expect GDP, as I mentioned, to be about 3.4 percent, and CPI inflation at
about 12 percent. In the absence of corrective measures, the fiscal deficit is likely to reach
7 percent of GDP. Now, if the authorities succeed in selling 3G licenses, of course, this
deficit will be lower.
Our Executive Board noted that in light of this background, there were measures that would
need to be taken in the short run to reduce vulnerabilities. And at the same time, measures
that needed to be taken to raise growth and make sure it is inclusive growth over the
medium term.
To address these vulnerabilities, a short-term action plan is needed that includes
strengthening of public finances, and a tightening of monetary policy if inflation increases.
It is particularly important to address the problems in the energy sector, and also the public
enterprises which are consuming a large amount of subsidies and resources every year.
With regard to creating employment opportunities and raising living standards, what is
needed, is first and foremost, fixing the energy supply, reducing the state's footprint in the
economy by restructuring loss-making public enterprises, improving the investment
climate, civil service reform, and also taking steps to improve the situation in the financial
sector to allow better channeling of savings to borrowers and to investors.
I will be very happy to answer any questions you may have at this moment.
SPEAKER: Yes, Mr. Mazarei, thanks for this important information. I would like to ask you -you mentioned energy sector and the problems created by it, and the issue of subsidies, as
well as the external situation. And you particularly mentioned the remittances decreasing.
So, what is the reason for this external situation to go down, because Pakistani policy
managers are very hopeful about it? And what are your recommendations for the energy
sector, and for the subsidies as they are now?
MR. MAZAREI: Thank you very much for your question.
On the external sector, the deterioration is coming, in large part, because of the
developments in the international economy. Commodity prices, prices of cotton and textiles
for Pakistan in particular, have come down drastically, while at the same there are
important risks to oil prices.
And because global economic activity is not robust, the demand for Pakistani products is
coming down. And this may also affect remittances.
On energy sector issues, as you know, the Fund is not an expert. And we often defer to our
colleagues in the World Bank and the Asian Development Bank for the technical plans as to
how to address these sector problems. And the case remains so.

What we indicate to the authorities -- and the authorities are quite aware of this -- is that
without structural change in the energy sector -- and this doesn't just mean price
increases, it means fundamental changes in the structure and the management of the
sector -- untargeted electricity subsidies will remain large, at about 2 percent of Pakistans
annual output which, by all measures, given the resource base in Pakistan, is quite high.
SPEAKER: Yes. Good morning. Two questions.
One is about the monetary policy. So I just want to make -- you say it's "too
accommodative," but then you say it should be tightened only if -- well, not "only," but if
inflation accelerates.
So did you consider that rates are too low at this point, and should be increased as soon as
this month? Or it's not that urgent.
And, second, regarding the IMF relationship with Pakistan, when are they starting to repay
the first loan? And is there any talk of a [renewed] loan?
MR. MAZAREI: Ill start with your second question.
Repayments to the Fund start in February, and the authorities have not requested a new
program.
On monetary policy, I'm not going to comment on whether their rate should be increased or
not at this stage. But what I would like to say is that, in the past year, the government has
been borrowing both from the Central Bank, and large amounts from the commercial
banks. The Central Bank has been injecting large amounts of liquidity into the money
markets -- which will push up prices, and eventually raise considerable pressures on
interest rates.
SPEAKER: Good morning.
I was wondering if you could give us a sense of -- I mean, the IMF uses all these words
about re-orientating the economy, you know "vulnerabilities," and so on.
But, you know, in short, it looks like Pakistan is pretty much in dire straits right now. And
what are the -- you know, beyond the steps that it needs to take, and obviously will take
some time, including, you know, management of its finances and stuff.What immediate
steps need to be taken to help its situation?
And then, I suppose, would you give any kind of advice to the Central Bank, and what they
should do in the upcoming monetary policy meeting on February 11th?
MR. MAZAREI: Well, as you correctly said, Pakistan is facing vulnerabilities. By
"vulnerabilities" we, of course, mean pressures and risks.
The way we recommended to the authorities to address these vulnerabilities is to recognize
that we are all, including Pakistan, living in a more dangerous environment because of the
deteriorating global environment -- and to build buffers.
One, to make sure there is immediate reconsideration of some of the non-essential
spending in the budget.
Two, making sure monetary policy doesn't end up pumping in too much rupees in search of
dollars.
Third, to protect foreign exchange reserves by making the exchange rate more flexible.
And, to the extent possible, seeking financial assistance from donors.
SPEAKER: Yes, thank you very much. And good morning, everybody.
My first question is regarding the fiscal deficit, as you mentioned, that it will be around 7
percent of GDP, but if the government succeeds in auctioning the 3G licenses, it will be a
little less. Of course, that will depend on the price that the government sees for the 3G
license.

But could you just tell us how much would be -- what would (inaudible) if the government
succeeds in the 3G auction license?
And also, my second question is that this year, as you mentioned, that Pakistan has to pay
$1.2 billion to the IMF [FY 2011/12].
In the next couple of fiscal years, the bigger loans have to be paid back. Do you see any
other dollars coming in, into Pakistan, that would help Pakistan to pay off its IMF loans and
not dent its exchange rate to a big extent?
MR. MAZAREI: First and foremost, on the budget.
The authorities estimate a maximum of about $700 to $800 million from the sale of 3G -which, if it happened, will bring down the budget deficit to around 6.6% of GDP. But that's
the maximum, and I have no idea about how much may actually earned on these 3G
licenses.
With regard to foreign inflows, there are various donors, official and bilateral, like the World
Bank and ADB, and the Islamic Development Bank, and others, who have regular
disbursements to Pakistan, which should be coming in. Now, depending on -- the adequacy
of these will, in large part, depend on, especially, the commodity price outlook, and how
this outlook materializes, especially for cotton and petroleum products.
SPEAKER: Thank you. Good morning.
I would like to ask a question about unemployment. You're saying that unemployment is
high, when you take into account underemployment, or unpaid employment. And you say
that unemployment should rise, since growth is too low to employ people who are entering
the labor market.
But you don't give any figures. Could you give us a sense of how high the unemployment
rate is in Pakistan right now?
MR. MAZAREI: The official unemployment rate is 6 percent now. But this figure does not
capture the partially employed and, for instance, household workers who are not paid.
The problem, in addition to the level of unemployment, is that there are about a couple of
million people who enter the labor force every year. And, as I noted, the authorities, in their
growth strategy, have indicated that they need about a growth rate of 7 percent per annum
to absorb this increase in the labor force. And with growth rates of 3 to 4 percent per
annum that we have right now, the task of creating jobs is becoming more difficult.
SPEAKER: A follow up question if I may. Six percent is the official rate, but it seems very
underestimated. Can we say it's -- the unofficial rate could be twice or three times this
one?
MR. MAZAREI: I am not in a position to give you an indication. It certainly is higher than
this.
SPEAKER: Mr. Mazarei, I was wondering if you could give us a sense of whether Pakistan is
headed for a balance-of-payments crisis? And there have been some -- I mean, I just want
to clarify, are you still disbursing -- you're not disbursing any more to Pakistan, are you?
MR. MAZAREI: The [Stand-By Arrangement] program ended last September.
And we are not disbursing.
Now, like a lot of countries in the world right now, the external outlook for Pakistan is
[uncertain]. Until recently, exports, especially of textiles, have been high, and remittances
have been high.
Looking ahead, prices of cotton and textiles have come down and they [may] have
bottomed out. And remittances are still strong, but they're subject to risks.
A couple of good things have happened in the recent weeks, too. One is the improving
trade relations with India. And, secondly, there's a new arrangement with the World Trade

Organization to give tariff exemptions to 75 items, which should help Pakistan's external
position.
There are upside risks and negative risks, but unless there are measures taken -- especially
to rein in the fiscal deficit, and the monetary policy tightening that is probably needed right
now -- pressures on the rupee could continue.
At the same time, of course, much of what is happening in Pakistan's balance of payments
and exchange market is affected by the political situation, which has a life of its own. And
it's difficult to predict for us.
SPEAKER: One quick question regarding the fiscal deficit, again, and as you mentioned, the
3G license.
The Finance Minister (inaudible) after the 3G license he expects the Coalition Support Fund
reimbursement to materialize during this fiscal year. And also, proceeds from Etisalat, $800
million.
So, have you not factored that in? And if that money comes in, then the fiscal deficit would
improve a little bit?
MR. MAZAREI: We've done so to some extent, but a lot depends on how much and when.
Of course, as you said rightly, the more through 3G, and the more the Coalition Support
Fund come in, there will be more budgetary space, and the deficit will be lower.
Thank you.
MR. ANSPACH: Well, with that, I would like to thank Mr. Mazarei for his availability.And I
would like to remind everybody that the call and the PIN to which you've had access are
embargoed until 9:45 D.C. time.
Also I would also like to inform you that the Staff Report on Pakistan will be made available
in the coming days.
Thank you very much again.
*****

January 12, 2012 -- Transcript of a Press Briefing by Gerry Rice, Director, External
Relations Department, International Monetary Fund

Transcript of a Press Briefing by Gerry Rice, Director, External Relations

Department, International Monetary Fund
Washington, D.C.
Thursday, January 12, 2012
Webcast of the press conference

MR. RICE: Good morning and happy New Year to everyone participating in this regular
press briefing. I am Gerry Rice, the Director of External Relations for the IMF. The briefing
is embargoed until 10:30 a.m. Washington time.
Let me update you on management travel and some upcoming events. Managing Director
Christine Lagarde will be in Davos, Switzerland to attend the World Economic Forum from
January 27 until January 29. Deputy Managing Director Min Zhu will attend the Forum also
from January 25 until January 29.
First Deputy Managing Director David Lipton on January 16 to 17 will speak at the Asia
Financial Forum in Hong Kong. We do expect to post that text on the external website for
you and we will try to provide an advanced text if we can. Media Relations will be in touch
with you on that. I can also tell you that Mr. Lipton will then travel on from Hong Kong to

Beijing for meetings with the authorities on January 18. This is a long-planned mission to
discuss the outlook for the global and the Chinese economy. Then on January 19 to 21, Mr.
Lipton will travel on to Mexico City for the G-20 deputies meeting.
Finally, the update of the World Economic Outlook, the Global Financial Stability Report and
the Fiscal Monitor will be published on Tuesday, January 24, and Messers. Blanchard, Vials
and Cottarelli, will hold a press conference here at the IMF Headquarters at 10:00 a.m. A
media advisory was published earlier in the week and you can contact our Media Relations
for more information. With that let me turn to any questions that you might have here in
the room or online.
QUESTIONER: Do you have some updates on the additional resources for the IMF from
European nations as Britain just mentioned that they are willing to hop in if other European
nations would also provide resources for the IMF? And Britain insisted that the money
should go to a general resources account.
MR. RICE: As we'd said before, we welcome contributions to help augment the Fund's
resources to help us in meeting our systemic responsibilities. I won't comment on any
reported individual country contribution. We have said and will say again that we welcome
the European Union's commitment of 150 billion and don't have much more detail for you
beyond that at this point.
QUESTIONER: I don't know where to start. Is it Italy, Greece or Hungary? First of all, do
you know when a monitoring mission is planned for Italy? Do you have any update on the
talks so far with Hungary? We know that they're meeting Ms. Lagarde this afternoon. The
question here is whether there is going to be a deal at the end of this. We know that that is
not the purpose. This is not a negotiating mission. But would you have any update for us in
the meantime?
MR. RICE: Let me take them in order. On Italy, as you know there was an IMF staff visit in
December to discuss the modalities of the monitoring mission with the Italian authorities.
What I can tell you is that the details are still being finalized and we expect that the first
monitoring mission could take place later this month or very soon thereafter. On your
question then on Hungary. I won't say too much because the Managing Director is meeting
with Minister Fellegi later this afternoon here at the Fund. But what I can say as you
indicated, these are not negotiating discussions. This is not a negotiation for the program.
It's an informal discussion and stay tuned for an update we may be able to give you later
today.
I have a slew of questions on Argentina and I want to make sure our online participants get
a chance here. There are several questions, "This month ends the period of 180 days that
the IMF gave Argentina to start normalizing its statistics. There is no sign that this has
happened. What will the IMF do about this? In the event that Argentina has not fulfilled
expectations, does the IMF apply a sanction? What kind of sanction? Argentina still does not
accept Article IV. Does the IMF have any updated opinion or resolution about this
situation?
Let me try and uncluster those questions a bit and say that of course we welcome any
opportunity to deepen our dialogue with Argentina. We maintain a regular bilateral dialogue
with the authorities including through our Resident Representative on the ground. On the
specific issue of the statistics, I can tell you that we expect that there will be a Board
meeting to assess progress toward the end of January or the beginning of February on this
topic and we would expect to provide a statement on the outcome of the Board meeting
upon its completion. The Executive Board will assess progress made and decide on any
necessary measures based on staff recommendations. It's too soon right now to determine
what those recommendations will be, but I can say the Board meeting will not result in any
sanctions on Argentina.

QUESTIONER: On the mission in Greece, when they are going there, when Mr. Thomsen is
going and how long they are going to stay in Athens?
MR. RICE: I can tell you the mission will begin next week on January 17 to discuss recent
economic developments and the policies underpinning Greece's adjustment program. I
don't have the precise concluding date for that mission but, again, it will be next week,
and, yes, the mission will be led by Poul Thomsen.
QUESTIONER: What is the IMF's assessment of the measures taken by the Italian
authorities? Do you think as a result of them Italy will be out of danger, let's say out of the
woods at this point? Also do you have any planned visit or encounter here in Washington
with Mr. Monti?
MR. RICE: On your last question, I'm not aware of any plans for Mr. Monti visiting
Washington or visiting the Fund. What I can tell you on the measures adopted by the
Italian government that the IMF believes these recent measures are an important step
toward restoring confidence, raising growth and putting debt on a downward trajectory. It's
probably best to leave it there.
QUESTIONER: According to some experts, Croatia is, together with Hungary and Latvia, the
next candidate for recession in 2012. What is the IMF's take on that one? And a second
question. Has the new Croatian government contacted the IMF already seeking help,
possibly a new standby arrangement? Thank you.
MR. RICE: On the overall outlook just to set Croatia and others in context, as I mentioned,
we're going to have an update on our World Economic Outlook on January 24 so that will
set the context. I think as the Managing Director and others in management in the Fund
have indicated in recent weeks, we are anticipating a markdown in the overall global
forecast. I don't have a number for you on that, but will have on January 24th.
Coming back to Croatia then we would expect that Croatia would be affected by the crisis in
the Europe and the challenging situation being faced there. More details will follow as we
continue our discussions with the Croatian government. On your second question, no, we
have not received a request for a program from the new government and I'm not aware of
any plans for a meeting in D.C.
QUESTIONER: If you plan to cut the global forecast, it's also going to affect Greece. What is
the IMF's position on the money Greece might need? There was an agreement in the past
month for public money for a second Greek program. Does this need to be increased? My
second question is on Egypt. Do you still have a mission going on Sunday and are we still
talking about a $3 billion sort of loan?
MR. RICE: On Greece, as I indicated, the mission next week will be discussing all the issues
so I don't want to preempt that in any way given those discussions that will take place and
given the discussions that are ongoing at the moment. On Egypt, yes, I can confirm that in
response to a request from the Egyptian authorities there will be an IMF mission in Cairo
beginning next week, the week of the 15th, to initiate discussions on possible IMF support
for Egypt's economic program. This mission will constitute the first step in the process
leading to possible financial assistance and we expect that this visit will be followed by
further discussions in the following weeks.
Let me turn again to our online participants. There is a question on the Dominican Republic.
"What is the status of the program discussions? What have been the outcomes of the IMF's
special delegation that visited the Dominican Republic in December?" On the status of the
program, the Fund keeps a close dialogue with the authorities and continues working on
policy and technical issues related to the programs. The dates for an eventual future
mission are still to be determined. I want to say on this question of the special delegation,
what that is referring to is that at the request of the authorities there was a team of tax
experts from our Fiscal Affairs Department that visited the Dominican Republic in early

December to conduct an in-depth analysis of the tax system. This is what we call a
technical assistance mission and not involved in the negotiations on the program.
Let me take this other question which I think may be of a broader interest. It's a question
about Madam Lagarde's recent meetings in Europe and about further steps is she urging
the Europeans to take and her message regarding Greece. To set the question in context, in
the first few days of this week, Christine Lagarde was indeed in Europe for a series of highlevel meetings and engagements. These included meetings in Basel with all key central
bank governors on Monday. On Tuesday the Managing Director had a dinner meeting with
Chancellor Merkel. She also met with Finance Minister Schaeuble and others in the German
government. And then on Wednesday the Managing Director met with President Sarkozy,
Finance Minister Baroin and again others in the French government.
I won't go into the details of these private discussions, but of course they discussed recent
developments in Europe, progress on the implementation of the European strategy that's
been discussed in various summits, recently October 26, December 9, for example, and
they also discussed developments related to Greece. So I think the bottom line is it was a
series of very active, high-level policy engagements with the European leadership on the
issues facing Europe at this point.
QUESTIONER: Did she ask Mrs. Merkel and Mr. Sarkozy for more money for Greece? Also,
are you satisfied with the 50 percent haircut or are you asking for more?
MR. RICE: As I said, I won't go into the details of any discussions that the Managing
Director had in Europe last week. I'll refer back to my answer that all issues will be
discussed by the mission next week so we should have more in the coming weeks. On PSI,
private-sector involvement, in the Greek financing package, what I'd like to say is that, yes,
the objective is still to reduce the Greek debt-to-GDP ratio to 120 percent by 2020 as was
agreed by leaders later last year.
QUESTIONER: To follow up, I believe it was the Handelsblatt that reported that Lagarde
said to Merkel that billions and billions more were needed for Greece. I want to clarify that
you're neither confirming nor denying the accuracy of their report. Secondly, I hear what
you're saying about the debt-to-GDP ratio. I want to understand what you've just said in
light of Blanchard's comments, was it last week?
MR. RICE: He was at the American Economic Association on Friday and Saturday.
QUESTIONER: At some point he said publicly that they may need a bigger haircut for the
bondholders. Can you explain to me how that dynamic works for what Blanchard said
publicly and what you just said? The IMF has also said publicly that it will revise its forecast
for the Euro zone for more recession. That is a note as well to Blanchard's and your
comments on the debt-to-GDP ratio.
MR. RICE: On the revision, again I think we should wait for the release of the WEO Update
so I'm not going to comment further on that, and that will be on the 24th. On your first
question, you're familiar with our policy that we don't comment on press reports so I'm not
commenting on your first point.
On the PSI issue, I think you know that Greece and its creditors are continuing to discuss
this issue. It's being discussed right now. It's an issue between Greece and its creditors.
Once they come to a formal agreement, the Fund will evaluate whether it's consistent with
the debt sustainability targets that I had referred to earlier. In terms of the Fund's role,
we've attended some of these meetings on the PSI as an observer. We bring to the table
our experience with PSI arrangements in other countries as well as our economic
assessments and expertise. But again in the end it's up to Greece and its creditors to come
to the agreement.
Let me take one more online question. The question is on Pakistan. It says, "Pakistan's
economy is not performing well. Is this a cause of concern for the Fund?" I don't have too

much on Pakistan, but we did have an Article IV discussion recently that was in November
and we had a press release around that time, so I would refer to that press release. Clearly
the 2011-2012 outlook for the economy is challenging and in this context, containing the
budget deficit and the cautious monetary policy, responsive exchange rate, et cetera, are
key to help Pakistan get back on the path of growth and sustainability.
QUESTIONER: On the PSI, do these discussions have to be completed before the IMF can
make an assessment on another program or financing for that, which would mean there's a
timeline here? If the team is going next week, the PSI should be wrapping up then surely.
The other issue is, was it made clear or is it important also this time that the Greek
program is fully financed? We know that if the PSI does not get what is necessary to reduce
the debt that there's going to be a financing gap and the question is who's going to make
that up. If you speak to the IMF board members, they will say it's not going to be the IMF.
So the question has to be raised what kind of pressure is the IMF putting on Europe to then
make up that money?
I want to clarify on Egypt. Were there informal discussions beforehand, and who's leading
that mission? Is Masood Ahmed going to be doing that? According to my sources, he's
going to go ahead before to talk to the authorities.
MR. RICE: Masood will be leading the mission. I don't have anything on going out earlier or
anything like that. But, yes, it would be Masood Ahmed, who is our Director for the Middle
East Department. On PSI, I think we would say along with others that the sooner the better
to complete the deal; that it's one of the key issues obviously in the overall financing of
Greece's needs. We always require full financing of any program in which we are involved
or might be involved. And I think as I said earlier, we need to wait and see what the details
and the final conclusions of the deal are, make an assessment of that how it meets the debt
sustainability targets that have been set and then the combination of PSI and OSI official
financing, private financing, that might be required and the precise combination.
QUESTIONER: My question is about Madam Lagarde's visit. Is she going to visit the Middle
East region? My second question about Egypt is we are going to have a mission from the
IMF to Egypt. What's your opinion about the current economic situation now in Egypt? And
are you expecting to have a deal with the Egyptian government? Thank you.
MR. RICE: On the Managing Director's travels, she has actually made a point to be visiting
most of the regions representing the entire global membership of the IMF in her first 6
months. She's traveled to Asia, she has traveled to Europe and to Eastern Europe. She has
traveled to Latin America. And she was in Africa up until last weekend and traveling there
so that that's part of a deliberate reach to the global membership.
What I can tell you on the Middle East is that there are tentative plans for the Managing
Director to visit some countries next month. We will come back to you with countries, dates
and confirmation of that trip. But again it's set in that broader context of the Managing
Director reaching out to the global membership of the IMF. On Egypt, you had heard what I
had said earlier. The objective of the mission indeed is to identify how the Fund can support
an Egyptian program. As I said, it's the first step in a process. The authorities are still
updating their economic program and the visit will allow the Fund to update our assessment
and then we'll be working together to take it from there so that we'll be able to update you
on that once the mission is underway and completes and in the usual way we'll be
publishing information on that.
Thank you very much. I'm going to wrap up here. Thanks to you all for coming, both in the
room and online. We'll see you in the very near future.