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By Matthew Russell Lee, CJR PFT NY Post

NEW YORK CITY, August 2 – When the International Monetary Fund held its biweekly embargoed media briefing on July 25, Inner City Press submitted five questions including on Jamaica and Lebanon which the IMF answered, see below. On August 2 on Zambia the IMF said, "On July 24, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Zambia. Zambia’s development strategy has focused on a rapid-scaling up of public investment to address the country’s infrastructure needs. While public investment has increased sharply, economic growth remains well below levels seen earlier this decade and is estimated at 3.7 percent in 2018. Inflation averaged 7 percent in 2018, but a depreciation of the currency late in 2018 and again this spring coupled with food price rises has pushed inflation above 8 percent. Fiscal revenues exceeded budget targets in 2018, but the deficit widened above 10½ percent on a commitment basis (over 8 percent of GDP on a cash basis) due to a rising interest bill and a surge in public investment reflecting faster than expected execution of public investment projects. Total public and publicly-guaranteed (PPG) debt including arrears at end-2018 was 78 percent of GDP. The current account deficit widened to 2.6 percent of GDP in 2018 due to higher imports and debt service, while reserves declined from 2.4 months of import cover in 2017 to 1.9 months at end-2018.  The outlook is clouded by the ongoing drought and heightened debt vulnerabilities. Growth is projected to slow to 2 percent in 2019, reflecting a decline in mining sector activity in an uncertain environment for mining companies and the drought’s impact on hydro power production. Absent significant policy adjustments, growth is likely to remain subdued over the medium term as expenditure arrears and an ongoing forced adjustment in response to increasing debt-related pressures weigh on the private sector. Inflation is projected to remain above the top of the Bank of Zambia’s (BoZ) target band in 2019 and 2020. The BoZ increased the policy rate by 50 bps to 10.25 percent in May. While the central bank has moved to shore up reserves as market conditions have permitted, reserves are projected to decline to 1.6 months of import cover by end-2019. Key risks include the uncertain impact of the drought, a potential tightening of global financial conditions, a further escalation in trade tensions, and the uncertain growth dividend from recent infrastructure investments.   Executive Board Assessment [2]  Executive Directors agreed with the thrust of the staff appraisal. They noted the deterioration in macroeconomic outcomes in Zambia and heightened vulnerabilities due to the ongoing drought and recent policy slippages.  Directors welcomed the Cabinet decision in late May to indefinitely postpone the contracting of all new non‑concessional loans, cancel some committed but undisbursed loans and enhance the control and management of disbursements of foreign‑financed loans, and to strictly adhere to public financial management rules under the 2018 PFM Act. Directors emphasized that strong actions would be needed to reduce debt‑related vulnerabilities and called for continued efforts to enhance debt management and transparency. They urged the authorities to address weaknesses in procurement and in project selection and management to ensure prioritization and greater investment efficiency. They also stressed that stronger procedures are needed to ensure that budget execution reflects the authorities’ fiscal goals. Directors noted the importance of ongoing and future technical assistance in enhancing the authorities’ capacity in these areas.  Directors welcomed the recent monetary tightening by the Bank of Zambia (BoZ). They underscored the important role for forward‑looking monetary policy in securing macroeconomic stability and supporting reserves, in conjunction with a reorientation of the fiscal stance. They commended BoZ’s actions to implement the recommendations of the 2017 FSAP, including strengthening its supervisory capacity and enhancing the crisis preparedness framework. Directors urged the authorities to closely monitor pressures from the macrofinancial linkages between the financial system and the sovereign. They also recommended continuing to address nonperforming loans." How? By foreclosing? We'll have more on this.

On July 25 on Jamaica Inner City Press asked, "given that the $1.6-billion Precautionary Stand-By Arrangement comes to an end in November, please state and explain what the functions will be of the IMF office that, unlike elsewhere, is to remain in the country for two years after the expiration of the SBA." Spokesman Gerry Rice, after reading out the question from "our friend Matthew Lee in New York" - these days covering it from the U.S. District Court for the Southern District of New York SDNY amid cases about for example Nigerian oil and GSE bonds - replied that it is be no means unheard of for the IMF to keep and office behind after a program. Inner City Press might add that it has given rise to enough concern among some Jamaicans that the IMF wrote to the Gleaner... 

From the IMF transcript, Rice: "On that one, I'd like to refer to a letter that was actually published by our mission chief in Jamaica, Uma Ramakrishnan and that was published in the Glean[e]r newspaper in Jamaica just yesterday. So, I urge you to take a look at that. I would also add that since 2013, we have had consecutive IMF-supported programs. Jamaica has established an exemplary track record of economic reform achieved through commitment and implementation of the Economic Reform Program. Now in that context then, IMF and the Jamaica Government consider it useful to have that office open, remaining open in Jamaica with the ResRep to continue the support in the post-program period, and as we transition from program to the Article IV annual process with Jamaica, and to continue to support Jamaica with capacity building. And what I can say is, you know, the question said that this as suggested that this was unlike elsewhere. In fact, this is not an unusual arrangement, so it's not unique to Jamaica by any means."

On Lebanon Inner City Press asked, "what is the IMF's comment on or response to PM Hariri having said, "I know the IMF has some reservations, but also if we want to adopt everything the IMF does ... (well then it also) proposes that we leave the Lebanese pound to float, that it go up and down as it wants." The IMF had also requested an increase of fuel excise in addition to an increase in VAT, Hariri said.  What is the IMF's comment?" On this, Spokesperson Rice said, "What's the IMF's comment on that? I would refer you to the recent concluding statement of our staff mission to Lebanon which said, amongst other things, rebalancing the economy in the current framework of an exchange rate peg requires strong implementation of a large and credible fiscal adjustment and ambitious structural reforms." We'll have more on this.

 Back on June 27, on Pakistan Inner City Press asked, "On Zimbabwe, what is the IMF's response to Finance Minister Mthuli Ncube saying 'The first order of business is to clear the arrears and then move on to phase two, which is the bilateral discussions with the Paris Club' - asked if Zimbabwe would seek financing from the IMF next year, Ncube said: 'Why not? We can only ask, they can only say no'?"  Camilla Andersen, Assistant Director of the IMF's Communications Department, read out Inner City Press' question and replied among other things that while Zimbabwe has cleared its arrears to the IMF, other debts that would have to be cleared remain. She cited the Staff Managed Program running into 2020 (transcript to come).

 On Moldova Inner City Press asked, "On Moldova, please confirm or deny this from the government: "The head of the IMF mission, Ruben Atoyan, said that the International Monetary Fund had quite attentively monitored the situation in Moldova and that the Fund showed full openness to help Moldova.  ... The resumption of the negotiations with the International Monetary Fund and implementation of the provisions of the memorandum of economic and financial policies will allow Moldova receiving the last two installments of the financing program on behalf of the Fund, worth about 66 million Dollars."  The IMF's Camilla Andersen replied among other things that the the IMF has disbursed $112 million under the program and continues to assess (full transcript to come). 

Back on June 13 Inner City Press asked, "what is the IMF's response to JI leader Sirajul Haq criticism of the "budget of IMF purely concentrating only on increasing taxes and prices of essential commodities, and was just read out by its slaves.  He said the budget did not care about reducing the problems of common man and price hike, adding that it was just a jugglery of figures and words which was incomprehensible even to the economic champions of the government."

  IMF Spokesperson Gerry Rice in the briefing said, transcript and video here: "There is a question on Pakistan, from our friend Matthew Lee in New York, asking in summary what is the IMF's response to the criticism of the Pakistani budget which was recently announced that the IMF is purely concentrating on increasing taxes and prices and doesn’t care about reducing the problems of the common man. Again, stepping back, Pakistan has requested a program from the IMF. Last month we reached a staff level agreement on that program so that’s now under discussion. So, I don’t really have a specific comment on the budget.  But in terms of our discussions, I can say that we are talking about broadly how to restore stronger, more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency and importantly protecting social spending. So that last part does indeed speak broadly to the point that Matthew is raising, that social spending is and protecting social spending is in fact an important part of the discussion that we are having on a program with Pakistan."

 Inner City Press asked asked, "On Kenya, please state the status with the IMF given reports that the country is "on course to renewing its $1.5 billion standby credit facility with the IMF signing a deal with selected banks to release close to Ksh1 trillion ($10 billion) in loans to the private sector despite the prevailing rate caps."  On the upcoming June 25-26 Bahrain conference on Palestine, given that the IMF has said it "has been invited to the meeting and expects to attend, along with other international financial institutions," please state if the IMF understands that the wider United Nations will attend, and/or has been invited."

Rice said, "There is a question on Kenya. “Please give the status of the IMF program with Kenya given reports that it's on course to renew its standby credit facility.” And on that about all I can say is that negotiations indeed are ongoing on a Fund supported program. I don't have a timetable on that but with the negotiations are underway."

  Inner City Press asked asked, again, for an update on Haiti.

 Rice said, "There is a final question online that I want to take which is on Haiti and asking about developments there and the status of IMF discussions on a program. And again, this is a case where recently there have been protests on the streets and some violence I'm sad to say. So, on that front of course as always, we express our condolences for the loss of life there in Sunday's demonstrations in particular. And, what I can also say is that of course we hope that the dialogue can go forward there and, you know, eliminate the violence that’s taking place and that we can have some consensus around a reform agenda.  On the program and discussions around the program, given the time that has now elapsed since the IMF team reached a staff level agreement, that was back in March. And given the changes in Haiti's' economic situation a reassessment of the economic framework and of the measures needed to stabilize and support the economy is going to be needed before we would be in the position to propose a program to our executive board. That said, we look forward to engaging with Haiti's new government as soon as feasible to find the best way forward and to protect the most vulnerable groups, improve governance and secure macroeconomic stability. So that’s where we are on Haiti."

  It's appreciated.

On May 23 Inner City Press asked, "what is the IMF's response to / comment or explanation on  the May 15 letter addressed to Congolese Prime Minister Clement Mouamba that "The advisers to the Republic wish to make you aware of the major risk of the programme’s rejection by the IMF’s board,” said Congo hired French financial advisers Lazard and more recently Parnasse, a firm employing former IMF Managing Director Dominique Stauss-Kahn, to assist it in the negotiations with the Fund. How is this not a conflict of interest?"

  IMF spokesperson Gerry Rice to his credit took the question, on camera, emphasizing that the discussion have been only between IMF staff and the authorities, no one else. He said that address the conflict of interest question. He also noted the IMF's May 9 announcement of a staff level agreement. But when will it go to the Board?

 On Barbados, Inner City Press asked for "   the IMF's response to Senator Crystal Drakes saying  that the Mia Mottley administration may have hit the benchmarks set under the IMF-sanctioned Barbados Economic Recovery and Transformation programme but is ignoring it’s sustained and impending collateral damage to the society.  “All of this has come at a social cost. Meeting those targets have been economic winds but socially we have paid a serious price for meeting those targets.  “In reducing our debt and closing the fiscal gap, Barbadians had to give up their wealth, particularly the vulnerable group of pensioners.  “Their disposable income through higher taxes and user fees, has resulted in persons falling below the poverty line.”

  Rice said the IMF's discussions had been with social partners including the unions and that the floor for social spending had been met, by an ample margin, in December and March.

More on this, including transcript, to follow. And on this:

  As China uses its Belt and Road Initiative to take over ports in Sri Lanka and prospectively Kenya, while using supposed NGOs to bribe UN officials including bidding on an oil company owned by Gulbenkian Foundations whose payments to UN Secretary General Antonio Guterres were omitted from his public financial disclosure covering 2016, even the IMF's Christine Lagarde is genuflecting in Beijing, albeit less cravenly than Guterres. Unlike Guterres' obsequious blue washing of BRI, Lagarde in her April 26 speech as least gently chided China for unsustainable loans. She said, "The BRI is clearly having an impact. From stimulating infrastructure investment to developing new global supply chains, some of the promises of BRI are being realized. Consider Kazakhstan, where a new manufacturing zone is beginning to unleash previously untapped economic potential. Or look at Senegal, where robust economic growth of over 6 percent in each of the last four years was supported partly by BRI-linked investment projects, including the construction of a new highway linking the airport to three large cities. At the same time, history has taught us that, if not managed carefully, infrastructure investments can lead to a problematic increase in debt. I have said before that, to be fully successful, the Belt and Road should only go where it is needed. I would add today that it should only go where it is sustainable, in all aspects." But what does this mean in terms of the BRI loans to Sri Lanka, and to the Kenya railroad? We'll have more on this.

More here.

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