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Transcript on the October 2018 International Monetary and Finance Committee Press Briefing

October 13, 2018

Participants:

Lesetja Kganyago, Governor, Reserve Bank of South Africa & IMFC Chair

Christine Lagarde, Managing Director, IMF

Gerry Rice, Communications Director, IMF

Mr. Rice: Good afternoon, everyone, and welcome to this press conference on behalf of the IMFC, that is the International Monetary and Finance Committee. The meeting just ended. I believe you all have a copy of the communiqué, and I am very pleased that we have with us to talk about that communiqué and the meeting, the Chairman of the IMFC, Mr. Lesetja Kganyago, who, as you know, is the Governor of the Reserve Bank of South Africa. And we also have with us, of course, Madame Lagarde, Managing Director of the IMF.

We are going to have a brisk press conference today, so the Chairman will begin. We will take a few questions, and then we will be running off to something else. First of all, let's hear from the Chairman.

Mr. Kganyago: Thank you very much, Gerry, and good afternoon, everyone. Let me start by extending our deepest sympathies to the people and the government of Indonesia on the recent devastating natural disasters. Our discussions in the IMFC were very productive.

As you see from the IMFC communique, the global expansion remains strong; however, the recovery is increasingly uneven. Some of the previously identified risks have partially materialized amid heightened trade tensions and ongoing geopolitical concerns, with tighter financial conditions particularly affecting many emerging markets and developing countries.

Policy uncertainty, historically high debt levels, rising financial vulnerabilities could further undermine confidence and growth prospects. That is why it is so important to advance policies and reforms to protect the expansion, mitigate risks, rebuild policy space, enhance resilience, and raise medium-term growth prospects for the benefit of all. That means ensuring growth-friendly, flexible fiscal policies and rebuilding buffers where needed, having data-dependent, well-communicated monetary policies, and advancing financial and structural reforms.

The communiqué also recognizes the need to continue to step up dialogue and actions to mitigate risks and enhance confidence in international trade. To support this, we will continue to work for a fair and modern international tax system, strengthen collaboration to liberate financial technology, while addressing associated risks, and tackle sources and channels of money-laundering and other illicit finance.

We will also refrain from competitive devaluations or otherwise target exchange rates for competitive purposes. To address concerns about rising debt vulnerabilities in many countries, we are working together to enhance debt transparency and sustainable financing practices by debtors and creditors, both public and private, and to strengthen creditor coordination in debt-structuring situations. We will also continue to support efforts to achieve the 2030 Sustainable Development Goals.

Finally, the Committee reaffirmed its commitment to concluding the 15th General Review of Quotas and agreeing on a new quota formula and called on the Executive Board to work expeditiously towards its completion by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019.

Before taking your questions, I would like to express our deepest appreciation to the Indonesian government and its people for the hosting of the 2018 Annual Meetings in Bali and for their warm hospitality.

Mr. Rice: Thank you very much, Mr. Chairman. Let me turn to the questions, and let me begin with our hosts, Indonesia, and the Metro TV in the front row. Thank you.

Question: Thank you. I have two questions. First of all, I would like to ask what do you think about the President of Indonesia's remark yesterday that used the analogy of the Game of Thrones, winter-is-coming remark, to depict the current situation of the global economy, and to what extent do you agree with this?

And the second question would be, what kind of measures are the IMFC and IMF planning to take in order to deescalate the current economic tension? Will you be producing sort of a communique to encourage the USA and China to commence trade talks, or will you be a mediator? Thank you very much for your attention.

Ms. Lagarde: Thank you so much, and through you and through your television and to all Indonesian people, thank you, because you have really hosted us with generosity. Your hospitality was warm and friendly and really also the spirit of Bali on the occasion of these Annual Meetings.

I have to tell you, President Joko Widodo's presentation was nothing less than astonishing and impressive. It was the master presentation of creativity, conviction, and invention, as well. So after him, as we said, we could only deliver a relatively weak presentation because he had captured it all. And for me, in addition to the communiqué that you have seen and that I am sure you will take time to read, which encapsulates all the technical assessments and the joint approach that we recommend, I think what will stay with me in addition to the smile of Bali, the spirit of Bali, and the resilience of all people in Indonesia, including in Lombok, which I visited on Monday, but from a pure economic and financial standpoint, I think it will be the Bali Fintech Agenda, which really captures the 12 key principles that we want the membership to address, verify, to make sure that the extraordinary technological developments that we are seeing in finance are actually for the benefit of people and do not shake the financial stability of the world.

The second thing I will remember is the sailing analogy, because we called this whole Annual Meetings Sailing to Indonesia. Well, as I said, steer the boat. Do not drift, and sail together, because we will be stronger together. What it means is focus on your policies. Make sure that they are the right ones in the face of economic developments. Do not drift, and let's cooperate as much as we can because we are stronger together.

Mr. Rice: Thank you. Mr. Chairman, would you like to add something?

Mr. Kganyago: There was a question about the Game of Thrones. I think that the presentation of the President was not just spectacular; it communicated very complex issues in a very simple manner using stories that people are familiar with, whether you are talking about trade tensions or you are talking about global cooperation, as the President communicated it in such simple terms, and I think that you could be proud to be led by a man like him.

Mr. Rice: Thank you, Mr. Chairman. Let me take Bloomberg in the front row, please.

Question: Thank you very much. Question for Madame Lagarde, two if I may. Firstly, will you travel to Saudi Arabia for the Davos in the Desert? And, secondly, could I ask you to sum up the mood here. There was a lot of talk about risk, but also a lot of talk that the global economy is doing quite well. Is there a disconnect or any kind of consensus? Thank you.

Ms. Lagarde: On the second one, I think the consensus is that the growth is strong and positive. 3.7 percent is way above the average growth that we have had in the last 10 years, but it is plateauing; so I think it is not inconsistent to have a plateaued growth and downside risks that are the clouds on the horizon, some of which have begun to open up, which is why both in terms of the level of debt around the world, we have given strong recommendations, and in terms of trade, deescalate and, please, dialogue, is clearly certainly our message from the IMF.

Now, on the other topic, human rights, freedom of information, are essential rights; and horrifying things have been reported, and I am horrified. But I have to conduct the business of the IMF in all corners of the world and with many governments. And when I visit a country, I always speak my mind. You know me. I do. So at this point in time, my intention is to not change my plan and to be very attentive to the information that is coming up in the next few days, but I speak my mind.

Mr. Rice: Thank you, Madame Lagarde. I am going to take one more question, and that is going to be from our South African colleague in the front row.

Question: Thank you. Governor, if you could address in terms of the Africa Rising narrative, we had a briefing this morning, and there are three elephants that are holding the Africa Rising down. That is namely, Angola, Nigeria, and South Africa. Is the Africa Rising narrative still floating upwards, or is it being tethered by the lead balloons?

Then if you could also indicate in terms of the IMF programs, there is lots of African countries that are waiting for assistance and have approached the IMF. If you could just update us in terms of timelines and how much they are looking for. And then, lastly, in terms of the Bali Fintech Agenda, if you could comment on an alternative to SWIFT; what are the plans? What are the IMF's views on the alternative to SWIFT? Thank you.

Mr. Kganyago: Thank you very much. Africa Rising, Africa continues to rise, but let's not deceive ourselves. Africa is a commodities play, and so when you are building that Africa Rising narrative, there was also the issue of commodities. But lots of countries have also begun to diversify. South Africa, we know, is one of the more diversified economies. And, quite frankly, if you were to take Nigeria and South Africa out of Sub-Saharan Africa, Sub-Saharan Africa is still growing very strongly, so let us not think that Africa has stopped rising. The fact that the two biggest economies have slowed down does not mean that Africa is not rising anymore. Africa is still rising.

The Fintech Agenda was not about an alternative to SWIFT. It was about the Fintech Agenda, and I think that is a very good platform on which we can build. Fintech offers incredible opportunities for financial inclusion; and just using some of the statistics, more than half of the mobile payment users are set to be on the African continent, and the reason is not hard to find. The reason is that where you have got very low banking penetration, the opportunities to use technology are actually significantly heightened.

There is a second aspect of fintech that would also be important, which has to do with cross-border remittances. I do not know if you know of the SADC (Southern African Development Community) RTGS (real-time gross settlement), which facilitates the movement of money within SADC, and it deals with one important issue, which is it has to do with the deadline in correspondent banking, because through that system, we are able to limit funds within the SADC region using technology.

And, third, you will be aware of the pilot that South Africa did in a project called Project Khokha, which was the utilization of distributed ledger technologies to settle payments within the payment systems, so within the payment, national payment assistance; and in the pilot, we were able to settle the volume that we normally settle in a whole day, we were able to do it in 1-1/2 hours.

So there are immense opportunities with respect to fintech, but as the Bali Agenda states, there are also risks that we are going to have to deal with, including whether regulators are geared to be able to make sure that the users of financial services are adequately protected with fintech. Without a doubt, it offers an incredible opportunity to broaden access to financial services.

Mr. Rice: Thank you, Mr. Chairman. Thanks, Madame Lagarde. Thanks to all of you. Thanks to Indonesia.

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