The IMF remains positive about prospects for strong global growth in 2004 despite recent sharp increases in oil prices, the institution’s new Managing Director Rodrigo de Rato told reporters on June 9. Speaking at his first press conference since formally assuming his duties two days earlier, Rato noted that increasing strength in parts of the world economy and rising demand are likely to compensate for oil prices that are now $5 a barrel higher than forecast in the IMF’s April World Economic Outlook. Spring projections had global growth at 4.6 percent in 2004, and, Rato said, “we don’t see a risk that will be revised downward.”
In opening remarks to the journalists, Rato reiterated that he is “deeply honored” to have the opportunity to lead the IMF. Although important challenges await both him and the IMF, he expressed confidence that the institution can contribute to its members’ well-being—particularly through “high-quality, independent macroeconomic policy advice” and financial support when needed.
Rato’s first week in office was spent in meetings with senior staff and the three Deputy Managing Directors, and chairing a session of the Executive Board. He indicated that he would be traveling to seek the views of the IMF’s member countries. Later in June, he will visit Japan, China, Singapore, and Vietnam. Trips to Africa and Latin America are scheduled before the IMF’s fall annual meeting and to other regions thereafter.
What should the IMF’s role be?
Should the IMF focus on macroeconomic matters and mitigating financial crises and leave development work to others, notably the World Bank and regional development banks? The question, posed by one reporter but echoing an ongoing debate among shareholders and academics, drew a forceful reply from Rato. There will be few opportunities to reduce poverty without macroeconomic stability and growth, he said, adding that he was not one of those who think development is one thing and macroeconomic stability, another.
The IMF, Rato observed, has the specialized capacity to help countries overcome crises and design financial policies. It also has expertise that can be used to collaborate with other organizations. Different international and regional institutions have different mandates, he said, but “we are all working in the same direction.” In the area of trade, which is a clear prerequisite for development and growth, the IMF is collaborating not only with the WTO [World Trade Organization] but also providing technical assistance to countries to help them cope with complicated negotiations and the new rules of open economies.
Argentina and its creditors
Reporters also pressed Rato for his views on the status of Argentina’s recovery and ongoing debt negotiations. The Managing Director complimented the country’s “better than expected” macroeconomic performance but underscored that more progress is needed in key areas if the country is to put the crisis behind it. Here he pointed to the need to keep working on fiscal agreements with the provinces, the closing of an agreement with all creditors, the strengthening of the financial system, and a legal and administrative environment that will be helpful for private investment. An IMF team, Rato added, will shortly be going to Buenos Aires and will be working with the authorities to determine the degree of progress that has been made and “how we should proceed in the future.”
Iraq and the IMF
Could the UN Security Council’s endorsement of a sovereign interim government in Iraq pave the way for IMF postconflict assistance? The UN action, Rato said, clearly is “a very important step regarding the future of the new Iraqi Government” and the collaboration the IMF will have with it. The passing of the resolution will facilitate the international recognition of the interim government—a step required for a normalization of Iraq’s relations with the IMF. Emergency Postconflict Assistance could be the first step in IMF financing assistance; technical assistance and training programs are already being provided on a wide range of issues.