Transcript of a Conference Call on Jordan’s Stand-By Arrangement, Morocco’s Precautionary and Liquidity Line and the IMF’s Engagement in the Middle East and North Africa
Portions related to Iraq are underlined
Friday, August 3, 2012
MR. ANSPACH: Hello, everybody, and thank you for joining this conference call on Jordan, Morocco, and the IMF engagement in the Middle East. With us today is Mr. Masood Ahmed, who’s the director of the IMF’s Middle East and Central Asia Department, as well as Ms. Kristina Kostial, who is the mission chief for Jordan; and Mr. Dominique Guillaume, who’s the mission chief for Morocco.
Before we start, let me just remind you that the embargo for this press conference call and the press releases I sent to you belatedly, and I apologize about that, is [5 p.m.] Washington time. With that, I’ll turn over to Mr. Ahmed for introductory remarks and then we’ll be happy to take your questions. Thank you.
MR. AHMED: Thank you very much, Raphael. Welcome to all of you. As Raphael said, I’m Masood Ahmed. I’m the director of the IMF’s Middle East and Central Asia Department, and I’d like to make some introductory remarks before we turn to you for your questions. And then Kristina Kostial and Dominique Guillaume will be here with me to respond to those questions.
Let me just, by way of background, say that in the year and a half since the onset of the Arab Spring, the Arab countries in transition have been going through a lot of changes apart from the political transition. We’ve seen, on the one hand, the uncertainties within the countries and the strained outlook from Europe as well as the international economy, which have affected economic performance in these countries: activity has slowed sharply, unemployment has risen. And this has been documented in a number of our own reports, including the most recent Regional Economic Outlook update that we issued in May of this year. At the same time, within the countries, in response to higher energy prices and higher demand for social spending, fiscal deficits have risen, international reserves have declined, and buffers have been used up in a number of countries. And at the same time, investor sentiment has weakened, which has led to higher sovereign borrowing costs and the weakening in financial market indicators.
Against this background, the IMF has been engaged closely with these countries. We have recognized from the outset that one of the important lessons of the uprisings, of the Arab renaissance as it were, has been that macroeconomic stabilization needs to be accompanied by a program of inclusive growth that will generate jobs and ensure that economic activities are distributed more equitably. We have been listening to and working with the authorities to help them develop economic policies that are homegrown and are based on broad political consensus. So, one part of our activity has been to advise and to work with authorities on the design of these policies. And another dimension of our engagement has been to provide technical assistance in the region to help build capacity and stronger institutions. Perhaps as important, as we said from the beginning, we in the IMF have also been ready to help countries meet their financing needs.
And in this context, I’m very pleased to announce that the IMF Executive Board earlier today approved two financing arrangements in support of economic reform in two countries – one of them is the stand-by arrangement for Jordan, the second is a precautionary and liquidity line for Morocco. You got the press releases for both of them, but let me just say a word on each.
The second question is you decided today to extend for seven months for Iraq. Is it over two or three years? And what happens if Jordan cannot implement your conditions? It might happen because of the uncertainty in the region about the situation. Could you extend it more than six months for Jordan?
MR. AHMED: I’m going to turn to Kristina to answer the questions on Jordan. But let me just give you one answer on the general point about the length of the arrangement, whether it’s a question of Iraq as you mention now, or other countries in the future, including Jordan.
When we start a program, we start a program with a certain time period that the government has in mind during which they propose to implement a certain set of measures which they come up with and for which they would like financing from the IMF to help ease the process of transition. In some countries what happens over time is that either because of external reasons or because of domestic policy constraints, it takes longer than anticipated to complete those measures. And in those cases, the IMF is often quite flexible in saying okay, well if it takes a little bit more time, we can adjust the timing of the IMF’s own program to support that, if it’s still a coherent and sustainable effort. And so is the case of Iraq.
The Iraqi authorities asked for an extension to a program which was coming to its end because they felt they needed a little bit more time to complete some of the measures that had been anticipated for the last review. The program has thus and been extended, as you know, for seven months. The SBA is normally a three-year maximum length. But if there was a reason to extend the program by a couple of months, either at the end or at the time of individual reviews when our Board considers progress under the program, then sometimes those reviews also can be moved a little bit if it takes a bit of extra time for governments to complete the necessary measures.
But certainly our expectation is that this is a three-year program that the government has come up with. That’s what they’ve asked for our support for, and at this stage we’re very confident that those measures will be implemented in that time.