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IMF releases $4.6 bn in bail-out funds for Greece

31 May 2014

The International Monetary Fund (IMF) has released $4.6 billion in aid to Greece, after a year-long delay to ensure that Athens was meeting the targets set by bailout lenders.

The disbursement followed the Euro group's release of 6.3 billion ($8.6 billion) in rescue programme support to Greece at the end of April, following progress in cleaning up of finances by the Greek government and the narrowing its budget deficit.

The executive board of the International Monetary Fund (IMF) on Friday completed the fifth review of Greece's performance under an economic programme supported by an Extended Fund Facility (EFF) arrangement.

The disbursement of SDR 3.01 billion (about 3.41 billion, or $4.64 billion) would bring total disbursements under the arrangement to SDR 10.22 billion (about 11.58 billion, or $15.75 billion), IMF said.

The IMF board also waived the nonobservance of the performance criterion on domestic arrears in the light of corrective actions taken by the government. The loan has also been rephrased in three disbursements to remove the anomalies caused by the delays in programme implementation.

The EFF arrangement, which was approved on 15 March 2012, is part of a joint package of financing with euro area member states amounting to about 173 billion over four years. It entails exceptional access to IMF resources equivalent to about 2,159 per cent of Greece's quota.

''The Greek authorities have made significant progress in consolidating the fiscal position and rebalancing the economy. The primary fiscal position is in surplus ahead of schedule, and Greece has gone from having the weakest to the strongest cyclically-adjusted primary fiscal balance in the euro area in just four years.

However, several challenges remain to be overcome before stabilization is deemed complete and Greece is back on a sustainable, balanced growth path,'' Naoyuki Shinohara, deputy managing director and acting chair, stated at the end of the board meeting.

He said the Greek government should ensure additional fiscal adjustment that is necessary for debt sustainability, through durable, high-quality measures, while strengthening the social safety net.

''Despite significant wage adjustment, export performance remains comparatively weak. The redoubling of efforts to liberalise product and service markets is therefore welcome. Further measures are necessary to remove regulatory barriers to competition in key sectors and to reform investment licensing. The authorities are committed to revitalizing labor market reforms and improving the business climate.

''Addressing the very high level of nonperforming loans remains an important priority. While there is no acute stability risk, it is critical for the economic recovery that banks be adequately capitalised upfront to recognize losses on the basis of realistic assumptions about loan recovery. Efforts are being made to recapitalise the banking system and set aside the buffer of the Hellenic Financial Stability Fund to deal with contingencies that may arise during the programme.''

IMF noted that Greece's European partners have assured that they will consider further measures and assistance, if necessary, to reduce debt to substantially below 110 per cent of GDP by 2022, conditional on Greece's full implementation of the programme.

The Greek government, however, has fought to limit the austere demands of lenders, as it remained stuck in a grinding recession dating back to 2008.

The economy remained in recession in the first quarter of 2014, contracting at a 1.1 per cent annual pace, but is expected to achieve overall growth of 0.6 per cent this year.


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