The IMF on Thursday approved 28 billion euros (US$36.56 billion) in funding for crisis-hit Greece over the next four years, while Standard and Poor’s (S&P) warned that the country’s new bonds remained vulnerable to default despite this month’s massive debt writedown.
The IMF’s executive board granted the immediate release of 1.65 billion euros of these funds as part of the country’s second bailout, a statement said.
Greece will receive a total 172.7 billion euros in rescue loans from its eurozone partners and the IMF to keep it afloat until 2016, as dizzily high borrowing rates have blocked its ability to raise money on the international bond markets.
IMF Managing Director Christine Lagarde said risks to Greece’s austerity and reform program still “remain exceptionally high, and there is no room for slippages.”
She said new pain lies ahead for Greeks, despite tough measures over the past two years.
“Full and timely implementation of the planned adjustment — alongside broad-based public support and support from Greece’s European partners — will be critical to success,” she said in a statement.
“Significant further fiscal adjustment is necessary to put debt on a sustainable downward trajectory,” Lagarde said, adding that politically difficult additional spending cuts worth about 5.5 percent of GDP — about 11 billion euros — lie ahead next year and in 2014.
The IMF forecast that the economy would shrink between 4.5 and 5 percent this year, while recovery is expected to begin next year.
The new bailout cash was approved after Greece secured a massive debt-reduction deal with banks and other private bond holders, swapping old government bonds for new ones that have better terms.
The ratings agency S&P assigned a “CCC” score — or still vulnerable to default — and said Greece’s sovereign rating would remain in selective default until the exchange was completed next month.
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