After lengthy delays, the IMF unblocked part of its aid to Greece on Wednesday, offering a brief respite to the recession-mired country grappling with austerity measures.
The amount released — 3.2 billion euros (US$4.3 billion) — might seem a mere footnote to the 172 billion euros international bailout for Greece in March last year, the second rescue effort after a 2010 aid program foundered.
“Greece’s fiscal effort has been impressive by any measure,” IMF managing director Christine Lagarde said in a statement.
The deep deficit slashing the country has been forced to undertake from the beginning of the program will help get Athens back to the spending levels prior to the crisis, she said, “and has been designed to protect the most vulnerable.”
However, she warned: “Much more remains to be done to achieve the critical mass of reforms needed to boost productivity and lower prices.”
“Looking ahead, Greece needs to radically overhaul its tax administration to bolster tax collections, fight tax evasion and shrink the public sector, in particular through targeted redundancies,” she said.
The IMF executive board approved the release of the funds after completing the first and second reviews of Greece’s economic performance under the program, which saw the board waiving some performance criteria and modifying others.
The EU had acted more swiftly than the IMF, releasing 34.3 billion euros in the middle of last month that had been frozen. The eurozone is expected to approve a another 9.2 billion euros installment in the coming days.
The fresh IMF payment is part of a four-year, 28 billion euros Extended Fund Facility loan.
The IMF released an initial 1.6 billion euros, but froze subsequent payments in view of Athens’ failure to meet the loan program’s criteria and concerns that the debt burden was unsustainable.
In November, after intense negotiations with European authorities, the IMF abandoned its 2020 goal for reducing Greece’s debt burden to 120 percent of GDP and accepted a compromise of a 124 percent debt-to-GDP ratio.
Greece’s debt currently stands at about 170 percent of GDP.
Greece must continue to restructure and strengthen the banking system, Lagarde said, noting that additional financing from eurozone member states to allow Greece to redeem treasury bills from banks could support liquidity and credit creation.
Separately, the IMF also released a 838.8 million euros installment of its loan program to Portugal, while calling the country’s efforts to reform its economy impressive. The latest money released is part of a 78 billion euros bailout agreed in 2011.