The International Monetary Fund (IMF) approved here Thursday a four-year 28 billion euro (USD 36.7 billion) arrangement under the Extended Fund Facility (EFF) for Greece" in support of the authorities' economic adjustment program." The IMF said in a statement that the approval "allows for an immediate disbursement of about 1.65 billion euro (USD 2.2 billion)." In this regard, IMF Managing Director Christine Lagarde said in a statement that "Greece has made tremendous efforts to implement wide-ranging painful measures over the past two years, in the midst of a deep economic recession and a difficult social environment." She added that the "fiscal deficit has been reduced markedly and competitiveness has gradually improved." "However, the challenges confronting Greece remain significant, with a large competitiveness gap, a high level of public debt, and an undercapitalized banking system," she stressed.
She affirmed that the "new Fund-supported program will enable Greece to address these challenges while remaining in the Eurozone." She noted that the Greek authorities "are fully committed to these ambitious objectives and stand ready to take any additional measures as may be necessary." "Greece's priority is to undertake competitiveness-enhancing structural reforms. The government's bold labor market measures will play a crucial role in this regard, complemented by measures to liberalize professions and product markets, improve the business environment, and privatize state-owned assets," she remarked.
"Significant further fiscal adjustment is necessary to put debt on a sustainable downward trajectory. Reaching a primary surplus of 4.5 percent of GDP by 2014 will require politically difficult cuts in government spending, as well as decisive measures to address tax evasion," she indicated.
According to the IMF, "the bulk of fiscal adjustment, however, will take place in 2013-14 to bring the primary balance to the new target of 4.5 percent of GDP." The Fund added that "to improve the fiscal position, the government will focus on improving tax collection, but even with an ambitious effort in this area some 5.5 percent of GDP in additional spending cuts will be needed."