International Monetary Fund approves 2.2-billion-euro rescue fund for Greece

The International Monetary Fund (IMF) on Monday approved the release of a long-delayed tranche of rescue fund for Greece under the joint IMF-European Union (EU) bailout program following headway made in Greek fiscal reforms, but pressed the nation to beef up structural reform efforts.

"The Executive Board of the IMF today completed the fifth review of Greece's economic performance under a program supported by a three-year Stand-By Arrangement (SBA) for Greece," the Washington-based IMF said in a statement.

The completion of the review enabled the immediate disbursement of an amount equivalent to special drawing right (SDR) 1.9 billion (about 2.2 billion euros), bringing total Fund disbursements under the SBA to an amount equivalent to SDR 17.5 billion (about 20.3 billion euros), said the global lender.

"Greece has substantial achievements to its credit, including a large fiscal deficit reduction. However, the program is in a difficult phase, with structural reforms proceeding slowly, the economy weak, and the external environment deteriorating. This has warranted a substantial downward revision to the medium-term outlook," said Christine Lagarde, the IMF Managing Director.

"The creation of a national unity government and the endorsement of program objectives and policies by major parties is an important step. The new government should use its wider mandate to steadfastly implement the program, which is the best way to help Greece manage the risks it now faces," noted Lagarde, also the IMF's Executive Board Chair.

Last week, Eurozone gave the green light for the release to cash-strapped Greece of the sixth tranche of the EU-IMF loan package locked since September due to missed deficit-cutting targets and delays in critical economic reforms.

"Fiscal adjustment remains the most immediate challenge for the authorities. The recent enactment of new measures will help correct implementation slippages. Adjustment efforts will have to be supported by a prompt implementation of underlying fiscal reforms, which are necessary to downsize the public sector and strengthen tax collection," she added.

The global lending agency's loan installment stood at 2.2 billion euros in the key 8-billion-euro tranche delayed for months that led to the downfall of former Prime Minister George Papandreou.

"Preserving financial sector stability is another key challenge. Plans to recapitalize banks are in place alongside a revised resolution framework that can help avoid disruptions to depositors and contain public sector costs. Viable banks should continue to have access to liquidity support," Lagarde added.

Asked whether the IMF and its European partners will consider a second bailout program for Greece last week, Gerry Rice, an IMF spokesperson, said the global lender was focused at present on the current 110-billion-euro bailout program extended to Greece last year.

"Structural reforms must accelerate to help improve competitiveness via productivity growth. Plans are in place to reduce high labor taxes, and the authorities must also finalize the liberalization of closed professions and implementation of business environment reforms," Lagarde urged.

Created in 1952, SBA is a commonly-used lending instrument for IMF member economies who need financing to help them overcome their balance of payments problems.