Press Release: IMF Executive Board Completes Fifth Review Under Stand-By Arrangement for Greece and Approves €2.2 Billion Disbursement
IMF News, December 5, 2011
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- Published: December 5, 2011
Fifth review outcome and disbursement
- The Executive Board completed the fifth review of Greece’s economic performance under a program supported by a three-year Stand-By Arrangement (SBA).
- Completion of the review enables the immediate disbursement of an amount equivalent to SDR1.9 billion (about €2.2 billion).
- Total Fund disbursements under the SBA now amount to an amount equivalent to SDR 17.5 billion (about €20.3 billion).
Performance criteria, waivers, and data revision
- The Executive Board approved:
- Modification of performance criteria.
- Waivers of non-observance of performance criteria related to:
- the primary cash balance for the general government,
- privatization receipts,
- external payments arrears.
- Waivers for the non-observance of the external payments arrears performance criterion following minor data revision after the approval of the arrangement.
SBA program design and exceptional access
- The SBA was approved on May 9, 2010 (see Press Release No. 10/187).
- The SBA is part of a joint package of financing with Euro area member states amounting to €110 billion over three years.
- The arrangement entails exceptional access to IMF resources, amounting to about 2,400 percent of Greece’s new quota as a result of the 2008 quota reform.
Managing Director Christine Lagarde — assessment and outlook
- Positive achievements noted:
- “Greece has substantial achievements to its credit, including a large fiscal deficit reduction.”
- Key risks and current difficulties:
- “The program is in a difficult phase, with structural reforms proceeding slowly, the economy weak, and the external environment deteriorating.”
- These factors “have warranted a substantial downward revision to the medium-term outlook.”
- Political context:
- “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.”
Policy priorities and recommended actions
- Fiscal policy
- “Fiscal adjustment remains the most immediate challenge for the authorities.”
- Recent enactment of new measures will help correct implementation slippages.
- Adjustment efforts must be supported by prompt implementation of underlying fiscal reforms to:
- downsize the public sector,
- strengthen tax collection.
- Financial sector stability
- “Preserving financial sector stability is another key challenge.”
- Plans to recapitalize banks are in place alongside a revised resolution framework to:
- avoid disruptions to depositors,
- contain public sector costs.
- “Viable banks should continue to have access to liquidity support.”
- Privatization
- “The government’s privatization plan can deliver higher investment, growth, and debt reduction.”
- Preparations must move forward expeditiously to give the Privatization Agency scope to meet the overall program target in a reasonable timeframe.
- Structural reforms and competitiveness
- “Structural reforms must accelerate to help improve competitiveness via productivity growth.”
- Plans are in place to reduce high labor taxes.
- Authorities must finalize:
- the liberalization of closed professions,
- implementation of business environment reforms.
- Debt sustainability and external support
- “Private sector involvement and prolonged support at low interest rates from European partners are crucial to reduce debt to a sustainable level.”
- “Near-universal participation in the proposed private debt exchange will be important to realize a sustainable debt position, meet financing needs, and ensure continued Fund support.”
Press Release No. 11/440 — December 5, 2011