IMF Completes Third Review Under Extended Fund Facility Arrangement for Greece, Concludes 2013 Article IV Consultation
IMF News, May 31, 2013
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- Published: May 31, 2013
Third Review and Disbursement
- The Executive Board completed the third review of Greece’s performance under an economic program supported by an Extended Fund Facility (EFF) arrangement.
- Completion of the review enables the disbursement of SDR 1.5 billion (about €1.74 billion or US$2.26 billion).
- This disbursement would bring total disbursements under the arrangement to SDR 5.7 billion (about €6.57 billion or US$8.55 billion).
EFF Arrangement and Financing Package
- The EFF arrangement was approved on March 15, 2012 for a total amount of about €28 billion.
- The EFF is part of a joint package of financing with euro area member states amounting to about €173 billion over four years.
- The arrangement entails exceptional access to IMF resources equivalent to about 2,159 percent of Greece’s quota.
Economic Outlook and Program Focus
- Context: Greece faces a still contracting economy and very high unemployment.
- Expected trajectory: The economic downturn is expected to bottom out this year, with a gradual recovery taking hold in 2014.
- Program priorities implemented by Greek authorities include:
- Restoring fiscal sustainability.
- Reforming tax collection.
- Boosting competitiveness through structural reforms.
- Recapitalizing the banking sector.
Article IV Consultation
- The Executive Board concluded the 2013 Article IV Consultation with Greece, addressing policies from a longer-term perspective.
- A Public Information Notice (PIN) on the Board’s assessment of the Consultation will be released separately.
Managing Director’s Assessment and Policy Recommendations (Ms. Christine Lagarde)
- Positive assessment:
- “The Greek authorities have made commendable progress in reducing fiscal and external imbalances and in restoring competitiveness.”
- Authorities are “well underway to complete [the] ambitious fiscal adjustment plan” and “on track to meet its 2013 fiscal targets.”
- Fiscal policy recommendations:
- Tackle tax evasion by pressing forward rapidly with reform of the revenue administration to improve operational independence and make the burden of adjustment more equitable.
- Resist pressures to reduce taxes using the space from any fiscal over-performance.
- Undertake decisive public administration reforms, including targeted staff reductions, to lower costs, improve efficiency, and increase fairness.
- Structural and competitiveness reforms:
- Continue far-reaching labor market reforms that have increased wage flexibility.
- Accelerate broader structural reforms to enhance productivity and improve the business environment, including the liberalization of regulated professions and other product and service markets.
- Ensure reform reduces costs, improves efficiency, and ensures the burden of adjustment does not fall solely on wages.
- Financial sector recommendations:
- Recapitalization of core banks and resolution of non-core banks are nearing completion.
- Reinforce the governance framework and return to the private sector the stakes in banks that are under government control at an early time.
- Reform insolvency and non-performing loan resolution frameworks to facilitate the repair of balance sheets and restoration of credit growth.
- Debt outlook and external support:
- “Public debt is projected to remain high well into the next decade.”
- The assurances from Greece’s European partners that they will consider further measures and assistance, if necessary, to reduce debt to substantially below 110 percent of GDP by 2022, conditional on Greece’s full implementation of all conditions contained in the program, are described as welcome.
- Continued commitment from partners to provide adequate financial support to Greece during the life of the program and beyond until it has regained market access, provided that Greece complies fully with the program, is described as essential.
Source: IMF Press Release No.13/195, May 31, 2013.