Press Release: IMF Executive Board Completes Fourth Review Under Stand-By Arrangement for Greece and Approves €3.2 Billion Disbursement
IMF News, July 8, 2011
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- Published: July 8, 2011
Review completion and disbursement
- The Executive Board completed the fourth 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 SDR 2.9 billion (about €3.2 billion).
- Total Fund disbursements under the SBA now amount to an amount equivalent to SDR 15.6 billion (about €17.4 billion).
- The SBA was approved on May 9, 2010 (see Press Release No. 10/187).
SBA features and financing package
- The SBA is part of a joint package of financing with Euro area member states amounting to €110 billion over three years.
- The SBA 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.
Economic assessment and outlook
- Greece’s economic adjustment program has continued to make some progress toward its objectives.
- The economy is rebalancing and competitiveness is gradually improving.
- A return to positive economic growth is projected for the first half of 2012.
- Greece has specified the policies necessary to overcome recent fiscal adjustment and structural reform implementation problems, which should allow the country to make further progress toward program objectives in the period ahead.
Fiscal strategy and structural reform priorities (Ms. Christine Lagarde)
- Fiscal progress and medium-term strategy
- A new medium-term strategy was approved, defining the measures required to reduce the general government deficit below 3 percent of GDP by 2014.
- The strategy confronts difficult issues, including the generous terms of public sector employment, the possibility to close inefficient public entities, and tax evasion.
- Steadfast and timely implementation will be crucial, together with complementary institutional reforms improving revenue administration and public financial management.
- Privatization
- The government’s privatization strategy is a critical step toward boosting investment and growth and reducing Greece’s high debt burden.
- The target of selling €50 billion of state assets by 2015 is described as very ambitious.
- The establishment of an independent privatization agency should help realize transparent and timely implementation.
- Structural reform acceleration
- To strengthen competitiveness, structural reform implementation needs to be accelerated.
- The reform agenda should be expanded to address Greece’s high labor tax wedge and inefficient judicial system.
- Synergies should be sought, such as between privatization and reducing administrative barriers to investment.
- Financial sector stability
- Banks’ capital buffers need to be raised.
- An adequate support and resolution framework should be put in place.
- Continued liquidity support from the ECB remains critical to manage liquidity needs.
- Debt sustainability
- Greece’s debt sustainability hinges critically on timely and vigorous implementation of the adjustment program, with no margin for slippage, and continued support from European partners and private sector involvement.
Press Release No. 11/273, July 8, 2011 — International Monetary Fund