Press Release: IMF Completes Third Review Under Stand-By Arrangement for Greece and Approves €4.1 Billion Disbursement

IMF News, March 14, 2011

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Canonical URL: Press Release: IMF Completes Third Review Under Stand-By Arrangement for Greece and Approves €4.1 Billion Disbursement

Date of press release: March 14, 2011
The Executive Board completed the third review of Greece’s economic performance under a three-year Stand-By Arrangement (SBA).
Immediate disbursement: amount equivalent to SDR 3.6 billion (about €4.1 billion).
Total Fund disbursements under the SBA after this disbursement: amount equivalent to SDR 12.725 billion (about €14.6 billion).
The SBA was approved on May 9, 2010 (Press Release No. 10/187).
The cooperative financing package with Euro area member states amounts to €110 billion over three years.
The SBA entails exceptional access to IMF resources, amounting to more than 3,200 percent of Greece’s quota.

Program objectives: put the economy on a path of sustainable growth by boosting competitiveness, strengthening financial sector stability, and securing sustainable public finances.
Progress noted:
- Output remains close to the targeted path.
- Underlying inflation remains low.
- Unit labor costs are falling.
- Significant fiscal adjustment is under way.
- Overall, a measure of stabilization has been achieved.
Caveats and remaining needs:
- Underlying fiscal and broader reforms necessary for medium-term objectives are gradually being put in place, but some major reforms still need to be designed and implemented to build a critical mass to underpin fiscal sustainability and economic recovery.

Fiscal framework and budgeting:
- Complete by May a medium-term budget strategy to help put fiscal adjustment on a firmer foundation.
- Address a projected budget gap: implementation should begin during 2011.
- The strategy of under-executing the state budget to offset revenue shortfalls and overspending at subnational levels cannot be sustained.
- Redouble efforts to combat tax evasion and control spending, especially at the local government level.
- Ensure a fair distribution of the adjustment burden; continue dialogue with social partners.
Structural reforms to support recovery:
- Deepen structural reforms.
- Fully implement legislation to liberalize regulated professions.
- Implement reforms pertaining to collective bargaining and the pension system.
- Reduce administrative barriers to exports.
- Formulate a strategy to unlock potential in the tourism sector.
Privatization and asset use:
- Scale up privatization and real estate development program.
- More efficient use of state assets will support fiscal adjustment, promote growth and employment, and help Greece retire maturing debt.
Financial sector stability:
- The financial system remains stable.
- Time will be provided to allow banks to deleverage and restructure in an orderly fashion.
- Capital support through the FSF remains available to viable banks if necessary.

The authorities are commended for their commitment to the program, which "will help Greece return to growth and prosperity," Mr. John Lipsky said.

International Monetary Fund — Press Release No. 11/77