IMF ap­proves $3.3b for Greece amid fis­cal ad­just­ment

La­hore, Is­lam­abad, Karachi Mon­day, De­cem­ber 20, 2010, Muhar­ram 13, 1432

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NEW YORK: The In­ter­na­tional Mon­e­tary Fund said Greece's res­cue pro­gram has "con­tin­ued to per­form well" and it ap­proved pay­ment of an­other 2.5 bil­lion eu­ros ($3.3 bil­lion), ac­cord­ing to a state­ment re­leased in Washington to­day.

The fund said the Greek au­thor­i­ties are "to be com­mended" for their ef­forts to im­ple­ment bud­get cuts, new eco­nomic poli­cies and other re­forms. In­fla­tion is fall­ing and the Greek econ­omy is be­com­ing more com­pet­i­tive, the IMF said.

"The over­all fis­cal ad­just­ment to date has been im­pres­sive," the IMF said. "It is im­por­tant that fis­cal struc­tural re­forms be force­fully ad­vanced to en­sure a last­ing con­sol­i­da­tion."

More re­forms are needed to boost po­ten­tial growth, the IMF said. Greece needs to make ad­di­tional changes to cre­ate new jobs, im­prove ac­cess to pro­fes­sions, and dereg­u­late tourism and re­tail trade, ac­cord­ing to the IMF.

"Mar­ket sen­ti­ment to­ward Greece re­mains volatile," the IMF said. "The econ­omy is still ad­just­ing and un­em­ploy­ment is ris­ing."

To­day's an­nounce­ment brings dis­burse­ments so far un­der Greece's standby ar­range­ment to about 10.6 bil­lion eu­ros, part of a 110-bil­lion euro res­cue pack­age that the IMF and Euro­pean Union an­nounced in May. The IMF's share is about 30 bil­lion eu­ros.

Greece's econ­omy has been strug­gling un­der the cri­sis, the fund said. Eco­nomic in­di­ca­tors point to­ward "con­tin­ued" con­trac­tion, the IMF said in a staff re­port ac­com­pa­ny­ing to­day's an­nounce­ment.

"The GDP con­trac­tion has been slightly deeper than ini­tially ex­pected," the IMF said. "Bond spreads re­main high ow­ing to an­other round of Greek fis­cal data re­vi­sions and fi­nan­cial turmoil in the Euro area pe­riph­ery."

The Greek econ­omy is now ex­pected to shrink 4.25 per­cent in 2010 and 3 per­cent in 2011, com­pared with pre­vi­ous fore­casts of 4 per­cent and 2.5 per­cent re­spec­tively, the fund said.

"Short-term risks to the out­look re­main skewed to the down­side, but there is up­side po­ten­tial in the medium-term," the IMF said. "The macroe­co­nomic out­look has weak­ened slightly."

The IMF said it was work­ing with EU of­fi­cials to move Greece's aid to the fund's "ex­tended fund fa­cil­ity," which has longer re­pay­ment terms than the "stand-by ar­range­ment" used to fund the cur­rent res­cue pack­age.

The IMF said Greece's bud­get mea­sures have re­duced the deficit by an es­ti­mated 6 per­cent of gross do­mes­tic prod­uct in 2010. Banks have "en­joyed some re­cent suc­cess" in rais­ing cap­i­tal and Greece has "nec­es­sary tools" to act as a back­stop if nec­es­sary. The next re­view of Greece's eco­nomic pro­gram will be in March, the IMF said. -PB News

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