May 30, 2014, The Executive Board of the International Monetary Fund (IMF) today
completed the fifth review of Greece’s performance under an economic
program supported by an Extended Fund Facility (EFF) arrangement. The
completion of this review enables the disbursement of SDR 3.01 billion
(about €3.41 billion, or US$4.64 billion), which would bring total
disbursements under the arrangement to SDR 10.22 billion (about €11.58
billion, or US$15.75 billion).
In completing the review, the Executive Board approved a waiver of
nonobservance of the performance criterion on domestic arrears, given
the corrective actions taken. In light of the delays in program
implementation, the Board also approved the authorities’ request for
rephasing three disbursements evenly over the remaining reviews in 2014.
The EFF arrangement, which was approved on March 15, 2012 (see Press Release No. 12/85),
is part of a joint package of financing with euro area member states
amounting to about €173 billion over four years. It entails exceptional
access to IMF resources equivalent to about 2,159 percent of Greece’s
quota.
Following the Executive Board discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:
“The Greek authorities have made significant progress in
consolidating the fiscal position and rebalancing the economy. The
primary fiscal position is in surplus ahead of schedule, and Greece has
gone from having the weakest to the strongest cyclically-adjusted
primary fiscal balance in the euro area in just four years. However,
several challenges remain to be overcome before stabilization is deemed
complete and Greece is back on a sustainable, balanced growth path.
“Additional fiscal adjustment is necessary to ensure debt
sustainability, through durable, high-quality measures, while
strengthening the social safety net. It is essential that the
authorities continue to improve tax collection, combat evasion, and
strengthen expenditure control. Public administration reforms need to be
accelerated. The authorities are taking remedial actions to clear
domestic arrears and expedite privatization.
“Despite significant wage adjustment, export performance remains
comparatively weak. The redoubling of efforts to liberalize product and
service markets is therefore welcome. Further measures are necessary to
remove regulatory barriers to competition in key sectors and to reform
investment licensing. The authorities are committed to revitalizing
labor market reforms and improving the business climate.
“Addressing the very high level of nonperforming loans remains an
important priority. While there is no acute stability risk, it is
critical for the economic recovery that banks be adequately capitalized
upfront to recognize losses on the basis of realistic assumptions about
loan recovery. Efforts are being made to recapitalize the banking system
and set aside the buffer of the Hellenic Financial Stability Fund to
deal with contingencies that may arise during the program. The private
debt resolution framework should also be strengthened expeditiously.
“Public debt is projected to remain high well into the next decade,
despite a targeted high primary surplus. The assurances of Greece’s
European partners are welcome 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
the program.”
