The International Monetary Fund (IMF) has approved the payment of €838.8 million to Portugal after completing the sixth review of Portugal’s performance under the country’s €78 billion bailout programme over three years.
In a press release, IMF Deputy Managing Director Nemat Shafik said: “The authorities’ policy and reform effort has been impressive. Considerable progress has already been made in fiscal and external adjustment and sovereign spreads have narrowed significantly, which bodes well for the authorities’ strategy of regaining market access.
“Nonetheless, the near-term outlook is uncertain and sizeable medium-term economic challenges remain. In light of this, the authorities need to sustain efforts to make the tradable sector more competitive, boost long-term growth, and further advance fiscal consolidation.”
Shafik also believes that a public debate on how to best share the burden of the remaining sizeable fiscal adjustment is needed, given the extremely high tax burden and the need to save €4 billion relating to the state reformation currently being debated by the government.
The IMF warns that Portugal should vigorously pursue structural reforms to achieve a lasting improvement in competitiveness, growth and employment, in which the success will depend critically on continued external support and successful crisis policies at the euro area level.
Shafik continued: “Progress has been made in keeping the banks well capitalised and adequately financed. Improved credit conditions will be important to facilitate economic recovery and ensure an orderly deleveraging by highly indebted firms.”
The seventh evaluation by the Troika to the Portuguese bailout programme will take place in February.
As reported in last week’s edition, the Troika confirmed that Portugal would be receiving an additional €3 billion to €4 billion in bailout funds, due to currency fluctuations and alterations to the loan regulations within the European Financial Stability Facility (EFSF), which means Portugal will be receiving in total between €81 billion and €82 billion.