By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) Wednesday approved €3.24 billion or US$4.3 billion Extended Fund Facility (EFF) arrangement for Greece.

IMF said its Executive Board completed the first and second reviews of Greece’s economic performance under a program supported by a four-year (4) Extended Fund Facility (EFF) arrangement for Greece.

“The completion of the review enables the disbursement of an amount equivalent to SDR 2.798 billion (about €3.24 billion or US$4.3 billion), bringing total Fund disbursements under the EFF arrangement to an amount equivalent to SDR 4.197 billion (about €4.86 billion or US$6.46 billion)” the IMF said.

The IMF said following a political crisis that delayed implementation of the economic program, understandings were reached with the government on a fully recalibrated economic program to be supported under the EFF arrangement.

Also, policies were modified to deal with stronger macroeconomic headwinds and to better reflect observed implementation capacity. “The fiscal adjustment path was lengthened by two years to 2016 to give Greece more time to reach the primary balance target, privatisation targets were adjusted downwards to reflect weak Market conditions, and the authorities specified the adjustment measures necessary to close the fiscal gap through 2014” the IMF said

The Fund affirmed that in addition, authorities took measures to liberalise product Markets and advance Bank recapitalization; while the Greek government also reached understandings with its European partners on a revised financing framework, including steps to ease its debt burden.

IMF said the EFF arrangement, which was approved on March 15, 2012, is part of a joint package of financing with euro area member states amounting to €172 billion over four years and entails exceptional access to IMF resources, amounting to about 2,159 percent of Greece’s quota.

In her reaction, Christine Lagarde, IMF Managing Director (MD) and Executive Board Chair, said the program is moving in the right direction, with strong fiscal adjustment and notable labour-cost competitiveness gains.

“While the program has been adjusted to take account of the deeper recession and implementation capacity, the strategy remains focused on restoring growth, competitiveness, and debt sustainability. Forceful structural reforms and broad-based domestic support will be needed to meet challenges, alongside long-term support from Greece’s European partners” Lagarde said.

She affirmed that Greece’s European partners have extended repayment periods on their loans and provided assurances that they will consider additional conditional measures and assistance to reduce debt to substantially below 110 percent (110%) of GDP by 2022.

“Euro area member states have committed to work together with the Greek authorities and the IMF to ensure the success of the program, reaffirmed the IMF’s preferred creditor status, and committed to providing adequate support to Greece during the program and beyond, provided that Greece continues to cooperate closely with the IMF in the implementation of appropriate adjustment policies. This would facilitate a return to debt sustainability and timely repayments to the Fund” she said.

Apart from these, Lagarde advised that efforts must be sustained in order to continue the restructuring and strengthening of Greece banking system.

According to the IMF MD, with the finalisation of the bank recapitalisation framework, it is vital that the new monitoring and supervisory framework be made effective to protect the public interest and prevent state interference in management. “Additional financing from euro area member states to allow Greece to redeem treasury bills from banks could support liquidity and credit creation” Lagarde said.

“Greece’s fiscal effort has been impressive by any measure. The frontloaded adjustment will help bring spending back towards pre-euro levels, and has been designed to protect the most vulnerable. Looking ahead, Greece needs to radically overhaul its tax administration to bolster tax collections, fight tax evasion, and shrink the public sector, in particular through targeted redundancies” she affirmed.