The executive board of the International Monetary Fund will meet on Friday morning, Washington time, to discuss and probably approve the disbursement of two bailout tranches to Greece, amounting to 3.5 billion euros. It is expected to be easier than similar previous meetings as Greece has made quantifiable progress, evidenced most notably in 2013’s considerable primary budget surplus.
Just like the report of the IMF mission to Greece, the fund’s board is expected to stress the need for the government to remain focused on the implementation of the streamlining program. This carries additional significance following the European elections as the main opposition party’s gains in Greece are likely to increase pressure on the government to ease up on the measures in the bailout agreement.
The IMF’s focus has now shifted from the fiscal adjustment to structural reforms that are deemed crucial “to build on recent progress,” as a source explained, and to create the conditions to strengthen growth. That will be important not only for the real economy but also in sustaining the primary surplus for the next few years, as the country will need to improve its growth prospects for the program to be implemented successfully.
The reforms considered crucial include the liberalization of the commodity, service and labor markets, so as to contribute toward attracting investment and boosting growth. In this context great emphasis will be placed on the so-called toolkit of the Organization for Economic Cooperation and Development (OECD) that was recently adopted by the Parliament.
The state’s debts to the private sector, the progress of privatizations and tax revenues will also be subjects for scrutiny. In this context the reform of the tax administration will remain high on the agenda.
The report on Greece’s debt is anxiously anticipated not only in Greece but also in Brussels, to see whether the IMF will demand that the eurozone speeds up its decisions regarding its lightening. However it appears that those in Washington are against such a decision before the publication of the stress tests by the European Central Bank this fall.