The International Monetary Fund on Thursday approved 28 billion euros in funding for Greece over the next four years and IMF chief Christine Lagarde lauded Athens’s reform efforts, but Fund officials highlighted the need for further fiscal adjustment and the implementation of tough reforms to ensure the country’s recovery program remains on track.

The IMF said it would immediately disburse 1.65 billion euros as part of the deal aimed at keeping Greece financed until 2014.

In a written statement issued after the announcement of the decision, Lagarde praised the government but said further reforms and fiscal adjustment were needed. “Greece has made tremendous efforts to implement wide-ranging painful measures over the past two years,” she said.

“Greece’s priority is to undertake competitiveness-enhancing structural reforms,” she said, adding however that “significant further fiscal adjustment is necessary to put debt on a sustainable downward trajectory.”

In a conference call from Washington, an IMF official said Greece’s debt to GDP ratio was projected to drop from 165 percent at the end of 2011 to 116.5 percent by 2020.

The IMF’s mission chief to Greece, Poul Thomsen, emphasized the importance of Greece implementing labor market reforms -- moving away from collective labor contracts -- in order to become more competitive.

“Greece still faces a major competitiveness gap; if it doesn’t close this gap, it will continue to see a reduction in wages,” Thomsen said.

Thomsen said he hoped for an increase in tax collection but did not see any scope for further tax hikes. His deputy, Mark Flanagan, answering a question put to him by Kathimerini English Edition, said there were “problems at every step of the process.”

“It takes about 10 or 12 years to enforce tax collection, which is an eternity,” he said. He said the government had promised not to offer amnesties and they expected it to honor this.