IMF set to approve July loan tranche Friday

The executive board of the International Monetary Fund ? one of Greece?s three foreign lenders ? was on Friday expected to approve the disbursement of 3.3 billion euros, its section of a fifth tranche of rescue funding pledged to the debt-ridden country last year to help it avoid default.

The lion?s share of the fifth tranche was approved by Greece?s euro zone partners last weekend during a teleconference. The funding ? which accounts for just over half of the 110-billion-euro loan package pledged to Greece last May by the IMF, European Commission and European Central Bank ? will ensure Greece meets its financing needs through the summer.

Meanwhile, European leaders are trying secure the participation of private investors in a second bailout for Greece, which is proving challenging as their role must appear to be voluntary otherwise rating agencies will declare Greece to have chosen the route of selective default.

Negotiations between the government and Greeces’ foreign creditors over a second loan deal – or memorandum – for Greece, should be wrapped up by September 20 so the agreement can be approved by Parliament by the end of the month, sources told Kathimerini on Thursday.

To secure the latest disbursement of loans and pave the way for a second bailout, Greece’s parliament had to approve deeply unpopular austerity measures in two votes in Parliament last week that were approved amid vehement public protests.

It remained unclear whether Christine Lagarde, the IMF’s new managing director, was to chair Friday?s board meeting. Until a week ago, she was participating in discussions on a new bailout in her role as France?s finance minister.

Some commentators believed Lagarde should not be involved in the discussions. «As a good lawyer, she should recuse herself from directly participating in an evaluation of something that she was part of less than a week ago,» Jacob Kirkegaard, a research fellow at the Peterson Institute in Washington, told Reuters. «She is aware that she will be scrutinized, and rightly so, because of the obvious potential conflict of interest,» she said.

Lagarde told reporters earlier this week that the euro zone debt crisis was her top priority, although she declined to prejudge the IMF board discussions and its outcome.

In a related development, the Wall Street Journal quoted current and former IMF officials on Friday as saying that the Fund may bend its own lending rules to approve the next tranche of a Greek loan and that it probably would not provide the details it normally requires for program financing.