The International Monetary Fund’s board on Thursday approved a $1.8 billion loan to Greece but will only release the money if the country gets debt relief from its European creditors.
The IMF has praised Greece for taking steps to reduce its budget deficits, including expanding its tax base and cutting spending on pensions. But the lending agency is pressuring Greece’s eurozone lenders to provide enough relief to ensure the battered country can pay its bills.
If an agreement on debt relief is reached, the IMF will join the eurozone lenders in an ongoing bailout.
IMF managing director Christine Lagarde said she expects “a plan to restore debt sustainability to be agreed soon between Greece and its European partners.”
Euro rules forbid an outright reduction of Greece’s public debt. But creditors can reduce interest rates or give the country more time to pay its public debt, which in Greece’s case is equal to a staggering 180 percent of economic output, second in the world behind Japan.
The IMF loan likely complicates the Greek government’s plans to issue bonds. The terms of the IMF loan would forbid Greece from increasing its debts.
Greece lost market access to the bond market due to high interest rates in 2010 and briefly returned with a 2014 bond issue, only to seek a third successive bailout the following year.
The current rescue program, funded by other eurozone nations and monitored with help from the IMF, ends in one year.
