The International Monetary Fund approved a disbursement to Portugal of about 1.5 billion euros ($1.8 billion) after reviewing implementation of policies attached to an aid package with the European Union.
“The authorities’ strong program implementation, despite the difficult euro area environment, is commendable, and there are welcome signs of adjustment in the fiscal and external accounts,” IMF Deputy Managing Director Nemat Shafik said in a statement released in Washington.
“Given the daunting challenges that Portugal still faces, it will be important to maintain the commitment to strong policies and structural reforms to foster sustainable growth, especially through labor and product markets reform, to strengthen debt dynamics, and to regain market access,” she said.
Portugal is cutting spending and raising taxes as it tries to comply with the terms of the 78 billion-euro international rescue plan. Prime Minister Pedro Passos Coelho said on March 5 that if the country can’t tap bond markets by September 2013 due to “external reasons,” it would be able to count on continued support from the IMF and the EU.
Portugal’s 10-year bond yield is now at about 10 percent, while two-year debt yields 7.6 percent.
Shafik said that the country’s fiscal consolidation “is on track” and that current targets can still be reached, even if risks have increased.
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