By Jan Strupczewski
WASHINGTON (Reuters) – The International Monetary Fund on Friday praised Greece’s fiscal over-performance in 2016, but said it still needed clarification from euro zone governments on what debt relief Athens could expect before joining the latest Greek bailout.
Greek statistics office data showed on Friday that the country far exceeded its international lenders’ budget demands, with a primary surplus of 3.9 percent of GDP last year.
“The number that came out this morning is well above what we have been projecting, what anybody has been projecting,” said Paul Thomsen, the head of the IMF’s European department.
Greece is on its third international bailout since 2010, but it has to pass reviews of reforms demanded by the lenders in exchange for new cheap loans.
The latest review has been dragging on since the middle of last year partly because the euro zone and the IMF could not agree on a common set of economic forecasts for Greece. Thomsen on Friday admitted the IMF had been too pessimistic of late.
“The reality is that for the first five years we were constantly wrong on one side – we constantly overestimated the fiscal reforms,” Thomsen said.
“It is true that in the last one-and-a-half years we have been consistently wrong on the other side. It is clear we did not understand fully, we were more wrong on assessing the impact of capital controls in 2015 and 2016 on the economy, we were too conservative about this, no doubt,” he said.
But he insisted that more than the ability to reach a target now, the IMF was keen to make sure Greece would be able to maintain its economic performance over the medium term.
“The issue is not the targets but the credibility of targets being maintained over the medium term while the economy is growing,” Thomsen said.
He said the Fund would send experts to Athens next week to help finalize a reform package agreed between euro zone finance ministers and Greece two weeks ago in Malta.
But before the IMF would join the latest bailout for Greece, now shouldered by the euro zone alone, euro zone governments would have to give the Fund an idea of how long they expected Greece to maintain a primary surplus of 3.5 percent of GDP and what kind of debt relief Athens could expect after 2018.
“We will not disburse before we have a deal on policies and on a credible debt strategy,” Thomsen said.
He said the IMF would rather see Greece be allowed to keep a smaller primary surplus for a shorter time and use the money to restructure its economy and make it grow faster.
(Reporting by Jan Strupczewski; Editing by Paul Simao)