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Greece is on the brink of an economic crisis.
Its economy is in tatters.
The country’s debt is over 100% of GDP.
The euro is devalued by nearly 50%.
Greece’s economy has shrunk by 10% in the last two years.
Now, as its government faces a new round of austerity measures, it is preparing to withdraw another $100 billion from the International Monetary Fund.
Greek Prime Minister Alexis Tsipras and his allies have been demanding a $100 million payment from the Fund for months.
This week, they have reached a deal to withdraw about $2 billion from it, according to the Wall Street Journal.
The withdrawal, which could come as early as April, will make it easier for the government to pay its bills and save the International Finance Corporation (IFC) the equivalent of about 1% of its annual budget.
A Greek government official said the funds could help Greece pay for some of the debt relief it has promised to its creditors, but that it would still have to pay about $1.5 billion in interest.
In exchange, the IMF is paying Greece about $800 million for bonds that were issued to finance the bailout, according the WSJ.
But there are more details to emerge.
Under the terms of the deal, the funds would be used to help Greece meet its debt payments to the International Bank for Reconstruction and Development (IBRD), the IFC and the International Trade Union Confederation (ITUC), according to The Wall Street Journ.
The rest of the funds will be used for the IMF’s economic stabilization program.
The deal also includes some additional benefits, including for Greece’s banks, according The Wall St Journ, which said that the funds also would allow them to recapitalize their banks, cut pension costs and boost their competitiveness.
Tsipras has said that he wants to reduce Greece’s debt to about $500 billion by 2020, from more than $7 trillion, to $500 to $600 billion.
But the IMF has been pushing for a more ambitious target of about $6 trillion, which would put it well ahead of Greece’s creditors and put pressure on Athens to agree to any new debt.
It is unclear how much money will be available to Athens from the withdrawal, but the IMF said that it was confident that Greece would meet its commitments to the IMF.
“The IMF and the Greek government have reached an agreement on the terms under which the IMF will withdraw $100bn from the IBCRD, which will enable the IBRD to continue to recapivise the banks and to provide assistance to Greece to enable it to meet its debts,” the IMF statement said.
Despite the IMF withdrawal, the Greek economy remains fragile, with the unemployment rate above 40%, the currency devaluation reaching levels not seen since the 2008-2009 global financial crisis, and the country’s GDP shrinking by 8% over the last year.
What’s next?
The IMF said it would review its stance on Greece’s bailout plans in coming days, and said that “the IBRRD will continue to meet Greece’s commitments to its IFC partners.”
The IMF also said that while it was not willing to consider Greece’s withdrawal request, it would consider it in light of the need to address other pressing issues.
There’s also speculation that the IMF might be ready to consider another $400 billion from Greece, according Bloomberg.
However, the IBF will continue with its plan to restructure the country, which includes reducing its deficit and paying its creditors.
The IBRd, which is part of the International Financial Institutions, also announced that it will make an additional $500 million in loans for Greece to pay for the rest of its debt.
