Econostrum | Economic News in the Mediterranean

Greece to pay off €1.85bn IMF debt by end of April 2022

Written by Frédéric Dubessy on Thursday, March 31st 2022 à 15:55 | Read 209 times

The Greek Prime Minister is very confident that the various rating agencies will revise his rating (Screenshot video of the Greek Prime Minister's Office)
The Greek Prime Minister is very confident that the various rating agencies will revise his rating (Screenshot video of the Greek Prime Minister's Office)
GREECE. Kyriakos Mitsotakis assured on Tuesday 29 March 2022 that the restoration of his country's investment grade in 2023 was "an achievable goal". In office since July 2019, the Greek Prime Minister indicates that he will succeed in reducing his debt and even in generating small but significant primary surpluses (i.e. excluding debt repayments). In 2021, its Gross Domestic Product (GDP) grew by 6.1%. The government expects a 4.5% growth in 2022.

Already in January 2022, while maintaining its rating at BB, Fitch had revised Greece's outlook upwards from stable to positive. The British rating agency of the US Hearst Corporation justified this change by stating that "the combination of stronger than expected economic growth and a reduction in the public deficit driven by a substantial reduction in pandemic-related support will allow for a decline in public debt as a percentage of GDP". Fitch also predicted that "the recovery in economic activity will continue into 2022". In April 2021, New York-based Standard & Poor's (S&P) had already upgraded Greece's rating by one notch to "BB" and gave it a positive outlook, welcoming "improved governance and debt-reducing measures".

The most indebted state in the euro zone

Having gone through a financial crisis from 2009 to 2018, Greece remains the most indebted state in the eurozone. It had received nearly €300bn from the International Monetary Fund (IMF - €32.1bn between 2010 and 2014) and the European Union (€256.6bn in three infusions) that came to its rescue to avoid bankruptcy. And above all the Grexit, an exit from the EU, which was looming.

On 21 June 2018, the Eurogroup, meeting in Luxembourg, delivered its fourth and final assessment of the third financial assistance programme granted by the ESM. The European finance ministers had agreed on the modalities for Greece's exit from the aid programmes. "The Greek crisis ends here, tonight. We have finally come to the end of what has been a long and difficult road. This is a historic moment," commented Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs.

In April 2019, his government announced a budget surplus of 4.5% of its GDP (one point better than the target set by the European Commission) for 2018, the best performance in the euro zone for that year. The Eurogroup also welcomed "the adoption of a budget for 2019, which should allow the achievement of the primary surplus target of 3.5% of GDP and the completion of important structural reforms including key privatisation operations". In November 2019, commenting on the autumn budget package, the European Commission had once again praised the action of this country which had "presented, in a short time, several important reform projects which should be favourable to investment and growth", as Pierre Moscovici pointed out.

Debt reduced from 206.3% of GDP to 189.6% of GDP

After two consecutive budget surpluses and eight years of trusteeship and austerity, Greece has been free of financial assistance programmes since August 2018. It has regained its financial independence and can once again go to the markets.

Today, the Greek government plans to reduce its debt from 197.1% of GDP in 2021 (206.3% in 2020) to 189.6% in 2022.

According to information from Greek sources revealed by AFP, the country should repay its entire debt to the IMF - €1.85bn - by the end of April 2022. It has received the green light from the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF) to bring forward this deadline to 2024.

Athens had already warned in 2021 of the possibility of early repayment to improve the country's image on the international markets. And in February 2022, Christos Staikouras, Greek Minister of Finance, announced that it could take place by the end of March 2022.

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