Portugal has been praised by the International Monetary Fund for the progress it has made towards regaining access to international debt markets. The IMF has also just approved payment of the next part of the rescue loan for Portugal, worth some €838.8 million.
The approval came as Lisbon has successfully completed its latest review. In spite of the praise given out, the IMF has also warned challenges still remain, and the Portuguese central bank recently forecast the economy would shrink by 1.9% this year which is slightly more than had been previously predicted.
Lisbon is due to gain access to the international debt markets this autumn, but is already considering an early return to the medium and long-term bond markets as it’s been buoyed up by the recent success of the Treasury bill auction. Last September the troika agreed to give Portugal an additional year to meet its deficit targets, as the budget deficit target last year was increased to 5% of national output, while the target for this year was increased from 3% to 4.5%.
This resulted in the government making stringent budget cuts as part of the necessary reforms. Although recent progress has been extremely good, the IMF is still warning that the Portuguese government needs to make sure structural reforms are pursued and met, as this is the only way to ensure long-term growth and employment, and an improvement in the country’s competitiveness. The IMF conceded that Portugal will need continued external support from the euro zone in order to achieve success.