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IMF announces more bailout money for Portugal due to progress on reforms
LISBON, Portugal (AP) ' Portugal should get the next installment of its euro78 billion ($107 billion) bailout package because it is expected to meet its debt-cutting targets this year, a report from the International Monetary Fund said Tuesday.
Portugal asked for a rescue earlier this year as it slid towards bankruptcy and stoked investor fears about the wider eurozone's fiscal problems.
Its European partners and the International Monetary Fund agreed to lend it money on condition it met a strict timetable of measures, including austerity packages and economic reforms, through 2013.
In its first review of the country's austerity program, the IMF said the country is due to meet its end-August fiscal targets. It said the country would receive almost euro4 billion in the latest disbursement.
The IMF mission chief for Portugal, Poul Thomsen, told reporters on a conference call that there had been "some slippage" in meeting fiscal targets for 2011 "but the government has been quick to identify the corrective measures needed."
Thomsen also said the banking sector needs to build up capital so that it can make loans to the private sector and provide "the oxygen needed to create jobs and promote growth."
The IMF said Portugal will need to take extra measures to reduce state spending, which has run higher than expected. But it expects it to meet its targets and to be able to return to the bond market in 2013, as forecast, despite the increased financial market volatility in the eurozone.
"The ambitious program is broadly on track, and the new government's strong commitment is encouraging," said a report by IMF staff, who completed a review of Portugal's policies in August in Lisbon.
The report warned, however, that if market jitters related to Greece intensified, Portugal could face new risks. Market turmoil could create a credit crunch, and strikes and social unrest could weaken the government's ability to implement reforms.
Thomsen said an IMF technical team would visit Portugal next week for talks with authorities on assembling the necessary economic information to start work on the second installment of the loan and a full IMF mission would visit in November.