February 12, 2014 / 10:32 PM / 5 years ago

UPDATE 1-IMF signs off on latest review of Portugal's bailout

WASHINGTON, Feb 12 (Reuters) - The International Monetary Fund’s board on Wednesday said Portugal was on track with the conditions of its bailout program, and gave the euro zone country about 910 million euros ($1.2 billion).

Portugal has so far gotten about 25 billion euros of the 26.9 billion euros the Fund pledged over three years to help Lisbon deal with a debt crisis, the IMF said.

Portugal plans to exit from its international bailout this June, just as its economy is expected to post the first year of growth since 2010.

The biggest threats to exiting the loan program are potential decisions by the country’s constitutional court that could challenge austerity measures required under the bailout.

The court has already thrown out several important measures over the past two years, forcing the government to come up with alternative steps in order to meet deficit targets.

“The Portuguese authorities’ implementation of their Fund-supported program has been commendable, despite recent legal setbacks,” IMF Deputy Managing Director Nemat Shafik said in a statement.

“At the same time, while the short-term outlook has improved, unemployment, while declining, remains high and risks remain,” she said.

Portugal’s jobless rate declined for the third consecutive quarter in the three months that ended in December, falling to 15.3 percent, from 15.6 percent in the third quarter, the National Statistics Institute said last week.

Before that, unemployment had continually rose for two years, to a record high in the first quarter of 2013, as the country grappled with a recession and the weight of austerity imposed by its 78 billion euro ($106 billion) EU/IMF bailout deal.

The IMF called on Portugal to continue structural reforms to boost the economy’s growth potential, including greater labor market flexibility and improvements in tax collection.

“The commitment by the European leaders to support Portugal until full market access is regained, combined with continued strong program implementation, is essential to help the country remain resilient to shocks and consolidate progress,” Shafik said.

Portugal wants to demonstrate to investors that it can issue bonds to ensure a smooth exit from its bailout, and managed a successful bond issue in January.

But many economists doubt Lisbon can exit its bailout without some sort of precautionary lending program, unlike Ireland, which made a ‘clean exit’ from its assistance plan late last year.

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