IMF OKs Greek next aid tranche; Lagarde sees progress

By Lesley Wroughton

WASHINGTON | Wed Jan 16, 2013 6:18pm EST

(Reuters) - Greece's bailout program is moving in the right direction, the head of the International Monetary Fund said on Wednesday after the IMF board agreed to pay the next aid tranche to Athens under the country's 240-billion-euro international bailout.

After months of uncertainty over Greece's debt sustainability and measures to get the Greek economy back on track, the IMF board of member countries supported the 3.24 billion euros ($4.31 billion) disbursement to Greece.

"Forceful structural reforms and broad-based domestic support will be needed to meet challenges, alongside long-term support from Greece's European partners," Lagarde said in a statement.

Greece avoided financial collapse in December after its European backers agreed to dole out more financial support and the IMF said it would continue to back Greece as long as it implemented promises of an IMF-EU financing package.

The deal averted a catastrophic default by Greece, now in its sixth year of a recession, and secured the country's survival in the euro zone after months of doubt and political turmoil.

Lagarde said Greece had made progress with economic reforms but urged it to do more to boost productivity and lower prices.

"Ambitious reductions in barriers to competition are crucial," Lagarde said. "It will also be important for the government to deliver its privatization plans and to take appropriate steps to strengthen the governance of the process, if necessary."

She said efforts should continue to restructure and strengthen Greece's banking system. It is vital that new monitoring and supervisory framework be put in place to prevent government interference in management, she added.

Lagarde also said Greece needs to "radically overhaul" its tax administration to increase tax collection, fight tax evasion and reduce the public sector through targeted layoffs.

The IMF chief has long pressed Greece to crack down on wealthy tax evaders. Athens has collected just half of the tax debts and conducted less than half of the audits it was supposed to under its international bailout.

Greeks are furious that the authorities have done little to crack down on tax evasion that contributed to the country's financial crisis.

(Reporting by Lesley Wroughton; editing by Chizu Nomiyama, G Crosse and M.D. Golan)