UPDATE 1-IMF approves $2.3 billion aid for Greece

Mon Jul 29, 2013 4:40pm EDT

(Reuters) - The International Monetary Fund on Monday approved a further 1.7 billion euros ($2.3 billion) in funds for Greece's bailout program after completing the fourth review of the cash-strapped euro zone state.

Greece last week adopted the last piece of legislation its international lenders required to release the next batch of rescue loans, after two months of wrangling over unpopular measures to overhaul the economy. The total funds from the IMF, the European Commission and the European Central Bank comprise 5.8 billion euros.

The IMF also confirmed lenders would modify Greece's September target for how much money it needs to get from privatizing state firms, after Athens struggled to sell natural gas distributor DEPA in June.

The European Union announced the move earlier on Monday, saying Greece would now need to make only 1.6 billion euros from privatizations, down from 2.6 billion euros. But Athens will now have to recoup that money in 2014 to ensure it stays on course to lower its debt.

"Urgent steps need to be taken to address concerns about the structure and governance of the privatization program and to improve its effectiveness," IMF Managing Director Christine Lagarde said in an updated statement on Monday.

Greece's reform record has been patchy ever since its EU/IMF bailout started in mid-2010, leading to frequent delays in the disbursement of rescue funds.

Opposition to the bailout has also intensified as Greece goes through its sixth year of recession and unemployment hovers at a record rate of 27 percent.

The IMF's board waived several requirements Greece had to meet by the end of June, since data was not yet available. This includes targets for overall government debt, government domestic arrears and the general government balance.

Lagarde commended Greece for cutting budgets and external imbalances, but said Athens has not done enough on broader reforms to its tax collection and public sector, which are necessary to ensure its economy returns to growth.

"Given the slow progress in public administration reforms, efforts should focus on ensuring exit of unqualified personnel to create room to hire new staff with the relevant skills," Lagarde said.

Subject to implementation of further reforms, Athens stands to receive another 1 billion euros from international lenders in October. Greece's rescue, approved in March 2012, will total 173 billion euros over four years, the IMF said. It is meant to help Athens recover from a sovereign debt crisis and return to markets, and protect the country from a possible exit from the euro zone.