BoG governor Stournaras: IMF underestimates progress made in Greece

The International Monetary Fund (IMF) underestimates the progress which has been made in Greece and is overly pessimistic on the macroeconomic forecasts, Bank of Greece (BoG) governor Yannis Stournaras said on Monday in a letter send to the fund.

The letter is a response to the IMF’s report published on Monday which proposed, among other measures, broadening the personal income tax base and rationalizing pension spending and reducing non-performing loans (NPLs).

“Given that the general government’s primary surplus may reach 2 percent of GDP, versus a target of 0.5 percent of GDP, the fund’s fiscal forecasts raise many questions,” Stournaras says, adding the IMF is also very pessimistic concerning future economic developments, including a need to recapitalize banks again.

In his letter, the central banker said the IMF argues banks will need an extra 10 billion euros in capital without explaining why this is the case. “According to the estimations of the regulatory authorities (ECB, SSM, Bank of Greece), the banks’ main capital ratios are 18 pct which is one of the highest in the EU,” he said. Additionally, according to the BoG, the achievement of medium-term targets for NPLs would further increase the capital adequacy ratio. The above points lead to the conclusion that the IMF’s long-term forecasts appear to have only incorporated risks instead of being a base line scenario.