IMF approves $37b loan for Portugal

WASHINGTON, May 21 (Reuters): The International Monetary Fund on Friday approved a $37 billion (26 billion euro) loan for Portugal to help the country recover from a debilitating sovereign debt crisis, saying it would immediately disburse 6.1 billion euros to ease investor concerns over the euro zone member's debts. The IMF said in a statement that total financing to Portugal in 2011 will include about 12.6 billion euros from the IMF and another 25.2 billion euros from the European Union . The funding is part of a joint IMFEU 78 billion euro ($110 billion) bailout package. "The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track," the IMF said in a statement. The financial package was calibrated to allow Portugal to stay out of the market for medium- to long-term bonds for slightly more than two years, IMF Mission Chief Poul Thomsen said. Under the agreement, Lisbon will have to carry out steep spending cuts, raise taxes, reform its labor and justice systems, and embark on an ambitious privatisation scheme. "The Portuguese authorities have put forward a program that is economically well-balanced and has growth and job creation at its center," said IMF Acting Managing Director John Lipsky . "It addresses the fundamental problem in Portugal -- low growth -- with a policy mix based on restoring competitiveness through structural reforms, ensuring a balanced fiscal consolidation path, and stabilizing the financial sector," he added. The deal follows a 110-billion-euro package for Greece last May and an 85-billion-euro programme for Ireland in November.