FXStreet (Mumbai) – Portugal has to implement a bold plan of decisive spending cuts and tax increases to deal with its high debt levels, the International Monetary Fund (IMF) warns in a new monitoring review on the progress Lisbon has made after its exit from the combined EU/IMF rescue program.
IMF noted in its latest report, “medium-term financing needs remain large, and rising bond market volatility implies significant risks around the baseline financing plan.”
The government “should continue to retain a large cash buffer in order to maintain flexibility in implementing their borrowing program,” the Fund added, and the measures have to be “accompanied by credible measures to achieve the required fiscal adjustment.”
“A sudden change in market sentiment due to concerns about the direction of economic policies or re-pricing of risk could render Portugal’s capacity to repay more vulnerable,” the report warned, adding that government debt, which reached 127% of GDP this year, left the country “vulnerable to any prolonged financial market turbulence.”
(Market News Provided by FXstreet)