IMF approves $1.8 billion loan for Greece 'in principle'

The International Monetary Fund late on Thursday approved a one-year, $1.8 billion loan programme for Greece , making a conditional commitment to help underpin the country's long-running bailout programme for the first time in two years.

The approval in principle means the loan "will become effective only after the Fund receives specific and credible assurances from Greece's European partners to ensure debt sustainability, and provided that Greece's economic program remains on track," the IMF said in a statement

The approval is also conditional on Greece keeping its economic reforms on track. The current bailout, Greece's third since 2010, is now shouldered exclusively by European institutions.

IMF Managing Director Christine Lagarde said Greece and Europe will need to agree on a debt plan "soon."

"As we have said many times, even with full programme implementation, Greece will not be able to restore debt sustainability and needs further debt relief from its European partners," Lagarde said.

A second Executive Board decision will be needed to make the IMF programme fully effective, the IMF said. The arrangement will expire on 31 August 2018, shortly after Greece's European Stability Mechanism loan programme ends.

Lagarde had refused to join the latest bailout in 2015, arguing it would not be sustainable without debt relief and deeper spending and economic reforms in Greece.

But after two years of wrangling over debt relief, she agreed to support a conditional IMF participation in the bailout in June as part of a deal that unlocked €8.5 billion in loans

Delia Velculescu, IMF mission chief for Greece, told reporters on a conference call there was no deadline for European lenders to agree on debt relief over the next 13 months.

The programme, which contains an overall central government debt ceiling for Greece, assumes that Greece's primary fiscal surplus will reach 2.2 percent of gross domestic product in 2018.