Subir Lall , head of the IMF mission to Portugal warned today in an interview with the Financial Times that in Portugal the effort must continue but that the IMF-agreed programme of ‘adjustments’ for Portugal’s economy will take another 10 to 15 years to be completed and must be done on its own and without more external help, warned Lall.
The IMF boss said that the distortions in Portugal’s economy have accumulated over decades and that therefore it is unrealistic to expect that they could be sorted out during the three years of the current adjustment programme, or that reforms successfully could be imposed from the outside.
Just six months from the end of the current Troika aid programme for Portugal the head of the IMF has come clean, saying that "the transformation of the economy will need to continue for another ten to 15 years and will have to be carried out from within."
Subir Lall also sent a clear message to Portugal’s politicians as to what must be done when the Troika leaves town, saying that "changing the way the economy responds and overcoming inertia both require a continuous effort that must be maintained, regardless of which political party is in power."
At the beginning of the Portuguese aid programme in May 2011 the IMF, along with the other two bodies that make up the Troika, were far more optimistic regarding the speed at which Portugal could transform its economy and make it grow.
When the first memorandum of understanding was signed Portugal's growth forecast for 2014 was 2.5%. After two and a half years and successive downward revisions of forecasts, a growth figure of just 0.6% has been proposed.
Subir Lall did not predict what he thinks will happen to Portugal in June 2014 when the current aid programme ends but he did say he hopes for the best early next year, at which time it widely is expected that Portugal will again be able to issue government bonds in the international market. “This will be a good time to see what investors are saying," said Lall .
Regarding the Constitutional Court’s frequent rejection of measures further to tax and reduce the population’s income, the head of the IMF mission said he was very confident that the government will be able to find alternative ways of filling any holes in the budget, adding that "when you have to find alternative measures, there is always the risk that they are not the best possible ones to promote economic growth and employment."
