(AP) WASHINGTON -- The International Monetary Fund approved on Friday just over $4.2 billion for Greece, the latest installment of a rescue package aimed at helping the country pull back from an impending debt default.
The move by the executive board had been expected after a decision last week by eurozone finance ministers to give Greece their portion of a $17.4 billion loan payment that is part of a $259 billion package agreed to last year.
Friday's IMF action, with new Managing Director Christine Lagarde in the chair, came as European banks, insurance companies and other financial institutions were trying to get the private sector involved in helping save Greece from default.
The 17 countries that use the euro will continue, with the IMF, to prop up Greece's struggling economy in the coming years with a second package of aid loans to be completed in September.
Lagarde said the raft of reforms, spending cuts and tax hikes the government has been carrying out as part of conditions to receive bailout funds "is delivering important results: the deficit is being reduced, the economy is rebalancing and competitiveness is gradually improving."
However, she said, Greek officials still face significant challenges, including meeting a target of getting its burdensome debt down to 7.5 percent of gross domestic product in 2011 and to less than 3 percent by 2014.
Lagarde said, "Greece's debt sustainability hinges critically on timely and vigorous implementation of the adjustment program with no margin for slippage, and continued support from European partners and private sector involvement."
She said the government's privatization strategy is a critical step toward boosting investment and reducing the debt burden.
The European Union and the IMF Fund had said they would refuse to pay out the next installment unless Greek lawmakers approved a new five-year package of $40 billion worth of spending cuts and tax increases and a $72 billion privatization plan before the end of June. Greek lawmakers delivered what was asked of them, cheering up global financial markets but provoking violent demonstrations in the streets of Athens.
Lagarde, a former French finance minister, took over as head of the 187-member lending institution on Tuesday, replacing Dominique Strauss-Kahn, who resigned in May to fight charges he sexually assaulted a New York City hotel housekeeper. Lagarde is the first woman to head the organization since it was founded after World War II.