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Portugal's parliament

The fund found that Portugal’s deficit, which it estimated to be at 4.4% of GDP in 2015 as opposed to the 2.7% target in the country’s budget, despite larger-than-expected savings on interest and social expenditure.

The news is likely to ramp up international concerns around Portugal’s financial health and ability to meet its budgetary targets for this year. 

The gap came from revenues falling far short of the government’s expectations, the IMF said, while “highly accommodative monetary conditions” managed to generate modest growth of 1.5% due to continuing structural impediments.

Policy changes already implemented or currently under consideration “imply at least a partial reversal of structural measures introduced” during Portugal’s fund-supported programme, the IMF noted.

General government debt is on a slow decline, however, falling from 130.2% of GDP in 2014 to an estimated 128.8% last year, and falling further this year and next. Unemployment has also fallen.

Portugal’s modest GDP growth is expected to slow again as the consumption-driven recovery loses momentum, and the country’s stock of corporate debt remains one of the highest in the EU.

On 30 March, the Bank of Portugal lowered its 2016 growth forecast to 1.5% from 1.7%, and 0.3 percentage points lower than the government’s 1.8% forecast, which was only reduced from 2% under pressure from the European Commission.

Earlier this year, Brussels demanded the Portuguese government hike taxes by nearly €1bn to tighten the budget further, and the EU is reportedly pushing for more cuts.

Portugal’s new administration began reversing austerity measures from the country’s debt crisis and bailouts when it came in to power in November, but still hopes to cut its deficit to 2.2% this year.

In February, the European Commission warned that Portugal was at risk of non-compliance with eurozone budgetary obligations as it considered the government’s projections in the 2016 budget too optimistic.

According to the commission’s own forecasts, Portugal would fall short of targets imposed as part of the corrective measures imposed under Europe’s Stability and Growth Pact, which requires EU member states in dire financial straits to follow a set of rules, including committing to targets to bringing down the debt or deficit.