Washington, May 22 (IANS/RIA Novosti) The International Monetary Fund (IMF) has approved a 26 billion euro ($36.8 billion) loan for Portugal to help the country overcome its debt crisis.

The Washington-based institution said it would immediately pay out 6.1 billion euro to ease investor concerns.

"The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track," the IMF said in a statement Saturday.

The loan is part of a joint 78 billion euro ($110 billion) rescue package with the European Union.

"The Portuguese authorities have put forward a programme that is economically well-balanced and has growth and job creation at its centre," IMF acting managing director John Lipsky said.

"It addresses the fundamental problem in Portugal - low growth - with a policy mix based on restoring competitiveness through structural reforms, ensuring a balanced fiscal consolidation path, and stabilizing the financial sector."

Under the deal, Portugal will cut spending, raise taxes, as well as reform its labour and justice systems and implement a privatisation programme.

Portugal is the third European Union country to receive a multi-billion EU/IMF bailout, following Greece in May last year and Ireland in November.