ATHENS, Nov 23: The International Monetary Fund has relaxed its debt-cutting target for Greece and only a 10 billion euro ($13 billion) gap remains to be filled for a vital aid installment to be paid, Greece's finance minister said on Friday.

But other sources involved in talks between eurozone finance ministers and the IMF cautioned that the funding gap was far bigger than suggested by Greece, and the two sides were not on the verge of striking a deal to solve the eurozone's most intractable problem, they said.

Finance Minister Yannis Stournaras signalled a compromise was near by saying the IMF had agreed to declare Greece's debt viable if it is projected to fall to 124 per cent of GDP in 2020, giving ground on its earlier target of 120 per cent.

The Eurogroup of eurozone finance ministers has already agreed on measures to reduce Greek debt to 130 per cent of GDP in 2020, Stournaras said.“That leaves a gap of 5-6 percentage points of GDP to be covered - about 10 billion euros,” he told reporters in Brussels.

The EU and IMF are considering bringing the debt down through a combination of interest rate cuts and extension of maturities on the country's loans, plus a debt buyback and a plan under which the European Central Bank would forego profits on its Greek bond holdings, a Greek finance ministry official told Reuters.

Teetering on the verge of bankruptcy, Greece is increasingly frustrated that its lenders are still squabbling over a deal to unlock fresh aid even though the government has pushed through unpopular austerity cuts that brought thousands on to the streets.Athens says time is running out and that it needs its next installments of almost 44 billion euros in aid to recapitalise banks and stabilise its economy. Its next big debt repayment falls due in mid-December.

It expects the aid to be paid out in one installment, the government spokesman told Greek radio, playing down recent speculation that it could dribble out in bits. The euro hit a three-week high against the dollar on growing optimism that Greece's lenders were close to an agreement.

Eurozone finance ministers, the IMF and ECB failed earlier this week to agree on how to get Greek debt down to a manageable level and will have a third go at resolving the issue on Monday.

European paymaster Germany expressed optimism that a deal could be struck at that meeting. “I am very hopeful that we can reach a solution on the question of the payment of the Greece tranches on Monday,” said Chancellor Angela Merkel.

She repeated her opposition to eurozone member states writing off a portion of their Greek bond holdings, known as a haircut. “We reject such a debt haircut.

We want to find another solution,” she told a news briefing.—Reuters