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Deadline day: Greek IMF payment explained

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Unless Greece suddenly finds 1.6 billion euros ($1.7 billion) down the back of the sofa, it will miss its deadline to repay the International Monetary Fund (IMF) by 6 p.m. ET on Tuesday.

Given that the country's fiscal situation has become so dire that its banks are shut and citizens can only withdraw 60 euros a day from ATMs, this is unlikely. Also, when countries repay the IMF, they usually give the lender 24 hours notice, which has not been forthcoming.

Greek Prime Minister Alexis Tsipras seemed in defiant mode Monday night as he tweeted: "Having asphyxiated banks & denied extension request, is it reasonable to expect that IMF installment will be paid tomorrow?"

Here we look at why this isn't just another deadline for Greece.

A default or not a default?

The IMF's official line is that countries which miss payments are in "arrears" rather than "default" – but this technical term is, essentially, the IMF wording for what most other institutions would call a default.

In not-so-good company

Other countries which have defaulted on their loan repayments to the IMF include: Zimbabwe; Sudan; Somalia; Cuba; Cambodia and Honduras – none of which are exactly safe havens.

One of the problems of the IMF granting Greece more time or money, when it is already the biggest debtor to the fund, is that it may anger less developed economies. They could argue that they need the funding or tolerance more than a European, relatively advanced economy like Greece.

Protesters call for a 'No' vote in the forthcoming referendum on bailout conditions, in front of the Greek parliament in Athens on June 29, 2015.
Aris Messinis | AFP | Getty Images

What next?

If a country is in arrears to the IMF, it means that it won't get any future aid until the bill is repaid.

The fund could allow Greece another 30 day period to repay the loan before Managing Director Christine Lagarde officially informs the board it is in arrears, but this looks unlikely.

Lagarde told CNBC at the weekend that she intends to, "call the board very, very promptly" in the event the Tuesday payment is not made. It's worth remembering that this payment itself was the result of a "bundling" of loans in an effort to give Greece more time to repay.

Domino effect

If Greece is viewed as being in default on its IMF repayments, there could be a domino effect with other creditors, and it will lose the protection of European Union rescue programs. The European Central Bank (ECB) has already capped its emergency backstop to Greek banks, and, if those banks look like losing their solvency, this source of funding could also be at risk. Greece is also likely to miss a payment to the ECB on July 20.

A European Union flag flutters before the temple of Parthenon at the Acropolis hill in Athens, Greece June 26, 2015.
Grexit, Grexident and Greferendum

The European Financial Stability Facility (EFSF), the temporary fund set up by euro zone nations to help solve the debt crisis, could decide to call in its loans if Greece is seen to have defaulted elsewhere – a "cross-default".

Much depends on Sunday's referendum. With a Yes vote, and potentially a change in government, Greece's creditors may feel more amenable to negotiation. A No, according to warnings from the creditors, could accelerate the path to the country leaving the euro zone.

- By CNBC's Catherine Boyle