Spain's prime minister said his government will unveil a stimulus package worth 6.3 billion euros ($8.6 billion) to boost competitiveness.

In another sign that the country is emerging from five years of economic hardship, Mariano Rajoy said his plan "aims to mobilise" 2.7 billion euros from the private sector and 3.4 billion euros from the public sector.

He said yesterday corporate tax would be cut from 30 per cent to 25 per cent.

Rajoy added that details will be revealed at a Cabinet meeting on Friday.

Standard & Poor's was the third credit rating agency to upgrade Spain's sovereign credit grade on May 23 although Spain is still saddled with a massive 26 per cent unemployment rate.

Rajoy said Spain has created employment in the last two quarters.

About one in four workers in Spain is unemployed, with the jobless rate climbing to more than 50 per cent for people aged 25 or less. A tentative economic recovery has yet to feed into jobs and better living conditions for most Spaniards.

The tax announcement comes as the International Monetary Fund this week asked Spain to increase tax revenues to protect its public services and make further efforts to cut its budget deficit to ensure a lasting economic recovery.

Later in June, the government would approve a wide-ranging tax reform, he said, including a cut in the corporate tax rate although companies would enjoy fewer tax breaks.

The government already approved earlier this year a cut in social security contributions for companies creating jobs and Rajoy has said the reform would also include a cut in income tax for middle- and low-income taxpayers.

Spain's government forecasts that the country's ratio of public debt to GDP will reach 99.5 per cent by the end of 2014.-Reuters