Press Release: IMF Executive Board Completes Review of Colombia’s Performance under the Flexible Credit Line
October 28, 2009Press Release No. 09/367
October 28, 2009
The Executive Board of the International Monetary Fund (IMF) today completed its six-month review of Colombia’s qualification for the arrangement under the Flexible Credit Line (FCL). The Board reaffirmed Colombia’s continued qualification to access FCL resources. The Colombian authorities have indicated they intend to continue treating the arrangement as precautionary and do not intend to draw on the line.
The one-year arrangement for Colombia of SDR 6.966 billion (about US$11.13 billion) was approved on May 11, 2009 (See Press Release No. 09/161). Colombia was the third country to gain access to an FCL, following Mexico and Poland. The IMF designed the FCL for countries that have a history of sound macroeconomic policies and institutional frameworks. The FCL is designed to help countries’ crisis efforts by providing the flexibility to draw on the credit line at any time. The FCL was created as part of an overhaul of the Fund’s lending framework this spring (see Press Release No. 09/85 and Public Information Notice 09/40).
Following the Executive Board discussion of Colombia, Mr. John Lipsky, First Deputy Managing Director and acting Chairman of the Board, made the following statement:
”Last May, at a time of heightened global uncertainty, the IMF Executive Board approved an FCL arrangement for Colombia to serve as additional balance of payments protection, providing further room for the authorities to pursue countercyclical policies in the context of strong institutional policy frameworks. Developments since the FCL approval have been generally positive, financial market conditions have improved and perceptions of tail risks to the balance of payments have subsided.
”The upturn in the global environment has improved the outlook for the balance of payments and economic activity. Exports and remittances have performed better than anticipated as commodity prices recovered faster than expected. Roll-over rates, in particular for the public sector, also have been higher than previously anticipated. Against this background, economic recovery is taking hold, and growth for the year is expected to remain positive.
”Colombia’s very strong institutional and policy frameworks provided scope to support domestic demand, with prudently expansionary macroeconomic policies. Since the FCL was approved, monetary policy has been eased further, while inflation expectations remained anchored; the exchange rate has continued to be an effective shock absorber; fiscal policy has helped sustain domestic demand, in particular through an increase in public investment; and, the financial system has continued to show resilience in the context of effective financial sector supervision. Looking ahead, monetary policy will continue to be guided by the inflation targeting framework and fiscal policy by a medium term framework, which should allow fiscal consolidation to restart by 2011.
”Against this backdrop of very strong policy frameworks and actions, the Executive Board today reaffirmed that Colombia continues to meet the qualification criteria for the FCL. Accordingly, access to resources under the FCL—which the authorities intend to continue to treat as precautionary—will remain available as envisaged through May 2010,” Mr. Lipsky said.