IMF Executive Board Approves Successor Two-Year US$ 5.84 billion Flexible Credit Line for ColombiaPress Release No.13/229
June 24, 2013
The Executive Board of the International Monetary Fund today approved a new two-year arrangement for Colombia under the Flexible Credit Line (FCL) in an amount equivalent to SDR 3.87 billion (about US$5.84 billion). The Colombian authorities indicated that they intend to treat the new arrangement as precautionary and do not intend to draw on the line.
Colombia’s first FCL was approved on May 11, 2009 (see Press Release No. 09/161) and two successor arrangements were approved on May 7, 2010 (see Press Release No. 10/186) and May 6, 2011 (see Press Release No. 11/165)
Following the Executive Board discussion of Colombia, Mr. David Lipton, First Deputy Managing Director and Acting Chairman of the Board, made the following statement:
“Colombia has very strong policy frameworks, comprising an inflation-targeting regime, a flexible exchange rate, effective financial sector supervision and regulation, and a fiscal policy guided by a structural balance rule for the central government. The authorities also have a sustained track record of implementation of very strong policies, which have underpinned strong economic performance in recent years. Looking ahead, the authorities are firmly committed to maintaining such policies and to undertaking further initiatives—including the recently-approved tax reform—to bolster growth, reduce inequality, and further increase economic resilience.
“Colombia’s macroeconomic policies provided resilience to the global financial crisis and supported a strong recovery and gradual rebuilding of policy buffers. The exchange rate has played a key shock-absorbing role, and the financial system has remained stable. The authorities have also taken advantage of strong capital inflows to partially rebuild their international reserve position.
“However, risks to the global economic outlook remain elevated, and if they materialized, they would affect Colombia’s economy and external accounts. Access to the Fund’s Flexible Credit Line (FCL) instruments will continue to play an important role in supporting the authorities’ macroeconomic strategy if that were to happen. A successor arrangement, which the authorities intend to continue to treat as precautionary, will help Colombia to effectively manage potential shocks and sustain strong economic performance, while the authorities continue strengthening their policy framework and rebuilding policy buffers.”
Background on the Flexible Credit Line:
The FCL was established on March 24, 2009 and further enhanced on August 30, 2010 (see Press Release No. 09/85 and 10/321). The FCL is available to countries with very strong fundamentals, policies, and track records of policy implementation and is particularly useful for crisis prevention purposes. FCL arrangements are approved for countries meeting pre-set qualification criteria. The FCL is a renewable credit line, which could be approved for either one or two years. Two-year arrangements involve a review of eligibility after the first year. If the country draws on the credit line, the repayment period is between three and five years. There is no cap on access to Fund resources under the FCL, and access is determined on a case-by-case basis. Qualified countries have the full amount available up-front, with no ongoing conditions. There is flexibility to either draw on the credit line at the time it is approved, or treat it as precautionary.