Press Release: IMF Executive Board Approves New Two-Year US$5.45 Billion Flexible Credit Line Arrangement for Colombia
IMF News, June 17, 2015
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- Published: June 17, 2015
Approval and key terms
- The Executive Board approved a successor two-year arrangement for Colombia under the Flexible Credit Line (FCL) in an amount equivalent to SDR 3.87 billion (about US$5.45 billion).
- The Colombian authorities stated their intention to treat the new arrangement as precautionary and do not intend to draw on it.
- FCL characteristics described:
- Renewable credit line 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; access is determined on a case-by-case basis.
- Qualified countries have the full amount available up-front, with no ongoing conditions.
- Flexibility to either draw on the credit line at approval or treat it as precautionary.
Macroeconomic assessment and policy strengths (statement by Mr. David Lipton, First Deputy Managing Director and Acting Chairman of the Board)
- Structural and policy strengths highlighted:
- Inflation-targeting regime.
- Flexible exchange rate.
- Effective financial sector supervision and regulation.
- Fiscal policy guided by a structural balance rule.
- Policy actions and outcomes:
- Macroeconomic policies provided flexibility to mitigate the impact of the recent sharp decline in world oil prices.
- The fiscal rule allows a smooth adjustment of expenditure to a dimmer medium-term oil outlook.
- The flexible exchange rate regime acts as a shock-absorbing mechanism helping the economy adapt to shifts in global economic and financial conditions.
- Banking and corporate sectors remain in good financial health.
- The central bank has used abundant capital inflows to further build up international reserves.
- Authorities’ commitments:
- Firm commitment to maintain current policies.
- Undertake further initiatives to strengthen resilience, boost competitiveness, and foster inclusive growth.
Risks, role of the FCL, and policy intent
- External risks:
- Adverse external risks pose strong headwinds and, if they materialize, could weaken Colombia’s external position.
- Role of the FCL:
- Access to the Fund’s FCL will continue to play a significant role in supporting the authorities’ policies in the presence of downside risks.
- A successor FCL arrangement, treated as precautionary by the authorities, will provide policy flexibility and serve as temporary insurance that reinforces market confidence.
- Authorities’ stated exit intention:
- The authorities intend to phase out the use of the FCL facility as global risks affecting Colombia decrease substantially.
Background on Colombia’s FCL arrangements and the facility
- Colombia’s prior FCL approvals:
- First FCL approved on May 11, 2009 (Press Release No. 09/161).
- Renewals on May 7, 2010 (Press Release No. 10/186), May 6, 2011 (Press Release No. 11/165), and June 24, 2013 (Press Release No. 13/229).
- FCL history and purpose:
- The FCL was established on March 24, 2009 and further enhanced on August 30, 2010 (Press Release No. 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 (Press Release No. 09/85).
Practical contact information (from press release)
- IMFCOMMUNICATIONS DEPARTMENT, Media Relations
- E-mail: media@imf.org
- Phone: 202-623-7100
Press Release No. 15/281 — June 17, 2015