News Brief: IMF Completes Mexico Review and Approves US$1.2 Billion Credit

March 17, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the first and second reviews under the Stand-by credit for Mexico. As a result, Mexico will be able to draw up to the equivalent of SDR 905 million (about US$ 1.216 billion) from the IMF.

In commenting on the IMF Executive Board discussion, Eduardo Aninat, Deputy Managing Director, said:

"The Mexican government's pursuit of sound economic policies in recent year allowed it to weather the unsettled conditions in international capital markets in 1998 without major contagion effects. This was also reflected in the favorable performance of the economy in 1999 and early 2000, in particular the continued growth momentum, the decline in inflation, and the improved capital market access.

"Macroeconomic policies were kept in line with the program in 1999, and the quantitative performance criteria under the stand-by arrangement were met, in some cases with large margins, with the exception of a small deviation in the public sector primary surplus. The Mexican government is to be congratulated for creating the economic conditions to ensure a smooth transition to the next administration. Such a transition would signal a major positive departure from past trends.

"In 2000, the government intends to continue to implement economic policies aimed at promoting sustainable growth of output and employment, addressing priority social needs, and continuing to lower inflation. In this regard, the economic program for 2000 is based on a prudent fiscal stance involving expenditure restraint in the context of the recent rise in world oil prices. Monetary policy will continue to be conducted within the context of the present flexible exchange rate system, with the objective of lowering inflation, and including the use of inflation targeting.

"Good progress has been made in implementing the structural reforms established under the program. Measures have been introduced to increase tax efficiency and improve the transparency and reliability of external debt statistics. Notwithstanding the important progress during the last few years in stabilizing and reforming the banking system, it remains undercapitalized. However, important steps have been taken to strengthen the operating environment of the banking system, and to facilitate the banking system recovery, including measures adopted to bolster the regulatory framework and advance the bank restructuring and recapitalization process.

"The proposed reforms to enhance bankruptcy procedures and enforcement of creditors' rights, and the authorities' plans to develop rapidly a market for the securities of the Bank Savings Protection Institute are critical, to strengthening further the banking system and for facilitating financial intermediation in the domestic economy", Aninat said.


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