IMF Executive Board Approves New Two-Year US$5.4 Billion Flexible Credit Line Arrangement for Peru

IMF News, May 27, 2022

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Canonical URL: IMF Executive Board Approves New Two-Year US$5.4 Billion Flexible Credit Line Arrangement for Peru

The Executive Board approved a successor two-year arrangement for Peru under the Flexible Credit Line (FCL) in an amount equivalent to SDR 4.0035 billion (about US$ 5.4 billion).
The Board noted the cancellation by Peru of the previous arrangement in the amount of SDR 8.07 billion.
The Peruvian authorities stated their intention to treat the new arrangement as precautionary.
The lower credit line request reflects better economic and external reserve positions and the authorities’ strategy of gradually exiting the facility.
[1] Dollar amount based on the Special Drawing Right (SDR) quote of 1 USD = SDR 0.74121 on May 27, 2022

Peru qualifies for the FCL by virtue of:
- its very strong economic fundamentals and institutional policy frameworks,
- a track record of implementing very strong policies,
- commitment to maintaining such policies.
The country’s very strong fundamentals include the accumulation of additional buffers with international reserves and a decline in external financing needs since the 2020 arrangement.

The FCL was established on March 24, 2009, as part of a major reform of the Fund’s lending framework.
The FCL:
- allows recipients to draw on the credit line at any time,
- is designed to flexibly address both actual and potential balance of payments needs to help boost market confidence,
- permits large, upfront access with no ex-post conditionality,
- does not phase drawings nor tie them to ex-post conditionality as in regular IMF-supported programs.
The absence of ex-post conditionality is justified by the very strong policy fundamentals, institutional frameworks, and sustained track records of qualifying countries.

Peru’s very strong economic fundamentals and policy frameworks are anchored by:
- a credible inflation targeting framework,
- a flexible exchange rate,
- effective financial sector supervision and regulation,
- a solid medium-term fiscal framework.
These foundations enabled the authorities to deliver a comprehensive and timely response to the COVID-19 pandemic and promote growth.
Peru’s economy recovered strongly in 2021, registering one of the highest growth rates in the region, spurred by:
- robust external demand,
- favorable terms of trade,
- a surge in construction.
The FCL arrangement will continue to support the authorities’ macroeconomic strategy by providing insurance against tail risks and bolstering market confidence.
The authorities intend to treat the arrangement as precautionary and exit the arrangement when external conditions allow.
The level of access requested—300 percent of quota, down from 600 percent in the FCL approved in 2020—reflects:
- the country’s very strong fundamentals,
- accumulation of international reserve buffers,
- decline in external financing needs since the 2020 arrangement,
- and the authorities’ strategy of gradually phasing out the use of the facility.

IMF Press Release No. 22/173, May 27, 2022