Press Release: IMF Executive Board Renews US$48 Billion Flexible Credit Line Arrangement with Mexico

IMF News, March 25, 2010

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Canonical URL: Press Release: IMF Executive Board Renews US$48 Billion Flexible Credit Line Arrangement with Mexico

The Executive Board approved a successor one-year arrangement for Mexico under the Flexible Credit Line (FCL) in an amount equivalent to SDR 31.528 billion (about US$48 billion).
The Mexican authorities stated they intend to treat the arrangement as precautionary and do not intend to draw on the line.
Date of press release: March 25, 2010.
The FCL was established on March 24, 2009 as part of a major reform of the Fund’s lending framework (see Press Release No. 09/85).

Designed for crisis prevention purposes and provides the flexibility to draw on the credit line at any time.
Disbursements are not phased nor conditioned on compliance with policy targets as in traditional IMF-supported programs.
Flexible access is justified by the very strong track records of countries that qualify for the FCL, which gives confidence that their economic policies will remain strong.

Mexico has a sustained record of sound economic policies, and has very strong economic fundamentals and frameworks.
Public and private debt levels were reduced and balance sheets strengthened in the years before the global crisis.
Well implemented rules-based policy mechanisms include:
- the balanced budget fiscal rule,
- inflation targeting framework,
- flexible exchange rate regime.
These mechanisms have anchored stability and helped preserve stability during the crisis.
For the first time in many decades, the authorities were able to deliver a sizable countercyclical fiscal and monetary policy response.
Adroit steps were taken in various financial market segments to maintain orderly conditions.
Authorities demonstrated commitment and ability to reform during challenging times, including through the passage of important revenue measures in the 2010 budget that will strengthen the medium-term fiscal outlook.
Swift action to secure contingent credit lines during the crisis—from the U.S. Federal Reserve and the International Monetary Fund—helped maintain external confidence.

Growth has resumed since mid-2009.
Asset prices have recovered from troughs seen at the height of the crisis.
Domestic financial stability has been maintained.
Policies will continue to be underpinned by the rules-based macroeconomic framework, and the authorities intend to continue to react as needed to any future shocks.
Sizeable downside risks still confront the global economy.
The successor one-year FCL arrangement is intended to be precautionary and to:
- continue to play an important role in supporting the authorities’ overall macroeconomic strategy,
- bolster confidence until external conditions improve,
- complement financing from other multilaterals.
Mexico’s strong policy frameworks and economic fundamentals, together with the additional insurance provided by the successor FCL arrangement, place Mexico in a very strong position to deal with potential risks as the global economy gradually recovers from the crisis.

Press Release No. 10/114, March 25, 2010.