Press Release: IMF Executive Board Approves New Two-Year US$88 Billion Flexible Credit Line Arrangement with Mexico

IMF News, May 27, 2016

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Canonical URL: Press Release: IMF Executive Board Approves New Two-Year US$88 Billion Flexible Credit Line Arrangement with Mexico

The Executive Board approved a successor two-year arrangement for Mexico under the Flexible Credit Line (FCL) in an amount equivalent to SDR 62.389 billion (about US$88 billion).
The previous arrangement (SDR 47.292, about US$67 billion) was canceled.
The Mexican authorities stated their intention to treat the arrangement as precautionary.

The FCL was established on March 24, 2009 as part of a major reform of the Fund’s lending framework.
The FCL is designed for crisis prevention purposes and provides the flexibility to draw on the credit line at any time.
Disbursements under the FCL:
- Are not phased.
- Are not 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’s first FCL arrangement was approved on April 17, 2009.
Successor arrangements were approved on:
- March 25, 2010
- January 10, 2011
- November 30, 2012
- November 26, 2014

Findings on Mexico’s policy framework and economic conditions:

“Mexico’s macroeconomic policies and policy frameworks remain very strong.”
Monetary policy: guided by an inflation-targeting framework in the context of a flexible exchange rate.
Fiscal policy: underpinned by the fiscal responsibility law; authorities are committed to a consolidation path that would put the public debt-to-GDP ratio on a downward trajectory over the medium term.
Financial system: the financial regulatory and supervisory framework is strong.
Structural reforms: medium-term growth should benefit from a range of ongoing structural reforms.
Current economic performance: “Economic activity is growing at a steady pace, inflation is low and stable, and the financial system is sound.”

External risks and rationale for higher access:

Mexico’s economy remains exposed to external risks, given its close ties with the global economy.
Downside risks to global growth have risen, and volatility in global financial markets has increased.
The new FCL arrangement, with a higher level of access, will:
- Provide insurance against greater external risks.
- Bolster market confidence.
- Continue to play an important role in supporting the authorities’ macroeconomic strategy.

Authorities’ commitments and intended use of the FCL:

Commitments to enhance resilience to external shocks further through:
- Steady implementation of the fiscal consolidation plans.
- Continued anchoring of inflation expectations.
- Gradual rebuilding of reserve buffers.
- Strong oversight of the domestic financial system.
The authorities do not intend to make permanent use of the FCL.
As global risks facing emerging markets recede, the authorities intend to reduce access under the FCL in the future, with a view to phasing out Mexico’s use of the instrument.

Source: Press Release No. 16/250 — IMF Communications Department, May 27, 2016