Reduced Flexible Credit Line for Mexico with the IMF
The Flexible Credit Line for Mexico (FCL) with the International Monetary Fund (IMF) is set to be reduced, as reported by official entities.
The Ministry of Finance and Public Credit (SHCP) and the Bank of Mexico announced that the government has decided to decrease Mexico’s Flexible Credit Line with the IMF from $48 billion to $35 billion.
Despite this reduction, they emphasized that the country will keep the Flexible Credit Line open for an additional two years.
The approval from the IMF Executive Board for Mexico to maintain the FCL open is a recognition of the strength of the country’s institutional framework for macroeconomic policies.
“The FCL is a precautionary instrument that enhances the reserve of international assets, thereby complementing the tools available to Mexican authorities to confront adverse external conditions and preserve economic and financial stability.”
The assessment by the Executive Board highlighted that Mexico continues to meet all the necessary qualification criteria to access the resources available through this instrument if needed, without any conditions attached.
It’s worth noting that Mexico pays a fee to the IMF for keeping the FCL open, and in the event of using the funds, it must pay an interest rate.
The IMF also emphasized that the strength of Mexico’s macroeconomic policies and institutional frameworks has contributed to the country’s economic stability.
It noted that the institutional quality of economic policy is supported by the inflation targeting framework, the Federal Budget and Fiscal Responsibility Law, and an effective regulatory and prudential regime for financial supervision.
Flexible Credit Line for Mexico: Good sign
On another note, it was recognized that Mexico’s economic growth is robust, monetary policy is focused on containing inflationary pressures, and fiscal policy has kept public debt on a sustainable path.
Considering the balance of external risks, the strength of the institutional framework for economic policies, and the commitment to maintaining economic and financial stability, Mexican authorities decided to reduce the level of access to the Flexible Credit Line.
Consequently, the Exchange Commission approved the request for a new FCL for our country for an additional two years, with an access amount equivalent to 26.7381 billion Special Drawing Rights – approximately $35 billion.
The Exchange Commission will continue the strategy of reviewing the level of access after one year, subject to a thorough analysis of the external risks facing the Mexican economy at that time.”.
