IMF approves larger credit line for Mexico

31 May 16

Mexico has secured an increased line of credit from the International Monetary Fund, worth around $20bn more than the previous arrangement.

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Mexico city, the capital of Mexico.

Mexico city, the capital of Mexico.

 

Mexico’s current access to a $67bn flexible line of credit, which the government can draw on at any time and is not tied to any policy targets, was due to end this year.

However, the country’s finance ministry and the Bank of Mexico requested the current two-year arrangement be cancelled early, and a larger, successor arrangement be considered.

The fund confirmed on Friday that its executive board had approved a new $88bn, two-year line of credit for Mexico.

First deputy managing director David Lipton said that while the government’s policies are strong and the economy is sound, the country remains exposed to risks due to its close ties with the global economy.

“Downside risks to global growth have risen, and volatility in global financial markets has increased,” he said.

“The new arrangement, with a higher level of access, will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against greater external risks and bolstering market confidence.”

He noted that Mexico does “not intend to make permanent use” of the line of credit. The government plans to reduce their access in future and phase out the country’s use of the instrument as global risks facing emerging markets recede.

The government will also work to enhance its resilience further by continuing with fiscal consolidation plans, building reserves, and ensuring strong oversight of the financial system, he added.

Also on Friday, the fund announced it will open a $478m, two-year programme with Suriname, starting with the immediate disbursement of $81m, to help the country’s economy recover from the recent crash in commodity prices.

The Central African Republic also looks set to receive $115m from the fund over a three-year period in order to get the country’s economy back on track, subject to approval by the IMF’s board.

 

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