The IMF renewed Mexico's $35 billion Flexible Credit Line for two more years, highlighting the country's solid macroeconomic policy framework and institutional strength.
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Leer en español: El FMI renueva línea de crédito de 35.000 millones de dólares para México por dos años
Renewal of the Flexible Credit Line (LCF) for Mexico
The executive board of the International Monetary Fund (IMF) renewed this Thursday the Flexible Credit Line (LCF) of 35,000 million dollars for Mexico for two more years, which represents "a recognition of the solidity of the institutional framework of macroeconomic policies," The Ministry of Finance and Public Credit (SHCP) and the Bank of Mexico reported this Thursday.
In a statement, both institutions indicated that the IMF executive board yesterday gave the green light to their decision.
Precautionary instrument for economic stability
The LCF is a precautionary instrument that reinforces the reserve of international assets and thus complements the tools of the Mexican authorities to face adverse external conditions and preserve economic and financial stability.
In its evaluation, the IMF executive board highlighted that Mexico "continues to comply with all the necessary qualification criteria to access, if required and without any conditions, the resources available through this instrument."
Furthermore, he highlighted that the solidity of Mexico's macroeconomic policies and institutional frameworks has contributed to the country's economic stability.
The IMF also pointed out that the institutional quality of economic policy is supported by the inflation targeting scheme, the Federal Budget and Fiscal Responsibility Law, and an effective regulatory and prudential regime for financial supervision.
He also recognized that "Mexico's economic growth is robust, that monetary policy is focused on containing inflationary pressures, and that fiscal policy has kept public debt on a sustainable path."
The decision to reduce the level of access to the LCF
Considering the balance of external risks, the strength of the institutional framework of economic policies, and the commitment to maintaining economic and financial stability, the Mexican authorities decided to reduce the level of access to the LCF.
Consequently, the Foreign Exchange Commission, the body in charge of exchange policy in Mexico, "authorized the request for a new LCF for our country for two more years for an access amount equivalent to 26,738 million special drawing rights, that is, approximately 35,000 million dollars," the note stated.
In addition, the Commission warned that "it will continue with the strategy of reviewing the level of access after one year subject to an in-depth analysis of the external risks facing the Mexican economy at that time."