Press Release No. 16/279

Press Release: IMF Executive Board Approves New Two-Year US$11.5 Billion Flexible Credit Line Arrangement for Colombia

June 13, 2016

The Executive Board of the International Monetary Fund (IMF) today approved a successor two-year arrangement for Colombia under the Flexible Credit Line (FCL) in an amount equivalent to SDR 8.18 billion (about US$11.5 billion) and canceled the previous arrangement (SDR 3.87 billion, about US$5.4 billion). The Colombian authorities stated their intention to treat the new arrangement as precautionary and do not intend to draw on it.

Following the Executive Board’s discussion on Colombia, Mr. Mitsuhiro Furusawa, Deputy

Managing Director and Acting Chairman of the Board, issued the following statement:

“Colombia has a track record of very strong policy frameworks, including an inflation-targeting regime, a flexible exchange rate, effective financial sector supervision and regulation, and a fiscal policy guided by a structural balance rule. The authorities are firmly committed to maintaining these policies and undertaking further initiatives to strengthen the resilience of the economy and boost competitiveness and growth.

“Colombia’s macroeconomic policies have provided flexibility to deliver a coordinated and gradual response to the large decline in oil prices. Exchange rate flexibility continues to be the main shock absorber, while the fiscal rule allows for a smooth adjustment of expenditure to a weaker medium-term oil outlook. The ongoing monetary policy tightening cycle will gradually bring inflation back to the target range, and the banking and corporate sectors remain in good financial health. International reserves are adequate for normal times.

“Nevertheless, global risks have risen with the potential to increase the severity of shocks that Colombia could suffer, despite the strength of its fundamentals and policy frameworks. The new arrangement under the Flexible Credit Line (FCL), with higher access, will provide added buffers and continue to play a significant role in supporting the authorities’ policies in the presence of these increased downside risks. It will also provide policy flexibility and serve as a temporary insurance that reinforces market confidence. The authorities intend to continue to treat this facility as precautionary and to phase out its use as risks to the global outlook and commodity prices substantially recede.”

Background:

Colombia’s first FCL arrangement was approved on May 11, 2009 (see Press Release No. 09/161 ) and was renewed on May 7, 2010 (see Press Release No. 10/186), May 6, 2011 (see Press Release No. 11/165), June 24, 2013 (see Press Release No. 13/229), and June 17, 2015 (see Press Release 15/281). The FCL was established on March 24, 2009 and further enhanced on August 30, 2010 (see Press Release No. 10/321). The FCL is available to countries with very strong fundamentals, policies, and track records of policy implementation and is particularly useful for crisis prevention purposes. FCL arrangements are approved for countries meeting pre-set qualification criteria (see Press Release No. 09/85). The FCL is a renewable credit line, which could be approved for either one or two years. Two-year arrangements involve a review of eligibility after the first year. If the country draws on the credit line, the repayment period is between three and a quarter and five years. There is no cap on access to Fund resources under the FCL, and access is determined on a case-by-case basis. Qualified countries have the full amount available up-front, with no ongoing conditions. There is flexibility to either draw on the credit line at the time it is approved, or treat it as precautionary.