Press Release No. 17/459

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

November 30, 2017

The Executive Board of the International Monetary Fund (IMF) yesterday approved a successor two-year arrangement for Mexico under the Flexible Credit Line (FCL) in an amount equivalent to SDR 62.3889 billion (about US$88 billion) and canceled the previous arrangement in the same amount. 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 (see Press Release No. 09/85). The FCL is designed for crisis prevention purposes as it provides the flexibility to draw on the credit line at any time. Disbursements are not phased nor conditioned on compliance with policy targets as in traditional IMF-supported programs. This 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. 

Following the Executive Board’s discussion on Mexico, Ms. Christine Lagarde, Managing Director and Chair, issued the following statement: 

“Mexico’s macroeconomic policies and policy frameworks remain very strong. Monetary policy is guided by an inflation-targeting framework in the context of a flexible exchange rate. Fiscal policy is anchored by the fiscal responsibility law, and the authorities are committed to a consolidation path that would lead to a reduction of the public debt-to-GDP ratio over the medium term. The financial regulatory and supervisory framework is strong. The authorities have implemented an ambitious structural reform agenda that is beginning to show results and should help boost medium-term growth.

“The Mexican economy has successfully navigated a complex external environment. Economic activity has shown resilience, although near-term growth is projected to slow down amid prolonged uncertainty related to Mexico’s future trade relations, as well as tighter macroeconomic policies. Inflation has started to decelerate following a pick-up owing to temporary shocks, and the financial system is sound. Nevertheless, given Mexico’s close ties with the global economy, particularly the United States, its economy remains exposed to external risks through both trade and financial channels.

“The global risk environment has improved, but the risk of an abrupt change in Mexico’s trade relations, or of a surge in financial market volatility and a sharp pull-back of capital from emerging markets, continues to be high. The new arrangement under the Flexible Credit Line (FCL), with an unchanged level of access, will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against external risks and bolstering market confidence.

“The authorities remain committed to enhancing Mexico’s resilience to external shocks further through steadfast implementation of the ongoing fiscal consolidation plans, continued anchoring of inflation expectations, gradual rebuilding of reserve buffers, strong oversight of the domestic financial system, and steadfast implementation of structural reforms. The authorities do not intend to make permanent use of the FCL, and will continue to treat the arrangement as precautionary. They intend to gradually phase out Mexico’s use of the facility, conditional on a reduction in external risks affecting Mexico.”