Press Release No. 18/196

IMF Executive Board Approves New Two-Year US$11.4 Billion Flexible Credit Line Arrangement with Colombia

May 25, 2018

The Executive Board of the International Monetary Fund (IMF) approved today a successor two-year arrangement for Colombia under the Flexible Credit Line (FCL) in an amount equivalent to SDR 7.848 billion (about US$11.4 billion) and canceled the previous arrangement in the amount of SDR 8.18 billion. The Colombian 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 Colombia, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Chair, issued the following statement:

“Colombia has very strong economic fundamentals and policy frameworks, anchored in an inflation-targeting regime, a structural fiscal rule, a flexible exchange rate, and effective financial sector supervision and regulation. The authorities are firmly committed to maintaining strong policies and implementing their ambitious structural reform agenda to strengthen the resilience of the economy and boost inclusive growth. There is also a broad consensus in Colombia on the importance of preserving macroeconomic stability and very strong policy frameworks.

“Colombia also has a proven track record of macroeconomic management, including a timely response to recent large external shocks. Exchange rate flexibility has continued to be the main shock absorber. The 2016 structural tax reform has helped smooth the impact of the decline in oil revenue and improved business competitiveness, which will support medium-term growth. The monetary policy easing cycle has supported the recovery while anchoring inflation expectations. International reserves are adequate for normal times. The authorities’ structural reform agenda is ambitious and rightly targets areas that will foster productivity growth and economic diversification.

“Global risks have evolved over the past few years. While the near-term outlook is improving, some external risks have increased, including those related to a potential reversal of cross-border integration. Colombia’s exposure to some of these tail risks has increased. The new arrangement under the Flexible Credit Line will provide added buffers and continue supporting the authorities’ policies. The arrangement will serve as temporary insurance that reinforces market confidence. The authorities intend to continue to treat this instrument as precautionary and to phase out its use conditional on a reduction of external risks. A communication strategy is being developed to prepare markets for a gradual exit from the instrument.”