On November 26, 2018, the Executive Board of the International Monetary Fund (IMF) completed its review of Mexico’s qualification for the arrangement under the Flexible Credit Line (FCL) and reaffirmed Mexico’s continued qualification to access FCL resources. At the request of the Mexican authorities for a reduction of access under the FCL arrangement for Mexico consistent with their intention last year, the Executive Board approved the FCL access of SDR 53.4762 billion (about US$74 billion1). The Mexican authorities stated their intention to continue treating the arrangement as precautionary.
The current two-year FCL arrangement for Mexico was approved by the IMF’s Executive Board on November 29, 2017 for an original access amount equivalent to SDR 62.3889 billion (about US$86 billion) (see Press Release No. 17/459). Mexico’s first FCL arrangement was approved on April 17, 2009 (see Press Release No. 09/130), and was renewed on March 25, 2010 (see Press Release No. 10/114), January 10, 2011 (see Press Release No. 11/4), November 30, 2012 (see Press Release No. 12/465), November 26, 2014 (see Press Release No. 14/543), and May 27, 2016 (see Press Release No. 16/250).
Following the Executive Board’s discussion on Mexico, Ms. Christine Lagarde, Managing Director and Chair, made the following statement:
Very strong policies and policy frameworks have helped Mexico navigate a complex external environment. Growth has remained resilient while inflation declined. Fiscal policy has stemmed the rise in the public debt-to-GDP ratio, monetary policy has maintained a prudent stance, and financial regulation and supervision remain strong. The flexible exchange rate has played a key role in helping the economy adjust to external shocks.
The current and the incoming administrations have stated their commitment to maintain very strong policies and policy frameworks, including the independence of economic-policy institutions. They are also committed to fostering a reform agenda to strengthen the rule of law and boost private investment. It will be important to adhere strictly to these commitments to preserve hard-won gains and instill policy predictability.
Given its openness to financial and trade flows, the Mexican economy remains exposed to external risks. These risks include renewed volatility and increased risk premia in global financial markets, a sharp pull-back of capital from emerging market economies, as well as weakening global growth and intensified global trade tensions. The risk of an abrupt change in Mexico’s trade relations, however, has receded.
The Flexible Credit Line arrangement plays an important role in supporting the authorities’ macroeconomic strategy by providing insurance against tail risks and bolstering market confidence. In light of the dissipation of some of the risks facing Mexico and given Mexico’s strong buffers, the authorities requested a reduction in access under the current arrangement, in line with the commitment they made at the time of its approval a year ago. The lower access is appropriate and consistent with the authorities’ strategies that envisage a gradual phasing out of Mexico’s use of the facility subject to a reduction in risks. Both current and incoming administrations intend to continue to treat the arrangement as precautionary.
Amount based on the Special Drawing Right (SDR) quote of November 27 2018 of I USD=SDR 0.724065.