The International Monetary Fund has approved a new, two-year $88 billion flexible line of credit to Mexico to bolster it against uncertainty in the global economy.
Mexico can draw on the line of credit at any time. Mexico has had such an arrangement at its disposal five other times since 2009, Reuters reported.
IMF Executive Board Acting Chairman David Lipton said in a statement Friday that Mexico’s macroeconomic policies remain very strong and its economy has been resilient in the face of a global slowdown in recent years.
Mexican President Enrique Pena Nieto says the line of credit could be used to protect it from external financial volatility.
Mexico was the first country to make use of the flexible credit facility when it was introduced in 2009 for countries with strong fiscal and monetary track records. The other countries that have access are Poland and Colombia.
With its open economy in terms of trade and capital, Mexico remains exposed to external risks, and its increased credit access will provide insurance and bolster investor confidence, the fund said.
While Mexico has used more than $28 billion of foreign reserves to support the peso in the past year and a half, it hasn’t tapped the IMF credit line. The fund said Friday that Mexico intends to reduce and eventually phase out its access as risks to emerging markets recede.
Mexico’s foreign exchange commission, which is composed of officials of the central bank and finance ministry, cited the global economic slowdown, slowing trade and capital flows, lower oil prices and uncertainty about the path of US interest rates in its decision to renew the flexible credit line.
