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  HOME | Mexico

IMF Renews Mexico’s Flexible Credit Line for $61 Billion

MEXICO CITY – The International Monetary Fund (IMF) has approved a two-year arrangement providing a new Flexible Credit Line (FCL) for the Mexican government worth close to $61 billion, the global organization announced in a statement.

The IMF said it canceled the previous agreement reached in 2017 for $86 million, and that Mexican authorities asked that the new accord be treated as “precautionary,” which includes close to $44.6 billion in Special Drawing Rights (SDR), which are supplementary foreign exchange reserve assets.

The IMF noted that “very strong policies” have helped Mexico navigate the “complex external environment,” largely because its “commitment to fiscal prudence is strong, monetary policy has succeeded in bringing inflation to target, and financial sector supervision and regulation remain robust.”

Nonetheless, the Mexican economy remains exposed to external risks, such as uncertainty over the future of its trade relations, increased global financial market volatility, a sharp pullback in capital from emerging markets and increased risk premiums, warned David Lipton, first deputy managing director of the IMF.

Lipton also pointed to the uncertain trade relations between Mexico and the United States.

In the analysis of the accord released by the IMF, the financial organization noted as a factor of uncertainty the lack of ratification of the latest trade treaty between Mexico, the United States and Canada (USMCA), which still awaits approval by both the US Congress and the Canadian Parliament.

It also said that the threat persists of tariffs of up to 25 percent that the Trump government threatened to impose on Mexican products back in May 2019, as a way of pressuring the Mexican government into taking stricter control over the waves of migrants from Central America heading for the southern border of the United States.

 

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