Mexico City. The International Monetary Fund (IMF) recognized that Mexico has solid economic fundamentals and very strong institutional policy frameworks, which is why it determined that it meets the criteria to maintain access to the Flexible Credit Line (LCF), an instrument that until The moment has not been used, but serves as a backup.
The Foreign Exchange Commission reported this Friday that within the framework of Article 4 of the Constitutive Agreement, the conclusions of the IMF technical team that visited the country to collect and analyze economic and financial information were presented.
Derived from the report, the Executive Board determined that “Mexico’s macroeconomic policies and institutional policy frameworks remain very solid, with a flexible exchange rate regime, a credible inflation targeting framework, a fiscal responsibility law, and a well-functioning financial sector. regulated”.
Although they pointed out that the Mexican economy is slowing, inflationary pressures are easing and there is the same level of risk compared to the review carried out last year, the board considered that the country continues to be a candidate to access the LFC.
It should be noted that this is not a loan, but rather insurance “against extreme risks” that is available to the country if it is needed. So far it has not been used by the Mexican government.
The IMF Executive Board highlighted that “the (Mexican) authorities intend to treat the agreement as precautionary and are firmly committed to maintaining their very strong macroeconomic policy record and institutional policy frameworks in the future.”
The Exchange Commission, which is made up of the Ministry of Finance and Public Credit (SHCP) and the Bank of Mexico (BdeM), explained that the amount of the LFC is equivalent to 26 thousand 7381 million special drawing rights, approximately 35 billion dollars.
This is the eleventh renewal of this instrument, since it was first requested in 2009 and has been reduced from 47 billion dollars.
“This measure reinforces the country’s position in the face of international volatility scenarios,” said the Commission, which also reiterated that it will continue with the gradual and orderly exit strategy of the LCF, announced in 2017.
The IMF Executive Board highlighted that Mexican authorities expressed that current access to the LFC “remains adequate to ensure a timely and adequate cushion to mitigate external risks should they materialize.”
The international body also recognized the country’s sustainable external position, adequate level of reserves, history of access to capital markets on favorable terms, healthy public finances, including a sustainable public debt position and a well-capitalized financial system and liquid that remains robust in the face of systemic risks and effective supervision.
“The authorities reaffirm their commitment to prudent macroeconomic policies that contribute to financial stability and sustainable and inclusive economic growth,” said the Foreign Exchange Commission.
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