IMF Executive Board Approves New Two-Year US$35 Billion Flexible Credit Line Arrangement with Mexico

IMF Executive Board Approves New Two-Year US$35 Billion Flexible Credit Line Arrangement with Mexico

November 16, 2023

• The IMF approved on November 15, 2023, a successor two-year arrangement for Mexico under the Flexible Credit Line (FCL), designed for crisis prevention, of about US$35 billion.
• Mexico qualifies for the FCL by virtue of its very strong economic fundamentals and institutional policy frameworks and track record of macroeconomic performance and policy implementation.
• The authorities intend to continue to treat the arrangement as precautionary and will reassess the outlook for external risks and their implications for access under the FCL at the time of the mid-term review next year.

Washington, DC:The Executive Board of
the International Monetary Fund (IMF) approved yesterday a successor
two-year arrangement for Mexico under the Flexible Credit Line (FCL) in an
amount equivalent to SDR 26.7381 billion (about US$35 billion,

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equivalent to 300 percent of quota) and noted the cancelation by Mexico of
the previous arrangement. The Mexican authorities stated their intention to
treat the new arrangement as precautionary.

This is Mexico’s tenth FCL arrangement since 2009. In recent years, Mexico
has been gradually reducing access under its FCL arrangements. The
arrangement approved on November 29, 2017 (see

Press Release No. 17/459) was for an original access amount equivalent to SDR 62.3889 billion
(about US$88 billion), which, at the request of the Mexican authorities,
was reduced to SDR 53.4762 billion (about US$74 billion) on November 26,
2018 (see

Press Release No. 18/440). The arrangement approved on November 22, 2019 (see

Press Release No. 19/431) was for an access amount equivalent to SDR 44.5635 billion (about US$61
billion), which was reduced in the successor arrangement approved in
November 2021 (see

Press Release No. 21/340) to SDR 35.6508 billion (about US$50 billion).

Following the Executive Board’s discussion on Mexico, Ms. Gita Gopinath,
First Deputy Managing Director and Acting Chair, made the following
statement:

“The Mexican economy is in the midst of a broad-based expansion, with
robust private consumption and investment. Mexico’s macroeconomic policies
and institutional policy frameworks remain very strong, with a flexible
exchange rate regime, a credible inflation targeting framework, a fiscal
responsibility law, and a well-regulated financial sector. Mexico continues
to meet all the Flexible Credit Line (FCL) qualification criteria.

“The authorities’ policies have remained prudent. Monetary policy has
focused on containing inflationary pressures, while fiscal policy has kept
public debt in check. These efforts should continue, accompanied by
supply-side reforms to address the existing bottlenecks, with an emphasis
on combating climate change, strengthening the AML/CFT framework,
addressing corruption, and improving the labor market.

“Mexico remains exposed to elevated external tail risks, albeit lower than
in previous years. These include risks of renewed volatility in the
financial markets, increased risk premia, and capital outflows from
emerging markets, as well as weaker U.S. growth and a global slowdown.
Upcoming elections in Mexico and the U.S. could further exacerbate
uncertainty. The new arrangement under the FCL will continue to play an
important role in supporting the authorities’ macroeconomic strategy and
provide insurance against tail risks while bolstering market confidence.

“The authorities intend to treat the arrangement as precautionary and are
firmly committed to maintaining prudent policies going forward. The lower
level of access is consistent with the authorities’ approach of reducing
access commensurate with reductions in external risks. At the time of the
mid-term review of the FCL in November 2024, the authorities will reassess
the outlook for external risks and their implications for access under the
arrangement.”

For more information on the IMF’s Flexible Credit Line:

https://www.imf.org/en/About/Factsheets/Sheets/2023/Flexible-Credit-Line-FCL