- The IMF completed the mid-term review of Peru's qualification under the Flexible Credit Line (FCL) arrangement. The arrangement was approved on May 27, 2022 for an amount of about $5.3 billion (equivalent to 300 percent of quota).
- Peru continues to qualify for the FCL by virtue of its very strong economic fundamentals and institutional policy frameworks, and sustained track record of implementing very strong macroeconomic policies that have helped the country absorb large adverse shocks in recent years.
- Given the still elevated global risks and increased uncertainty, the authorities have expressed a desire to maintain the current level of access. The authorities intend to continue to treat the arrangement as precautionary. In line with the strategy delineated at the time of the FCL approval, exit from the arrangement will be conditional on the evolution of external risks.
Washington, DC : The Executive Board of the International Monetary Fund (IMF) completed on May 17, 2023, the mid-term review of Peru's qualification under the Flexible Credit Line (FCL) arrangement. [1] The Executive Board reaffirmed that Peru's very strong macroeconomic policies and institutional policy frameworks, sound economic fundamentals, and proven track record of policy implementation warrant continued access to FCL resources.
The two-year arrangement was approved on May 27, 2022 for an amount of SDR 4.0035 billion (about US$5.3 billion or 300 percent of quota). The Peruvian authorities have reiterated their intention to continue to treat the arrangement as precautionary. The authorities intend to exit the arrangement conditional on the reduction of external risks, in line with their strategy that sees the use of the facility as temporary.
Following the Executive Board's discussion on Peru, Mr. Kenji Okamura, Deputy Managing Director, made the following statement:
"Over the past two decades, Peru's very strong economic fundamentals, institutional policy frameworks, and prudent policy settings have underpinned robust economic growth and stability, spanning multiple electoral cycles and governments. The solid inflation-targeting regime, credible fiscal framework, and robust financial sector supervision and regulation have allowed the country to deploy a robust policy response to mitigate the socio-economic impact of the pandemic, and subsequently remove the policy stimulus, while preserving macroeconomic stability and maintaining ample access to international capital markets.
"Following a strong post-pandemic rebound, economic activity slowed down in 2022 and is expected to remain subdued in 2023, with inflation gradually declining to the target range by year-end. The economic outlook remains highly uncertain, and external risks remain elevated. Access to the Flexible Credit Line arrangement, along with sizable international reserves, low public debt, anchored inflation expectations, and a sound financial system have provided the authorities with valuable insurance in a period of high uncertainty and volatility.
"Peru has a sustained track record of implementing very strong macroeconomic policies, and the authorities remain committed to maintaining very strong policies in the future. The Flexible Credit Line will continue to play an important role in supporting the authorities' macroeconomic strategy by sustaining market confidence and providing a valuable buffer against tail risks. The authorities intend to continue to treat the arrangement as precautionary, and to exit the facility conditional on the evolution of external risks."
[1] The FCL was established on March 24, 2009 as part of a major reform of the Fund's lending framework (see Press Release No. 09/85). The FCL is designed for crisis prevention purposes as it provides the flexibility to draw on the credit line at any time during the period of the arrangement (one or two years), and subject to a mid-term review in two-year FCL arrangements. Disbursements are not phased nor conditioned on compliance with policy targets as in traditional IMF-supported programs. This large, upfront access with no ongoing conditions is justified by the very strong track records of countries that qualify for the FCL, which gives confidence that their economic policies will remain strong.
