IMF Sanctions $35B Two-Year Flexible Credit Line for Mexico

• 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,[1]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 (seePress 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 (seePress Release No. 18/440). The arrangement approved on November 22, 2019 (seePress 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 (seePress 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