The IMF logo at the institution’s headquarters in Washington DC (USA), in a file image.YURI GRIPAS (Portal)
The Mexican government agreed this Thursday on a new credit line with the International Monetary Fund (IMF) for 35 billion dollars, a reduction of almost 15 billion since the renewal of the previous line in 2021, the multilateral reported in a statement. The flexible credit line is a tool available to some countries of the world that allows them to strengthen their reserves and cope with unexpected shocks. The line is valid for two years.
According to the fund, this is the fourth consecutive time that Mexico has decided to reduce its exposure to this type of financing. In 2018, Latin America’s second-largest economy decided to lower the limit from $88 billion to $74 billion.
The credit line, granted on the basis of special drawing rights and ensuring a rapid and flexible transfer of resources, was controversial in 2021 when President Andrés Manuel López Obrador made a request to receive the money and pay off part of the debt of the troubled state Oil company Petróleos Mexicanos (Pemex). At the time, a deputy governor of the Bank of Mexico, Gerardo Esquivel, assured that this was a violation of the law since the loan from the fund was intended to strengthen the bank’s reserves. Pemex is the most indebted oil company in the world.
“Mexico remains exposed to high external tail risks, although lower than in previous years. These include new periods of volatility in financial markets, rising risk premiums and capital outflows from emerging markets, as well as weakening US growth and a global economic slowdown,” said Gita Gopinath, first deputy managing director of the IMF. “The upcoming elections in Mexico and the United States could further exacerbate uncertainty. “The new agreement under the LCF will continue to play an important role in supporting the authorities’ macroeconomic strategy and providing insurance against extreme risks, as well as strengthening market confidence,” he added.
The fund believed that the Mexican central bank’s monetary policy is prudent as it has focused on containing inflationary pressures. With regard to the federal government’s financial policy, it has kept national debt under control, the Multilateral described. “These efforts must continue, accompanied by supply-side reforms that address existing bottlenecks, with a focus on combating climate change, strengthening the anti-money laundering and terrorist financing framework, as well as combating corruption and improving the labor market.” “recommended the IMF.
“The Mexican economy is in the midst of a broad-based expansion with strong private consumption and investment,” Gopinath said in a statement. “Mexico’s macroeconomic and economic policy institutional framework remains very strong, with a flexible exchange rate regime, a credible inflation targeting framework, the Federal Budget and Fiscal Responsibility Law and a well-regulated financial sector.” “Mexico continues to meet the eligibility criteria for the Flexible Credit Line (LCF).” , he added.
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