WASHINGTON: The International Monetary Fund announced Thursday it has approved a new $88 billion credit line for Mexico, replacing the existing line.
The two-year flexible credit line boosts Mexico’s ability to immediately deal with a potential need for liquidity, without having to request an IMF loan.
The country considers the funds precautionary and does not intend to draw on them, although the IMF notes increasing risks from the potential changes to the North American Free Trade Agreement.
While Mexico’s economy has proven resilient, the credit line “will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against external risks and bolstering market confidence,” IMF Managing Director Christine Lagarde said in a statement.
“The global risk environment has improved, but the risk of an abrupt change in Mexico’s trade relations, or of a surge in financial market volatility and a sharp pull-back of capital from emerging markets, continues to be high,” she said.
NAFTA members Mexico, Canada and the United States currently are holding talks to renegotiate the 1994 trade pact, but are at odds over some of the measures Washington is demanding. The IMF cautions that the delay in the talks increases the uncertainty for Mexico’s economy.
Mexico requested a new credit line several months early, because the existing arrangement was due to expire only a few weeks before the July 2018 presidential elections, according to the fund report.
The IMF said Mexican authorities “prefer to de-link the renewal process from the electoral cycle.”
Mexico has had an IMF credit line in place since 2009, in the midst of the global financial crisis.