NEW YORK — The International Monetary Fund approved today a new two-year flexible credit line of USD50 billion for Mexico that the country will use as “precautionary”, the multilateral lender announced in a public statement.

The flexible credit line is Mexico’s ninth FCL arrangement, after the IMF approved the first one on April 17, 2009. 

Mexico’s economy remains exposed to external risks, including from renewed waves of the COVID-19 pandemic, as well as international financial volatility arising from inflation expectations in advance economies and faster-than-expected normalization of their monetary policies, said Geoffrey Okamoto, First Deputy Managing Director and Acting Chair of the IMF.

“The new arrangement under the Flexible Credit Line will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against tail risks and bolstering market confidence,” Okamoto said in the statement.

The Mexican economy is rebounding from its deepest recession in decades, spurred by strong U.S. growth and rising vaccination rates, the IMF said. Mexico’s GDP contracted 8.3% in 2020 under the heavy burden imposed by the COVID-19 pandemic on its manufacturing industry.

Flexible Credit Lines

Mexico’s first FLC with the IMF was renewed on March 25, 2010, and extended in January 10, 2011 and then in November 30, 2012. After two year, the country signed a new agreement on November 26, 2014 that was renewed on May 27, 2016 and then in November 29, 2017. Before today the most recent FLC was signed November 22, 2019, the IMF said.

Mexico has been gradually reducing access under its FCL arrangements. The arrangement approved on November 29, 2017 was for an original access of ~USD86 billion, which at the request of the Mexican authorities, was reduced to USD74 billion on November 26, 2018. The arrangement approved on November 22, 2019 was for a FCL of ~USD61 billion, the IMF said.

The Mexican authorities stated their intention to request a further reduction in access at the mid-term review next year, according to the statement.

Goldman Sachs forecast the nation’s gross domestic product will recover this year, expecting a 5.7% expansion, but a growth of only 2.5% in 2022 due to rising rates, softer U.S. demand and “overall difficult business and regulatory environment,” the investment bank said in a report to investors published November 9.