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International Monetary Fund

macroeconomic policies and institutional frameworks. Colombia is the second country to formally request a successor FCL arrangement, following Mexico (see Press Release No. 10/114 ). 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. Disbursements are not phased nor conditioned on compliance with policy targets as in traditional IMF-supported programs. This flexible access

International Monetary Fund

-year arrangement under the IMF’s FCL, which the authorities intend to treat as precautionary. This successor FCL arrangement will continue to play an important role in supporting the authorities’ overall macroeconomic strategy and in bolstering confidence until external conditions improve, complementing financing from other multilaterals. Mexico’s very strong policy frameworks and economic fundamentals, together with the additional insurance provided by the successor arrangement under the FCL, put Mexico in a very strong position to deal with other potential risks that could

International Monetary Fund. Western Hemisphere Dept.

country’s external position. Access to the Fund’s FCL will continue to play a significant role in supporting the authorities’ policies in the presence of these downside risks. A successor FCL arrangement, which the authorities intend to continue to treat as precautionary, will provide policy flexibility and serve as a temporary insurance that reinforces market confidence. The authorities intend to phase out the use of the FCL facility as global risks affecting Colombia decrease substantially.” Background: Colombia’s first FCL arrangement was approved on May 11

International Monetary Fund
protracted global uncertainty combined with frequent episodes of capital flow volatility have intensified demand for liquidity support. In response to calls from the IMFC and the G20, the Fund has identified gaps in the global financial safety net (GFSN) and the Fund’s lending toolkit for crisis prevention, including insufficient coverage against liquidity pressures resulting from volatile capital flows. The proposals in this paper draw on the previous Fund work on the adequacy of the GFSN, the review of the Fund’s current toolkit for crisis prevention, and extensive consultations with the membership. The review of the FCL concludes that the FCL has been effective in providing precautionary support against external tail risks. Successor FCL arrangements and associated access levels have been in line with the assessment of external risks and potential balance of payments needs. However, there is scope to strengthen the transparency and predictability of the qualification framework by adding indicator-based thresholds to complement and inform judgment. To enhance crisis resilience while improving the Fund’s toolkit coherence and resource use, the paper proposes three complementary reforms: The establishment of a Short-term Liquidity Swap to provide renewable and reliable liquidity support against potential short-term moderate volatility of capital flows. The proposed instrument is for members with very strong fundamentals and economic policies, and tailored to improve reliability and appeal to users. The use of a core set of indicators with thresholds to guide judgment in FCL qualification. This will improve predictability and transparency while keeping the standards unchanged. The elimination of the PLL to maintain a streamlined and coherent toolkit, given the low use of the PLL, likely reflecting issues of tiering with the FCL. The paper also discusses possible reforms of the current commitment fee policy to promote a more balanced use of Fund resources. Possible options include increasing the commitment fee at high access levels or introducing a new time-based commitment fee.
International Monetary Fund
This report focuses on Colombia’s economic policy framework and the policy response to the global crisis. In recent years, Colombia’s policies strengthened a strong macroeconomic performance, which helped in achieving higher tax revenues and restraint on current spending. Colombia was not affected too severely by the global crisis. The impact of the crisis was mitigated by the authorities through countercyclical monetary and fiscal policies. The monetary stance is expected to remain supportive unless there are signs of domestic demand pressures guided by the inflation targeting framework.
International Monetary Fund

limit the availability and access to external financing. In addition, increased political tensions with Venezuela could have a larger-than-expected impact on activity and/or destabilize domestic financial markets. II. R ole of the F lexible C redit L ine A rrangement 9. The authorities are of the view that a successor FCL arrangement would provide useful insurance against tail risks in the global outlook . They consider that the arrangement that expires on May 11, 2010 increased their capacity to follow countercyclical fiscal and monetary policies in

International Monetary Fund

; World Economic Outlook; and IMF staff estimates. 1/ GIR at the end of 2009 in percent of ST debt at remaining maturing and current account deficit in 2010. The current account is set to zero if it is in surplus. 12. The authorities believe that a successor FCL arrangement, which they would again intend to treat as precautionary, could play an important role in supporting Mexico’s economic policy strategy in a continued difficult external environment . In particular, another FCL arrangement would provide insurance against still present tail risks in the period

International Monetary Fund. Western Hemisphere Dept.
Over the last quarter of a century, Peru has become one of the most dynamic economies in Latin America. During this period, Peru built very strong policy and institutional frameworks and economic fundamentals while maintaining external, financial, and fiscal stability. The strength of the Peruvian economy was tested with the COVID-19 pandemic in 2020, when the economy collapsed, leading to a significant deterioration of the fiscal accounts. Subsequently, the economy recovered strongly in 2021, and the fiscal position strengthened considerably, while inflationary pressures emerged (in line with global trends). However, Peru is bearing a very high humanitarian and economic cost from the COVID-19 pandemic, sizable under-employment, and a large increase in poverty. These challenges and recent social unrest related to high energy and food prices point to the need to accelerate structural reforms to foster high and inclusive growth. While political uncertainty has risen, with frequent cabinet reshufflings, the authorities remain committed to maintaining their very strong policy frameworks and prudent macroeconomic policies.
International Monetary Fund. Western Hemisphere Dept.
This paper discusses Colombia’s Arrangement Under the Flexible Credit Line (FCL) and Cancellation of the Current Arrangement. In the baseline scenario, growth in Colombia is expected to decelerate to 3.4 percent in 2015 but gradually return toward potential over the medium term and inflation to remain at the midpoint of the central bank’s 2–4 percent target range. The authorities are requesting a successor two-year FCL arrangement for 500 percent of quota, and cancellation of the current arrangement which expires on June 23, 2015. The IMF staff assesses that Colombia meets the qualification criteria for access to IMF resources under the FCL arrangement, and recommends its approval by the Executive Board.