IMF Executive Board Approves Augmentation of Colombia’s Flexible Credit Line
September 25, 2020
- The IMF Executive Board approved Colombia’s request for an SDR 4.4174 billion augmentation of access under the Flexible Credit Line (FCL) arrangement. The total amount now available under the line stands at SDR 12.267 billion (about USD 17.2 billion).
- The augmentation was approved in light of Colombia’s continued qualification with very strong institutional policy frameworks, track record of economic performance and policy implementation, and against a backdrop of higher external risks and a larger than expected adverse impact from COVID-19 pandemic.
- The FCL is designed to address both actual and potential balance of payment pressures and help boost market confidence. Combined with the comfortable level of international reserves that Colombia has, the FCL provides added insurance against downside risks.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved today
a request by the Colombian authorities to increase access under its current
Flexible Credit Line (FCL) arrangement to SDR 12.267 billion (about USD
17.2 billion), equivalent to 600 percent of quota. This represents an SDR
4.4174 billion increase (about USD 6.2 billion) in relation to the two-year
arrangement that was approved on May 1, 2020. The credit line approved in
May had kept access unchanged relative to the previous FCL arrangement
approved in 2018.
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 tied to
compliance with policy targets as in regular IMF-supported programs. This
large, upfront access with no ongoing conditions is justified by the very
strong policy fundamentals and institutional policy frameworks and
sustained track records of countries that qualify for the FCL, which gives
confidence that their economic policies will remain strong.
Following the Executive Board’s discussion on Colombia, Ms. Antoinette
Sayeh, Deputy Managing Director and Acting Chair, issued the following
“Colombia’s very strong policy frameworks—anchored by a flexible exchange
rate, a credible inflation targeting-regime, effective financial sector
supervision and regulation, and a structural fiscal rule— continue to serve
the country well and have allowed the authorities to deliver a coordinated
and timely response to the Covid-19 pandemic.
“Colombia’s economy was hit harder by the pandemic than anticipated at the
time of the approval of the current Flexible Credit Line (FCL) arrangement
in May and is now expected to experience its largest recession on record
this year. The authorities’ early response and continuing actions
–including the temporary suspension of the fiscal rule to raise health
spending, as well as to assist vulnerable households and businesses—are
welcome and supporting the economy through the recession.
“The larger-than-anticipated deterioration in the macroeconomic and fiscal
situation due to the pandemic has resulted in larger balance of payments
(BOP) needs than envisaged in May. Moreover, external risks are higher and
remain sharply skewed to the downside amid an exceptionally weak external
environment that raises Colombia’s vulnerability to still lower commodity
prices, additional financial market volatility, and a further deterioration
of the Venezuelan crisis. The augmentation of access under the current FCL
arrangement will help Colombia manage heightened external risks, protect
ongoing efforts to effectively respond to the pandemic, continue to
integrate migrants from Venezuela, foster inclusive growth, and reduce
external vulnerabilities. Higher access under the arrangement should also
boost market confidence, and combined with comfortable international
reserves, provide adequate insurance against downside risks.
“The FCL instrument is flexible to address both actual BOP needs that have
emerged and to adequately insure against potential BOP needs given higher
external risks for Colombia. In this context, the authorities have
expressed their intention to partially draw on the arrangement for budget
support to help Colombia effectively respond to the pandemic. The
authorities’ have also stated their intention to treat the bulk of the FCL
arrangement as precautionary and remain committed to a gradual exit
strategy from the instrument as exceptional global risks clearly recede.”
IMF Communications Department
PRESS OFFICER: Maria Candia
Phone: +1 202 623-7100Email: MEDIA@IMF.org