The International Monetary Fund has approved a $735 million fund for Costa Rica, so that the country can strengthen its economy against the global crisis. But it is a "standby" loan, meaning it will only be used if needed.
AFP - The International Monetary Fund said Monday it had approved a 735-million-dollar standby loan for Costa Rica to help it weather the global financial and economic crisis.
The Washington-based IMF said the turmoil "entails risks to Costa Rica's outlook in 2009 and 2010" but added that it was not facing immediate balance of payments pressures.
The 15-month stand-by arrangement, approved by the IMF executive board on Friday, was designed to bolster confidence in the Central American country's policy framework, it said.
"The Costa Rican authorities intend to treat the arrangement as precautionary, meaning that they do not intend to draw on the Fund's resources unless a need arises," the IMF said in a statement.
The IMF said that access to its financial support would "increase considerably the country's external financial defenses to help absorb any larger-than-anticipated balance of payments shocks and safeguard the ongoing gradual transition to greater exchange rate flexibility."
Murilo Portugal, IMF deputy managing director, said while Costa Rica's economic fundamentals were "solid," the global financial and economic turmoil "entails risks" to its outlook this year and in 2010.
Portugal said that Costa Rica's economic strategy would involve a gradual increase in exchange-rate flexibility supported by monetary restraint, a moderate fiscal expansion, a further strengthening of the financial sector, and the mobilization of substantial precautionary financing, including from the World Bank and the Inter-American Development Bank.
"This financing will boost the economy's foreign currency liquidity buffers, and provide protection against any larger-than-anticipated shocks to the balance of payments," Portugal said.
The IMF also said that Costa Rica's banking system was "generally strong" with banks "not exposed to structured financial products."
The global financial crisis was triggered by a US home mortgage meltdown that led to securities linked to the mortgage market going sour.
Date created : 2009-04-13