The International Monetary Fund (IMF) approved a $47 billion credit line for Mexico under a new program to help developing countries cope with the financial crisis in what senior IMF official John Lipsky (photo) called a “historic occasion".
AFP - The International Monetary Fund approved a 47-billion-dollar credit line for Mexico Friday under a new scheme designed to throw a cash lifeline to countries hit by the global economic crisis.
"The Mexican authorities have stated they intend to treat the arrangement as precautionary and do not intend to draw on the line," the IMF said.
It was the first line of credit approved under a new IMF program aimed at giving countries the flexibility to draw on credit at any time to prevent financial crisis.
"Today is a historic occasion. The IMF Executive Board has approved the first Flexible Credit Line (FCL) arrangement and, at the same time, the largest financial arrangement in the Fund's history," said John Lipsky, acting chairman of the IMF board.
He said the credit line was justified by Mexico's strong track record of solid growth with low inflation, steady reductions in public spending, a contained deficit, strong corporate earnings and a well capitalized banking system.
Mexico has not had to tap the IMF for credit in a decade.
"However, the current difficult global economic and financial environment poses challenges even for countries with very strong fundamentals," Lipsky said.
"As the global situation has deteriorated, Mexican asset prices have fallen sharply in line with the global market sell off, and GDP growth has slowed sharply.
"While Mexico's underlying fundamentals remain very strong, and the balance of payments position is manageable, the open capital account and close global financial linkages -- on top of close trade links with the United States -- could expose the country to potential downside risks," he said.
The next potential customer is Poland, which has requested a 20-billion-dollar line of credit.
Other possible candidates for an IMF credit line could be Brazil, Chile, Colombia, South Korea, the Czech Republic and Singapore.
Date created : 2009-04-18