The IMF ratifies the credit line of Mexico thanks to the responsible management of the 4Ts

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The Finance Secretary and the Bank of Mexicoreported a few days ago that the International Monetary Fund (IMF), ratified it Mexico meets all the qualification criteria necessary to access, if required and without any conditions, the resources of a Flexible line of credit (LC extension) granted in 2021 for a period of two years. Which means that the government of Fourth transformation (4T) is conducting an adequate economic policy with sound public finances.

The fact that the Aztec country can have access to these IMF resources is a Good news for the economy, as it gives confidence to both domestic and foreign investors and means insurance if an eventuality arises that put at risk the financial stability from Mexico.

The Flexible Line of Credit, which is a revolving line of credit, that can be subscribed to 1 or 2 years (If it’s for two years, it requires a mid-term review) and that only countries that meet certain access criteria have access. fiscal discipline yes macroeconomic stability.

The executive committee of the international organization has decided to maintain for Mexico the amount of access equivalent to approx 50 billion dollars this is, 35,650.8 million from Special drawing rights (GRADE).

It is enough to have access to the credit line of the international organization even without making the loan effective It has a cost “The hiring fee is paid annually and is calculated as a percentage of the LCF. In the case of Mexico, the currently contracted Flexible Credit Line, which represents the 500% of the fee of Mexico in the IMF, has a annual cost from 133.69 million DSP (approx $200 million a year)”.

The Flexible Credit Line was created by the IMF, the March 24, 2009 as part of a profound reform of financial institution lending mechanisms, and this tool is designed to lend money to countries that are going through a shortage of liquiditywith the idea of ​​adapting its loan instruments to the different needs and circumstances of the member countries.

Countries qualified to receive loans from the IMF are eligible flexibility use the revolving credit line at any time within a predetermined period or treat it as a precautionary toolin addition to the fact that these nations have large and immediate access to the resources provided by the World Bank (BM extension) without continuous conditions.

The cost of the loan for Mexico in case the country needs access to the flexible credit line, It’s short and the same as in the framework of the Standby agreements traditional of the IMF and of the Precautionary and liquidity line (LPL extension).

In June 2020, the World Bank granted a credit from billions of dollars to the government of the Fourth Transformation for the economic recovery of the country in the face of the crisis caused by the expansion of the covid-19 pandemic.

The loan granted to Mexico by the World Bank was an IMF flexible credit line to deal with the loan application from prevention yes mitigation from countries with very strong political frameworks and economic histories.

Mexico is not the only country that has been granted a Flexible Credit Line, given the crisis caused by the Coronavirus pandemic; a Peru such a loan was granted by 11 billion dollars which is a higher amount than over thousand% to granted to Aztec nation.

In conclusion, we can state that the flexible credit line granted by the IMF and the WB satisfies the demand for loans by prevention yes crisis mitigation of countries with political frameworks and economic histories solid and the government of the Fourth Transformation meets those criteria imposed by international organizations, in addition to the responsible attitude of don’t borrow more to the country, as previous federal administrations have done.