Credit line

IMF Approves New Two-Year $5.4 Billion Flexible Credit Line for Peru | News | ANDEAN

The Executive Board of the International Monetary Fund (IMF) has approved a new two-year arrangement for Peru under the Flexible Credit Line (FCL) – designed for crisis prevention – for an amount equivalent to 4 .0035 billion SDRs (about $5.4 billion) .

In addition, the IMF noted Peru’s cancellation of the previous agreement in the amount of SDR 8.07 billion.

According to the global institution, Peruvian authorities have declared their intention to deal with the new arrangement preemptively.

Following the Executive Board’s discussion on Peru, IMF Deputy Managing Director Kenji Okamura said that Peru’s very strong economic fundamentals and policy frameworks – anchored by a credible debt targeting framework he inflation, a flexible exchange rate, effective supervision and regulation of the financial sector, and a strong medium – long-term fiscal framework – have enabled the authorities to provide a comprehensive and rapid response to the COVID-19 pandemic and to promote the growth.

“As a result, and spurred by robust external demand, favorable terms of trade and a strong increase in construction, the Peruvian economy has recovered strongly in 2021, registering one of the highest growth rates of the region,” he said.

Nevertheless, he said, the Peruvian economy remains exposed to high risks, in particular due to the new waves of the COVID-19 pandemic, the slowdown in economic activity in the main trading partner countries, the war in Ukraine, tightening global financial conditions and political uncertainty.

“The new arrangement under the flexible credit line will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against tail risks and bolstering market confidence,” noted the Managing Director. IMF deputy.

Okamura noted that authorities intend to treat the arrangement as a precautionary measure and terminate the arrangement when external conditions permit.

“The lower level of access requested – 300% of the quota, compared to 600% in the FCL approved in 2020 – as part of the authorities’ strategy to phase out the use of the facility is a reflection of the very strong fundamentals of the countries, including the additional cushions built with the accumulation of international reserves, as well as the decline in external financing needs, since the 2020 agreement,” he added.

About FCL

The FCL was created on March 24, 2009, as part of a major reform of the Fund’s lending framework.

It allows its beneficiaries to draw on the line of credit at any time and is designed to respond flexibly to actual and potential balance of payments needs to help build market confidence.

(END) DND/RMB

Posted: 05/28/2022