The International Monetary
Fund’s executive board said on Monday it approved a US$10.5
billion flexible credit line for Colombia as the Andean
country seeks to fend off the global financial crisis.
The IMF said the Colombian government would take the
one-year credit arrangement as a precautionary measure that
will further bolster confidence in its policies.
“The one-year arrangement … which the authorities intend
to treat as precautionary, will play an important role in
bolstering confidence in the authorities’ policy framework and
strategy at a time of heightened global uncertainty,” John
Lipsky, the fund’s first deputy managing director, said.
Colombia’s government, which requested access to the
credit line last month, said the arrangement would act as a
type of “insurance” in moments of crisis.
“Colombia now has an insurance for times of extreme
difficulty, but you can be sure that the country has strong
levels of liquidity,” Finance Minister Oscar Zuluaga told
Lipsky said while Colombia had maintained a strong
macroeconomic performance, which had resulted in robust
economic growth and single-digit inflation in the past decade,
the global crisis had affected its near-term outlook.
“While the flexible exchange rate absorbed the first round
effects of the global crisis, weak external demand has led to
a contraction of exports and a considerable slowdown in
economic activity,” he said.
Lipsky described the Colombian government’s response to
the crisis, which included monetary easing as inflation
pressures eased, as prudent and appropriate.
“Colombia’s strong fundamentals and institutional
frameworks … and the additional insurance provided by the
FCL arrangement give confidence that the authorities are well
prepared to manage potential risks and pressures in the event
that the global environment deteriorates further,” he said.
The flexible credit line is designed to boost countries’
crisis prevention efforts by providing the flexibility to draw
on the credit line at any time.
with policy targets as in traditional IMF-supported programs. (Reuters)