OREANDA-NEWS. The Executive Board of the International Monetary Fund (IMF) today approved a successor two-year arrangement for Colombia under the Flexible Credit Line (FCL) in an amount equivalent to SDR 8.18 billion (about US$11.5 billion) and canceled the previous arrangement (SDR 3.87 billion, about US$5.4 billion). The Colombian authorities stated their intention to treat the new arrangement as precautionary and do not intend to draw on it.

Following the Executive Board’s discussion on Colombia, Mr. Mitsuhiro Furusawa, Deputy

Managing Director and Acting Chairman of the Board, issued the following statement:

“Colombia has a track record of very strong policy frameworks, including an inflation-targeting regime, a flexible exchange rate, effective financial sector supervision and regulation, and a fiscal policy guided by a structural balance rule. The authorities are firmly committed to maintaining these policies and undertaking further initiatives to strengthen the resilience of the economy and boost competitiveness and growth.

“Colombia’s macroeconomic policies have provided flexibility to deliver a coordinated and gradual response to the large decline in oil prices. Exchange rate flexibility continues to be the main shock absorber, while the fiscal rule allows for a smooth adjustment of expenditure to a weaker medium-term oil outlook. The ongoing monetary policy tightening cycle will gradually bring inflation back to the target range, and the banking and corporate sectors remain in good financial health. International reserves are adequate for normal times.

“Nevertheless, global risks have risen with the potential to increase the severity of shocks that Colombia could suffer, despite the strength of its fundamentals and policy frameworks. The new arrangement under the Flexible Credit Line (FCL), with higher access, will provide added buffers and continue to play a significant role in supporting the authorities’ policies in the presence of these increased downside risks. It will also provide policy flexibility and serve as a temporary insurance that reinforces market confidence. The authorities intend to continue to treat this facility as precautionary and to phase out its use as risks to the global outlook and commodity prices substantially recede.”