While the nation has had a credit arrangement under this IMF program dating back to 2009, Colombia’s policymakers have stated that they continue to view this as merely a precautionary source of capital and not an arrangement they plan to draw on currently, according to the global institution.
In reaffirming the nation’s eligibility for the line of credit, Tao Zhang, deputy managing director and acting chairman of the IMF’s executive board, praised Colombia’s continued economic resilience despite the drop in global oil prices that has constrained its finances in recent years.
“The resilience of the Colombian economy in the face of a complex external environment reflects the country’s very strong policy and institutional frameworks and excellent track record of policy implementation,” said Tao Zhang. “The inflation-targeting regime, flexible exchange rate, fiscal rule, and effective financial supervision and regulation will continue to be integral parts of Colombia’s strong policy framework.”
In addition to recognizing the country’s ability to sidestep challenges, the acting chairman also underscored the fact that Colombia’s economy now faces additional uncertainty amid lower growth than it had come to expect earlier in the decade.
“Colombia is adapting smoothly to the oil price shock experienced since 2014, but the country continues to face elevated global and regional downside risks, including possible capital flow reversals,” said Tao Zhang. “Despite these uncertainties, the outlook is for a gradual increase in growth and a further reduction of the current account deficit. The FCL arrangement will support the authorities’ efforts to complete the adjustment to the oil shock and will serve as an additional buffer against external shocks.”
The IMF’s flexible credit line program was established in 2009 for countries with “very strong fundamentals, policies, and track records of policy implementation.” Its primary intention is as a backstop for crisis prevention and management with a credit line that can be drawn on at any time and a repayment period of up to five years.
Lines of credit within the program can be approved for a maximum of two years, as in the case of Colombia’s current line. Prior to receiving approval for this $11.4 billion USD arrangement in 2016, Colombia had also continuously maintained lines of credit dating back to the program’s inception.
Photo: International Monetary Fund headquarters in Washington, D.C. (Credit: AgnosticPreachersKid)