WASHINGTON: The International Monetary Fund will increase Mexico's flexible line of credit to a record 72 billion dollars, as it grapples with the continued impact of global recession, officials said.
The IMF said in a statement that its executive board had granted the two-year increase as a successor to a 47-billion-dollar flexible line of credit authorized nearly a year ago.
It would be the biggest flexible line of credit ever awarded by the IMF. But it may never be drawn on.
"As before, the (Mexican) authorities intend to treat the arrangement as precautionary," said John Lipsky, the board's acting chairman.
Even so, he said the new line of credit would play "an even stronger role in insuring Mexico against external risks while continuing to support the authorities' overall macroeconomic strategy."
Lipsky said Mexico had strong economic fundamentals, good policies and had made major progress over the years toward strengthening public and private sector balance sheets.
"These strengths have facilitated the maintenance of orderly economic conditions in Mexico, even amidst the substantial external volatility during the global crisis, supported by the authorities' prompt and well-calibrated policy responses," he said.
"The arrangement of contingent financing with the IMF through the Flexible Credit Line has helped maintain confidence," he said.
Lipsky noted that Mexico was experiencing a robust recovery, and said the authorities were taking steps to further bolster its medium term prospects and policies.
"However, important risks to the global economic outlook remain, particularly from pressures on global investor confidence and capital flows, which pose continuing challenges for emerging markets like Mexico," it said.
When Mexico requested the increase last month, President Felipe Calderon said he wanted to "financially armor" the country's economy at a time of persistent uncertainty in the world financial markets.
At the time, IMF managing director Dominique Strauss-Kahn agreed that the longer duration and greater amount of the new credit line would help support Mexico's policy strategy and in maintaining external confidence.
The flexible credit line is a new instrument that the IMF created to help countries with strong fundamentals to ward off financial crises.
Two other states besides Mexico have flexible credit lines -- Poland (21 billion dollars) and Colombia (3.5 billion dollars). None of the three have drawn on their credit lines as yet.
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