What did the IMF take into account to deliver US$9.8 billion to Colombia?

What did the IMF take into account to deliver US$9.8 billion to Colombia?

The International Monetary Fund (IMF) valued the political guarantees provided by the presidential candidates to approve, in the last week of April 2022, a new two-year agreement with Colombia within the framework of the Flexible Credit Line (LCF) for 9.8 billion dollars.

(See: Banco de la República raised interest rates to 6%).

This was stated by the organization’s head of mission for Colombia, Hamid Faruqee, who said that “The Fund also considered the political guarantees of the candidates, the political commitments in the sense that there would be a policy of continuity, to maintain solid policy frameworks“.

The IMF felt comfortable with those commitments, those declarations“, he added in reference to the presidential elections on May 29, who have as their favorite the leftist Gustavo Petro, candidate of the coalition of the Historical Pact. yes

ccording to recent polls, Petro and Federico ‘Fico’ Gutierrez, of the right-wing Team for Colombia, are the most likely to go to a second round.

A recently published survey by the firm Invamer indicates that Petro has 43.6% of the voting intention for the first round and leads Gutiérrez by 16.9 percentage points, who reaches 26.7%, with which both they would dispute the Presidency in the second round of June 19.

(See: Colombia would be the fourth country with the highest economic growth in Latam).

SCOPE OF THE AGREEMENT

The agreement announced by the IMF last week replaces the one approved in 2020, and will be considered by the Colombian authorities as a financing line from “precautionary character to face external risks“, according to the agency.

This line of credit, created in 2009, allows beneficiary countries to use it at any time and is designed to “flexibly cope with actual and potential balance of payments pressures and to help underpin market confidence“.

(See: Reasons why the industrial sector accelerated its growth).

Colombia maintains access to this mechanism since its creation and this is the country’s ninth agreement, although before the pandemic the Colombian authorities had been gradually reducing access in the agreements.

With the decision to enhance the new agreement for Colombia, the IMF has decided that Colombia continues to qualify for this LCF based on its very strong economic fundamentals, economic frameworks, and compliance record.Farukee added.

The official explained that the Colombian authorities have seen the increased external risks and that was why they requested the renewal of the line of credit.

(See: Colombian microenterprises improve, but their recovery is very slow).

I have to say that the ‘timing’ of the opportunity to (take) this decision is very good for Colombia. We also see that external risks have increased given this situation of the war in Ukraine and global inflation.“, among other factors, detailed.

EFE

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