June 6, 2017

• IMF Board reaffirms Colombia’s continued qualification to access US$ 11.35 bln Flexible Credit Line
• Colombia is adapting smoothly to the oil price shock, but country continues to face elevated global and regional risks
• The FCL will help authorities’ efforts to complete the adjustment to the oil shock and serve as an additional buffer against external shocks

On June 5, 2017, the Executive Board of the International Monetary Fund (IMF) completed its review of Colombia’s qualification for the arrangement under the Flexible Credit Line (FCL) and reaffirmed Colombia’s continued qualification to access FCL resources. The Colombian authorities stated their intention to continue treating the arrangement as precautionary.

Following the Executive Board’s discussion on Colombia, Mr. Tao Zhang, Deputy Managing Director and Acting Chairman of the Board, issued the following statement:

“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. Despite these uncertainties, the outlook is for a gradual increase in growth and a further reduction of the current account deficit.

“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. 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.

“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 authorities will continue to treat the arrangement as precautionary, and intend to reduce access in possible requests for subsequent FCL arrangements, to the extent that the reduction of the global risks affecting Colombia allow it.”

Background:

The two-year FCL arrangement for Colombia in an amount equivalent to SDR 8.18 billion (about US$11.350 billion [1]) was approved by the IMF’s Executive Board on June, 2016 (see Press Release No. 16/279 ). Colombia’s first FCL arrangement was approved on May 11, 2009 (see Press Release No. 09/161 ) and was renewed on May 7, 2010 (see Press Release No. 10/186 ), May 6, 2011 (see Press Release No. 11/165 ), June 24, 2013 (see Press Release No. 13/229 ), and June 17, 2015 (see Press Release 15/281 ). The FCL was established on March 24, 2009 and further enhanced on August 30, 2010 (see Press Release No. 10/321 ). The FCL is available to countries with very strong fundamentals, policies, and track records of policy implementation and is particularly useful for crisis prevention purposes. FCL arrangements are approved for countries meeting pre-set qualification criteria (see Press Release No. 09/85 ). The FCL is a renewable credit line, which could be approved for either one or two years. Two-year arrangements involve a review of eligibility after the first year. If the country draws on the credit line, the repayment period is between three and a quarter and five years. There is no cap on access to Fund resources under the FCL, and access is determined on a case-by-case basis. Qualified countries have the full amount available up-front, with no ongoing conditions. There is flexibility to either draw on the credit line at the time it is approved, or treat it as precautionary.