A Sensible Move

COLOMBIA - In Brief 28 Sep 2020 by Andrés Escobar Arango
The IMF approved Colombia’s request to increase the size of its Flexible Credit Line (FCL) facility from USD 10.800 million (4% of GDP, approved last May) to USD 17.300 million (6.5% of GDP). The Ministry of Finance announced that part of the additional resources (USD 5.300 million or 2.0% of GDP) will be used to finance this year’s National Central Government (NCG) deficit, estimated at 8.2% of GDP.The monies will be directly disbursed to the National Treasury without going through the Central Bank. They do not represent financing in excess of what the Ministry of Finance has envisaged, but become instead part of the financing strategy of the NCG for this year.In its press release, the IMF highlighted the country’s strong policy framework, a fact that can be hardly disputed in the region. It also stressed the fact that the impact of the pandemic on the Colombian economy had been much stronger than initially anticipated when the FCL was renewed last May.Asking for an enhanced FCL and tapping the additional resources approved make a lot of sense. The precautionary nature of the FCL remains in place, as the amount approved last May remains fully available in case of need. Using the additional resources to finance the NCG deficit is a sensible move, as it avoids tapping international markets for the remainder of the year and diversifies funding sources through a relatively inexpensive facility.

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