Minister Carrasquilla on the flexible credit line with the IMF

COLOMBIA - In Brief 07 Apr 2020 by Andrés Escobar Arango

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During a debate in Congress today, carried out using one of the many VC apps out there, Minister Carrasquilla addressed the question of increases in the fiscal package to face the negative effects of COVID-19 across different sectors of the economy. He mentioned four circles or areas of attention, three of which were announced from the onset a couple of weeks ago (health, support to households and support to firms). The fourth, new in the discussion, had to do with the stability of the financial sector.In this regard, Minister Carrasquilla said that, should the need arise, the government would not hesitate to shore up the financial system in order to avoid a financial crisis. He was quite clear in saying he does not see a financial crisis in the making and does not expect the current downturn to take us to such limits, but he wanted to stress how far the government is willing to go if need be.In this context, he talked about the USD 11 bn flexible credit line (FCL) Colombia has with the IMF, due to expire in May. He said Colombian authorities are discussing with the IMF a new extension of the FCL (most probably a 2-year extension, as has been the case so far for all the renewals of the line since 2011).Does this announcement mean the Colombian government is planning on using the USD 11 bn? Not necessarily, and not immediately. For the time being, we think the announcement should be read as an intention to keep the credit line open as a much-needed buffer to give room to macro policy under extreme circumstances.Regarding the question of whether the government can have access to the FCL resources, currently intended to be used by the Central Bank to face balance of payme...