(Adds comments from IMF’s Christine Lagarde, Mexico’s Foreign Exchange Commission)
MEXICO CITY, Nov 30 (Reuters) - The International Monetary Fund on Thursday said it approved for Mexico a two-year flexible credit line worth about $88 billion that will replace a previous line.
The IMF said in a statement that the line had been approved as a precaution in case of a crisis. Mexico was first extended such a credit line from the IMF in 2009 but Latin America’s No. 2 economy has never tapped the funds.
“The new arrangement under the Flexible Credit Line (FCL), with an unchanged level of access, will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against external risks and bolstering market confidence,” said IMF Managing Director Christine Lagarde.
Due to Mexico’s close ties with the global economy, in particular the United States, its economy remains exposed to external risks through both trade and financial channels, Lagarde added in a statement.
Mexico’s peso has been battered this year by concerns that U.S. President Donald Trump could end a decades-old free trade agreement with Mexico and Canada.
“Considering that external risks remain high, the FCL will play a critical role in supporting authorities’ macroeconomic strategy, maintaining investor confidence and supporting the strength of Mexico’s economy in case of extreme adverse events,” said Mexico’s Foreign Exchange Commission.
The commission said it intended to gradually phase out its use of the facility, conditional on a reduction in external risks. (Reporting by Michael O’Boyle & Anthony Esposito; Editing by Chizu Nomiyama and Marguerita Choy)