Mexico: Arrangement Under the Flexible Credit Line and Cancellation of Current Arrangement-Press Release and Staff Report

This paper presents Mexico’s Arrangement under the Flexible Credit Line (FCL) and Cancellation of Current Arrangement. Mexico qualifies for the FCL by virtue of its very strong economic fundamentals and institutional policy frameworks and record of accomplishment of macroeconomic performance and policy implementation. The authorities intend to continue to treat the arrangement as precautionary and will reassess the outlook for external risks and their implications for access under the FCL at the time of the mid-term review next year. Mexico remains exposed to elevated external tail risks, albeit lower than in previous years. These include risks of renewed volatility in the financial markets, increased risk premia, and capital outflows from emerging markets, as well as weaker US growth and a global slowdown. Upcoming elections in Mexico and the United States could further exacerbate uncertainty. The new arrangement under the FCL will continue to play an important role in supporting the authorities’ macroeconomic strategy and provide insurance against tail risks while bolstering market confidence. The authorities intend to treat the arrangement as precautionary and are firmly committed to maintaining prudent policies going forward.