LatinNews Daily - 30 May 2022

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In brief: IMF approves new credit line for Peru

*The International Monetary Fund (IMF) has approved a successor two-year arrangement for Peru under the Flexible Credit Line (FCL), designed for crisis prevention, of about US$5.4bn. According to an IMF statement, Peru qualifies for the FCL by “virtue of its very strong economic fundamentals and institutional policy frameworks, a track record of implementing very strong policies, and commitment to maintaining such policies”. Established in 2009, the FCL allows its recipients to draw on the credit line at any time and is designed “to flexibly address both actual and potential balance of payments needs to help boost market confidence. Drawings under the FCL are not phased nor tied to ex-post conditionality as in regular IMF-supported programmes”, according to the IMF. It adds that this large, upfront access with no ex-post conditionality is justified by the very strong policy fundamentals and institutional policy frameworks and sustained track records of countries that qualify for the FCL. While the IMF notes that Peru meets this criteria, it adds that the “Peruvian economy remains exposed to elevated risks, including from renewed waves of the [coronavirus] Covid-19 pandemic, slowing economic activity in key trade partner countries, the war in Ukraine, tighter global financial conditions, and political uncertainty”.

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