The International Monetary Fund (IMF) announced on Friday that its executive board had approved a new two-year, $24 billion flexible credit line for Mexico, designed to serve as a safeguard against external risks.

The IMF highlighted that Mexico has steadily reduced its dependence on the precautionary fund in recent years.

The Mexican authorities have opted to treat the new credit line as precautionary, cancelling their previous arrangement of approximately $35 billion, according to the IMF's statement.

This marks Mexico’s eleventh such arrangement since 2009, with the size of the credit line having decreased from a peak of around $88 billion in 2017.

The IMF noted that the smaller credit line reflects the increased economic buffers and resilience of Mexico’s economy.

Mexican officials requested the new credit line for another two years at a reduced access level, citing the country's strong finances, which make it less susceptible to sudden changes in capital flows, according to a joint statement from the Bank of Mexico and the Mexican finance ministry.

However, IMF Deputy Managing Director Nigel Clarke acknowledged that the country’s economy faces challenges.

"Economic activity in Mexico remains subdued, constrained by necessary fiscal consolidation and still restrictive monetary policy, along with the dampening effects of trade tensions," he said.

He added that while Mexico has demonstrated resilience, "trade-related risks have increased since the last FCL review."

The new credit line will continue to play a significant role in supporting Mexico's macroeconomic strategy, offering "insurance against tail risks while reinforcing market confidence," the IMF concluded.

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