In a news brief issued on June 15, IMF Managing Director Michel Camdessus announced that an IMF Executive Board meeting had been set for early July to consider Mexico’s request for a Stand-By credit from the IMF equivalent to SDR 3.1 billion (about $4.1 billion). “The credit would be in support of the government’s strong economic program for 1999–2000,” Camdessus said, “and would help ensure the maintenance of a strong policy framework during the transition to the next administration, and thereby support market confidence during this period.
“Economic growth in Mexico has been resilient in the face of international market turbulence. The government has reacted swiftly to a series of external shocks over the past two years, with adjustments in fiscal and monetary policies. Moreover, the flexible exchange rate has acted as an important buffer, giving market participants greater confidence that no major imbalances would develop.
“The 1999–2000 economic program aims to reduce inflation to 10 percent by 2000. Real GDP growth is projected to slow in 1999, reflecting, in part, reduced access to international capital markets, and then recover to 5 percent in 2000 as market access improves and investment picks up. The authorities intend to maintain tight fiscal and monetary policies and vigorously implement structural reforms that are already in progress.
“The overall public sector deficit is programmed, based on a conservative oil price assumption, at 1¼ percent of GDP in 1999, the same level as last year, with a decline to 1 percent of GDP planned for 2000. Fiscal measures already taken are expected to raise non-oil revenue by over ½ of 1 percentage point of GDP, while expenditure restraint is maintained within the context of increased social spending.
“As part of the program, the banking system is to be strengthened. This will be facilitated by financial sector legislation passed in December 1998 that established the Savings Protection Institute, which, among other things, will create an intervention and resolution framework for distressed banks and manage the assets acquired by the Savings Protection Fund. The authorities also intend to continue to enforce strict adherence to existing regulations and upgrade the system’s legal, regulatory, and supervisory framework consistent with Basle core principles,” Camdessus said.