He Central Bank of Colombia plans to gradually accumulate international reserves with a program to acquire up to US$ 1.5 billion, which would avoid a reduction in the flexible credit line of the International Monetary Fund.
The bank’s board of directors approved the start of the program to maintain “appropriate external liquidity levels”the bank said in a statement posted on its website. “The program does not pursue any exchange rate objective and does not seek to alter the level or volatility of the exchange rate”he added.
He International Monetary Fund awarded to Colombia a $9.8 billion flexible credit line designed for crisis prevention in 2022, as the nation recovered from the effects of the pandemic.
The bank will accumulate international reserves of up to US$200 million per month through “put” options, which can only be exercised when the official exchange rate, known as TRM, falls below its 20-day moving average.
“This avoids purchases in periods of upward pressure on the exchange rate.”, noted the bank. “This mechanism has been used in the past by the Bank of the Republic with similar purposes”.
The first auction will take place on January 2 for US$200 million and the options will be exercised from January 3 to 31.
Source: Gestion
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