Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved today a two-year arrangement for Chile under the Flexible Credit Line (FCL) in the amount of SDR 13.954 billion (about US$18.5 billion[1]; 800 percent of quota). The Chilean authorities intend to treat the FCL as precautionary. Given that the FCL can address all types of balance of payment needs, the Chilean authorities also notified the Fund of their decision to cancel the existing Short-term Liquidity Line (SLL) of SDR 2.529 billion (about US$3.3 billion; 145 percent of quota), an approach that is consistent with current Fund policies.
The FCL was established on March 24, 2009, as part of a major reform of the Fund’s lending framework (see Press Release No. 09/85). 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. Drawings under the FCL are not phased nor tied to ex-post conditionality as in regular IMF-supported programs.
The FCL will augment Chile’s precautionary reserve buffers on a temporary basis and provide substantial insurance against a broad range of risks, including from a possible abrupt global slowdown; commodity price shocks; spillovers from Russia’s war in Ukraine; or a sharp tightening of global financial conditions.
Chile qualifies for the FCL given its very strong economic fundamentals and institutional policy frameworks, a sustained track record of implementing very strong policies, and the authorities’ continued commitment to maintaining very strong policies in the future. Qualification criteria for an arrangement under the FCL are the same as for the SLL.
Following the Executive Board’s discussion on Chile, Ms. Kristalina Georgieva, Managing Director, issued the following statement:
“After an impressive recovery from the fallout of the Covid-19 pandemic, Chile is facing a marked increase in global risks.
“Against the backdrop of a challenging external environment, the authorities have continued to implement very strong policies to mitigate risks, preserve macroeconomic stability, and support vulnerable groups, while advancing ambitious reforms. The FCL with access of 800 percent of quota will provide a substantial precautionary buffer against a broad range of risks. The authorities intend to treat the arrangement as precautionary and exit the arrangement when external conditions allow.
“Chile has very strong fundamentals and a sustained track record of implementing very strong policies, anchored in a long-standing structural fiscal balance rule, credible inflation targeting with a flexible exchange rate, and a sound financial system supported by effective regulation and supervision. These very strong fundamentals and policy frameworks continue to support the country’s resilience and capacity to respond to shocks.”
[1]US$ amounts have been calculated using the exchange rate as of August 2, 2022 (SDR 0.755229/US$), consistent with the Staff Report.