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IMF approves two-year $18.5 billion flexible credit line for Chile — MercoPress

IMF approves two-year $18.5 billion flexible credit line for Chile

Monday, September 5, 2022 – 08:33 UTC


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Kristalina Georgieva, Chief Executive, said: “After an impressive recovery from the fallout from the Covid-19 pandemic, Chile is facing a marked increase in global risks”

The Executive Board of the International Monetary Fund (IMF) has approved a two-year arrangement for Chile under the Flexible Line of Credit (FCL) in the amount of SDR 13.954 billion (about US$18.5 billion). 800% of quota).

Chilean authorities intend to treat FCL as a precaution. Since the FCL can meet all types of balance of payments needs, the Chilean authorities also notified the IMF of their decision to cancel the existing short-term liquidity line (SLL) of SDR 2.529 billion (approximately $3.3 billion; 145 percent of quota), an approach that is consistent with current Fund policies.

The FCL was created on March 24, 2009, as part of a major reform of the Fund’s lending framework. The FCL allows its beneficiaries to draw on the line of credit at any time and is designed to respond flexibly to actual and potential balance of payments needs. Drawings under the FCL are not phased or tied to ex post conditionality as in regular IMF-supported programs.

The FCL will temporarily increase Chile’s precautionary reserve buffers and provide substantial insurance against a wide range of risks, including against a possible sharp global downturn; commodity price shocks; fallout from Russia’s war in Ukraine; or a sharp tightening of global financial conditions.

Chile qualifies to benefit from the FCL given its very strong economic fundamentals and institutional policy frameworks, its sustained track record in implementing very strong policies, and the continued commitment of the authorities to maintain policies. very solid in the future. The qualification criteria for an agreement under the FCL are the same as for the SLL.

Following the Board’s discussion on Chile, Ms. Kristalina Georgieva, Managing Director, issued the following statement: “After an impressive recovery from the fallout from the Covid-19 pandemic, Chile is facing a marked increase in global risks.

“In the context of a difficult external environment, the authorities have continued to implement very vigorous policies to mitigate risks, preserve macroeconomic stability and support vulnerable groups, while advancing ambitious reforms. FCL with 800 percent quota access will provide a substantial precautionary buffer against a wide range of risks. The authorities intend to treat the arrangement as a precautionary device and to terminate it when external conditions permit.

“Chile has very strong fundamentals and a sustained track record of implementing very strong policies, anchored in a longstanding structural balanced budget rule, credible inflation targeting with a flexible exchange rate and a sound financial backed by effective regulation and supervision. These very strong fundamentals and policy frameworks continue to support the country’s resilience and ability to respond to shocks.