Chile Receives IMF´s First Short-term Liquidity Line
IMF News, May 20, 2022
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Bibliographic details
- Published: May 20, 2022
Arrangement details
- The Chilean authorities accepted an offer of a Short-term Liquidity Line (SLL) arrangement amounting to about US$3.5 billion.
- The amount equals "145 percent of quota, the maximum amount under this arrangement."
- The offer is for a one-year SLL arrangement.
- The equivalent in SDR is "SDR 2.529 billion."
- The authorities also notified the IMF of their decision to exit the current two-year Flexible Credit Line (FCL) arrangement.
Purpose and key features of the SLL
- The SLL is a revolving and renewable liquidity backstop created on April 21, 2020.
- It is designed for members with very strong fundamentals and policy track records that face potential, moderate, short-term balance of payments needs.
- Qualification criteria for support under the SLL are the same as for support under the FCL.
- Disbursements:
- Recipients can draw from the liquidity line at any time that balance of payments needs arise.
- Disbursements are not phased nor tied to compliance with policy targets as in regular IMF-supported programs.
- The Chilean authorities plan to treat the SLL as precautionary.
- The SLL will complement existing buffers, support resilience, and provide a confidence signal on Chile’s very strong fundamentals and policies.
Chile’s economic context and qualification
- Following a swift and wide-ranging policy response to the COVID-19 pandemic, Chile’s recovery is described as "well-entrenched."
- The authorities have recalibrated macroeconomic policies and built comfortable liquidity buffers, while maintaining macroeconomic stability and fiscal sustainability.
- Chile qualifies for the SLL given:
- "very strong economic fundamentals and institutional policy frameworks,"
- a sustained track record of implementing very strong policies,
- and the authorities’ commitment to maintain very strong policies in the future.
- The SLL facilitates transition from the FCL since qualification criteria are the same.
Executive Board / IMF statement highlights (Mr. Bo Li, Deputy Managing Director and Acting Chair)
- “I am delighted that Chile has accepted the Fund’s offer of an SLL, becoming the first user of this special and innovative instrument.”
- Chile’s very strong policy frameworks are anchored in:
- "a long-standing structural fiscal balance rule,"
- "credible inflation-targeting with a free-floating exchange rate,"
- "and a sound financial system supported by effective regulation and supervision."
- The statement notes:
- "Following an impressive vaccination campaign and an effective and well-coordinated policy response, the Chilean economy has rapidly recovered from the fallout of the Covid-19 pandemic."
- The SLL "will further support Chile’s external resilience by providing a revolving liquidity backstop in foreign exchange."
Procedural note on the SLL
- The Fund extends an offer of an SLL arrangement to those members that qualify; the IMF’s Board approves the extension of the offer.
- The arrangement becomes effective once the Fund confirms receipt of the member’s signed written communication, including the acceptance of the offer and policy commitments.
Press Release No. 22/164, May 20, 2022. International Monetary Fund.