IMF Executive Board Approves Two-Year US$18.5 Billion Flexible Credit Line for Chile
IMF News, August 29, 2022
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- Published: August 29, 2022
Summary
- The Executive Board of the International Monetary Fund approved a two-year Flexible Credit Line (FCL) arrangement for Chile in the amount of SDR 13.954 billion (about US$18.5 billion).
- The Chilean authorities intend to treat the FCL as precautionary.
- The authorities 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).
Purpose and key features of the FCL
- The FCL can be drawn 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.
Rationale and qualification for Chile
- Chile qualifies for the FCL by virtue of its very strong economic fundamentals and institutional policy frameworks, and a sustained track record of implementing very strong policies.
- Qualification criteria for an arrangement under the FCL are the same as for the SLL.
- The Executive Board approval cites Chile’s commitment to maintaining very strong policies in the future.
Risks and scenarios the FCL addresses
- The FCL is intended to provide insurance against:
- a possible abrupt global slowdown;
- commodity price shocks;
- spillovers from Russia’s war in Ukraine;
- a sharp tightening of global financial conditions.
Authorities’ actions and intentions
- The Chilean authorities intend to treat the FCL as precautionary and to exit the arrangement when external conditions allow.
- The authorities cancelled the existing SLL of SDR 2.529 billion (about US$3.3 billion), consistent with current Fund policies.
Policy frameworks and institutional strengths highlighted
- Long-standing structural fiscal balance rule.
- Credible inflation targeting with a flexible exchange rate.
- Sound financial system supported by effective regulation and supervision.
- Continued implementation of very strong policies to mitigate risks, preserve macroeconomic stability, and support vulnerable groups while advancing ambitious reforms.
Key statistics and references preserved exactly from the source
- FCL amount: SDR 13.954 billion (about US$18.5 billion).
- Access: 800 percent of quota.
- SLL cancelled: SDR 2.529 billion (about US$3.3 billion); 145 percent of quota.
- FCL establishment date: March 24, 2009 (see Press Release No. 09/85).
- Exchange rate used for US$ amounts: SDR 0.755229/US$ as of August 2, 2022.
- Press Release No.: 22/294.
- Date of press release: August 29, 2022.
IMF Executive Board Approves Two-Year US$18.5 Billion Flexible Credit Line for Chile
