IMF Executive Board Approves New Two-Year Flexible Credit Line Arrangement with Chile

IMF News, August 27, 2024

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The Executive Board approved a two-year arrangement for Chile under the Flexible Credit Line (FCL).
Amount: SDR 10.4658 billion (about US$13.8 billion), equivalent to 600 percent of quota.
Press Release No. 24/309; date: August 27, 2024.
The Board noted the cancellation of Chile’s previous arrangement.

Chile qualifies for the FCL by virtue of its very strong economic fundamentals and institutional policy frameworks, and sustained track record of very strong macroeconomic policies.
The Chilean authorities stated their intention to treat the new arrangement as precautionary and to continue gradually lowering access, conditional on external risk developments.
This is Chile’s third FCL arrangement since 2020, with access having been gradually lowered:
- First FCL: approved May 29, 2020, amount SDR 17.443 billion (equivalent to 1,000 percent of quota).
- Second FCL: approved August 29, 2022, amount SDR 13.954 billion (equivalent to 800 percent of quota).

Near-term outlook: improved, supported by a pickup in mining exports and a recovery in consumption.
Elevated external risks highlighted:
- Uncertainty around the potentially higher-for-longer interest rate environment in the U.S.
- A slowdown in China and other key trading partners.
- An intensification of regional conflicts in the world.

Authorities have continued to implement very strong policies which have largely resolved macroeconomic imbalances built during the pandemic.
Government reform ambitions aim to add dynamism to the economy, while making it more inclusive and greener; key efforts include:
- Expedite investment permits.
- Capitalize on Chile’s opportunities from the global green transition.
- Continue to raise revenues—mainly by enhancing tax compliance.
- Strengthen social security.

Chile’s very strong institutional policy frameworks that support resilience and shock response capacity include:
- A credible inflation-targeting framework with a flexible exchange rate.
- A debt anchor and structural fiscal balance rule.
- Effective financial sector regulation and supervision.

The FCL will provide a valuable buffer against tail risks and signal Chile’s policy and institutional strengths.
Authorities remain committed to treating the FCL arrangement as precautionary and gradually reducing access as part of their exit strategy, conditional on external risk developments.
FCL design and modalities (background):
- The FCL was established on March 24, 2009.
- The FCL is designed for crisis prevention purposes, providing flexibility to draw on the credit line at any time during the period of the arrangement (one or two years), and subject to a mid-term review in two-year FCL arrangements.
- Disbursements are not phased nor conditioned on compliance with policy targets as in traditional IMF-supported programs; large, upfront access with no ongoing conditions is justified by very strong track records of qualifying countries.

US$ amounts were calculated using the exchange rate as of June 27th, 2024 (1 SDR = US$1.315010), consistent with the Staff Report for the FCL request.

IMF Press Release No. 24/309, August 27, 2024.