## IMF Executive Board Approves Two-Year US$23.93 Billion Flexible Credit Line Arrangement for Chile

_IMF News, May 29, 2020_

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## Bibliographic details
- Published: May 29, 2020

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### Approval and key figures
- IMF Executive Board approved a two-year arrangement for Chile under the Flexible Credit Line (FCL).
- Amount: SDR 17.443 billion (about US$ 23.93 billion, equivalent to 1,000 percent of quota).
- Date of approval: May 29, 2020.
- The authorities intend to treat the arrangement as precautionary financing.
- The FCL arrangement term: two years, with a mid-term review in two-year FCL arrangements.
- The FCL was established on March 24, 2009.

### Rationale for approval and country qualification
- Chile qualifies for the FCL by virtue of:
  - very strong fundamentals,
  - institutional policy frameworks,
  - track record of economic performance and policy implementation,
  - commitment to maintain such policies in the future.
- The arrangement is expected to boost confidence and, together with Chile’s comfortable level of international reserves, provide insurance against downside risks.
- The Executive Board decision cites Chile’s strong policy frameworks anchored in:
  - the structural fiscal balance rule,
  - the credible inflation-targeting framework with the free-floating exchange rate,
  - a sound financial system supported by effective regulation and supervision.

### Features of the Flexible Credit Line (FCL)
- Designed for crisis prevention; provides flexibility to draw on the credit line at any time during the arrangement period (one or two years).
- 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.
- The FCL provides valuable insurance against tail risks by enhancing external buffers.

### Risks, intended use, and exit
- The IMF highlighted substantial external risks from the ongoing Covid-19 outbreak, including:
  - significant deterioration in global demand for Chilean exports,
  - sharp decline or reversal of capital inflows toward emerging markets,
  - abrupt tightening of global financial conditions.
- The authorities intend to treat the arrangement as precautionary and temporary, and to exit the arrangement as soon as the 24-month period is completed, conditional on a reduction of risks at the time of the mid-term review.

### Statement by Managing Director Kristalina Georgieva (summary of key points)
- Chile’s very strong fundamentals and policy settings have helped absorb recent shocks.
- Authorities show strong commitment to maintaining very strong policies and institutional policy frameworks going forward.
- The FCL arrangement will help boost market confidence amid elevated uncertainty and volatility in global financial markets resulting from Covid-19.

### Additional information
- For more information on the IMF’s Flexible Credit Line: https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/40/Flexible-Credit-Line

*Press Release No. PR 20/227 — May 29, 2020 — IMF Communications Department*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
- [Chile and the IMF](http://www.imf.org/external/country/CHL/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/40/Flexible-Credit-Line](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/40/Flexible-Credit-Line)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2020/05/29/pr20227-imf-executive-board-approves-two-year-flexible-credit-line-arrangement_