## Chile’s New Short-term Liquidity Line to Support Resilience and Recovery

_IMF News, May 20, 2022_

## Source details

**Canonical URL:** [Chile’s New Short-term Liquidity Line to Support Resilience and Recovery](https://www.imf.org/en/news/articles/2022/05/20/cf-chile-new-short-term-liquidity-line-to-help-cement-strong-recovery)

## Other formats

- [Markdown version](/en/news/articles/2022/05/20/cf-chile-new-short-term-liquidity-line-to-help-cement-strong-recovery/index.md)
- [Structured JSON version](/en/news/articles/2022/05/20/cf-chile-new-short-term-liquidity-line-to-help-cement-strong-recovery/index.json)
- [Bundle manifest](/en/news/articles/2022/05/20/cf-chile-new-short-term-liquidity-line-to-help-cement-strong-recovery/bundle-manifest.json)

## Bibliographic details
- Published: May 20, 2022

---

### Rapid recovery and policy response
- Chile’s economy recovered very fast from the pandemic driven by:
  - an extensive vaccination campaign and an effective economic policy response that was "swift and comprehensive, and anchored in very strong policy and institutional frameworks."
  - significant buffers bolstered by its access to the Flexible Credit Line (FCL).
  - the government’s multi-year fiscal package which "has helped to safeguard health, protect incomes and jobs, support credit, and buttress the recovery."
- Central Bank measures to support liquidity:
  - monetary stimulus and unconventional measures.
  - adjustments to financial sector policies to facilitate the flow of credit, especially to households and small and medium-sized enterprises.

### Exit from the Flexible Credit Line (FCL) and preparation
- Chile began preparing an exit strategy from the FCL "ever since it gained access in May 2020."
- As part of the strategy, the Central Bank of Chile purchased international reserves for a total of US$7.4 bn.
- Additional measures that strengthened Chile’s external position:
  - the IMF’s general allocation of Special Drawing Rights.
  - the central bank joining the Fondo Latinoamericano de Reservas (FLAR).
  - the country’s access to the US Federal Reserve’s REPO FIMA.
- Considering these tools, the normalization of exceptional pandemic measures, and lower perceived public health risks, the central bank decided to access the Short-term Liquidity Line (SLL) to complement sources of external liquidity.

### Short-term Liquidity Line (SLL): purpose, candidacy, and expected benefits
- Facility design and intent:
  - The SLL "is designed to be a liquidity backstop for members with very strong policy frameworks and fundamentals that face potential, moderate, short-term balance of payments needs."
  - It is "an innovative instrument that provides predictable, revolving, and renewable liquidity support in foreign exchange."
  - The SLL was created in April 2020.
- Why Chile is a suitable candidate:
  - Chile has "very strong economic fundamentals and institutional policy frameworks" and "has shown a sustained track record of implementing very strong policies."
  - Policy anchors include:
    - a well-established structural fiscal balance rule,
    - credible inflation targeting with a free-floating exchange rate,
    - a sound financial system supported by effective regulation and supervision.
  - These features have "sustained Chile’s resilience even in the face of very large shocks."
- Expected contributions of the SLL:
  - complement existing buffers and make available predictable and revolving liquidity support.
  - serve as a signal of confidence in Chile’s very strong fundamentals and policies.
  - support Chile’s resilience and capacity to respond to shocks, helping "maintain macroeconomic stability and lay the foundations for sustained and green growth to the benefit of the Chilean people."

### Key figures and dates
- US$7.4 bn — international reserves purchased by the Central Bank of Chile as part of the FCL exit strategy.
- May 2020 — when Chile gained access to the FCL.
- April 2020 — creation of the SLL.
- May 20, 2022 — publication date of the page.

*Source: Chile’s New Short-term Liquidity Line to Support Resilience and Recovery — May 20, 2022, International Monetary Fund.*

---


## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Press Release](https://www.imf.org/en/News/Articles/2022/05/20/pr22164-chile-receives-imfs-first-short-term-liquidity-line)
- [SLL Factsheet](https://www.imf.org/en/About/Factsheets/Sheets/2020/04/17/short-term-liquidity-line)
- [Regional Economic Outlook](https://www.imf.org/en/Publications/REO/WH/Issues/2022/04/22/regional-economic-outlook-for-western-hemisphere-april-2022)
- [Chile and the IMF](https://www.imf.org/en/countries/chl)
- [Flexible Credit Line](https://www.imf.org/en/News/Articles/2020/05/29/pr20227-imf-executive-board-approves-two-year-flexible-credit-line-arrangement)
- [fiscal balance rule](https://www.imf.org/external/datamapper/fiscalrules/map/map.htm)
- [inflation targeting](https://www.imf.org/external/pubs/ft/fandd/basics/target.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2022/05/20/cf-chile-new-short-term-liquidity-line-to-help-cement-strong-recovery_