IMF Govt Board Approves Two-Yr US$18.5 Billion Versatile Credit score Line for Chile

IMF Govt Board Approves Two-Yr US$18.5 Billion Versatile Credit score Line for Chile

August 29, 2022

• The IMF accepted right this moment a two-year Versatile Credit score Line (FCL) association for Chile of about US$18.5 billion to reinforce buffers and supply insurance coverage towards antagonistic eventualities. The FCL will likely be handled as precautionary.
• After a formidable restoration from the fallout of the Covid-19 pandemic, the Chilean financial system is confronting marked enhance in world dangers.
• Chile qualifies for the FCL by advantage of its very robust financial fundamentals and insurance policies, which proceed to help the nation’s resilience and capability to answer shocks.

Washington, DC: The Govt Board of the Worldwide Financial Fund (IMF) accepted right this moment a two-year association for Chile beneath the Versatile Credit score Line (FCL) in the quantity of SDR 13.954 billion (about US$18.5 billion [1] ; 800 % of quota). The Chilean authorities intend to deal with the FCL as precautionary. Provided that the FCL can tackle all sorts of steadiness of fee wants, the Chilean authorities additionally notified the Fund of their resolution to cancel the prevailing Quick-term Liquidity Line (SLL) of SDR 2.529 billion (about US$3.3 billion; 145 % of quota), an method that’s per present Fund insurance policies.

The FCL was established on March 24, 2009, as a part of a serious reform of the Fund’s lending framework (see Press Launch No. 09/85). The FCL permits its recipients to attract on the credit score line at any time and is designed to flexibly tackle each precise and potential steadiness of funds wants. Drawings beneath the FCL aren’t phased nor tied to ex-post conditionality as in common IMF-supported packages.

The FCL will increase Chile’s precautionary reserve buffers on a brief foundation and supply substantial insurance coverage towards a broad vary of dangers, together with from a doable abrupt world slowdown; commodity worth shocks; spillovers from Russia’s battle in Ukraine; or a pointy tightening of world monetary situations.

Chile qualifies for the FCL given its very robust financial fundamentals and institutional coverage frameworks, a sustained monitor file of implementing very robust insurance policies, and the authorities’ continued dedication to sustaining very robust insurance policies sooner or later. Qualification standards for an association beneath the FCL are the identical as for the SLL.

Following the Govt Board’s dialogue on Chile, Ms. Kristalina Georgieva, Managing Director, issued the next assertion:

“After a formidable restoration from the fallout of the Covid-19 pandemic, Chile is going through a marked enhance in world dangers.

“In opposition to the backdrop of a difficult exterior atmosphere, the authorities have continued to implement very robust insurance policies to mitigate dangers, protect macroeconomic stability, and help susceptible teams, whereas advancing bold reforms. The FCL with entry of 800 % of quota will present a considerable precautionary buffer towards a broad vary of dangers. The authorities intend to deal with the association as precautionary and exit the association when exterior situations enable.

“Chile has very robust fundamentals and a sustained monitor file of implementing very robust insurance policies, anchored in a long-standing structural fiscal steadiness rule, credible inflation focusing on with a versatile trade charge, and a sound monetary system supported by efficient regulation and supervision. These very robust fundamentals and coverage frameworks proceed to help the nation’s resilience and capability to answer shocks.”