May 14, 2021

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded on May 14, 2021 its review of Chile’s qualification for the arrangement under the Flexible Credit Line (FCL) and reaffirmed Chile’s continued qualification to access FCL resources.

The current two-year FCL arrangement for Chile was approved by the IMF’s Executive Board on May 29, 2020 (see Press Release No. 20/227 ), in the amount of SDR 17.443 billion (1000 percent of quota, around US$23.93 billion). The Chilean authorities stated their intention to continue to treat the FCL as precautionary and maintain their intention to exit as soon as the 24-month period is completed, conditional on developments and risks.

The FCL was established on March 24, 2009 as part of a major reform of the Fund’s lending framework (see Press Release No. 09/85). The FCL is designed for crisis prevention purposes as it provides the 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. This large, upfront access with no ongoing conditions is justified by the very strong track records of countries that qualify for the FCL, which gives confidence that their economic policies will remain strong.

Following the Executive Board’s discussion on Chile, Mr. Mitsuhiro Furusawa, Deputy Managing Director, made the following statement:

“The COVID-19 pandemic hit the Chilean economy hard as it was recovering from the 2019 social unrest. Swift policy action and fast progress in vaccination have mitigated its impact. Chile’s very strong economic fundamentals and institutional policy frameworks are anchored in the inflation-targeting framework, the structural fiscal balance rule, the free-floating exchange rate, and the sound financial system.

“The Chilean economy remains exposed to external risks tied to the evolution and impact of the pandemic, such as adverse global demand and financial conditions. The new surge in COVID cases and the need to ensure an inclusive recovery continue to pose domestic policy challenges. Continued strong policy actions, rapid vaccination progress, and well-anchored inflation expectations will remain critical in ensuring continued market confidence and bringing the economy on a firm path to recovery.

“The Flexible Credit Line (FCL) will continue to play an important role in supporting the authorities’ macroeconomic strategy, by providing a valuable buffer and boosting market confidence. The authorities continue to show strong commitment to maintain very strong policies and institutional policy frameworks. They intend to continue to treat the arrangement as precautionary and to exit the FCL arrangement at the end of the 24-month period, conditional on developments and risks.”