Press Release No. 24/309

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

August 27, 2024

• The IMF approved today, a successor two-year arrangement for Chile under the Flexible Credit Line (FCL), for an amount of about US$13.8 billion (equivalent to 600 percent of quota).
• 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.
• In the context of the still elevated external risks and a stronger near-term baseline outlook, the authorities have requested a reduction in access. They are committed to gradually lowering access depending on external risk developments and intend to continue treating the arrangement as precautionary.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved today, a two-year arrangement for Chile under the Flexible Credit Line (FCL) in an amount of SDR 10.4658 billion (about US$13.8 billion),[1] equivalent to 600 percent of quota and noted the cancelation of Chile’s previous arrangement.[2] The Chilean authorities stated their intention to treat the new arrangement as precautionary and continue to gradually lower access, conditional on external risk developments.

This is Chile’s third FCL arrangement since 2020 with access having been gradually lowered. The first FCL arrangement was approved on May 29, 2020 in an amount of SDR 17.443 billion (equivalent to 1,000 percent of quota) (see Press Release No. 20/227). The second arrangement, approved on August 29, 2022 (see Press Release No. 22/294), was for an amount of SDR 13.954 billion (equivalent to 800 percent of quota).

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

“The near-term outlook has improved, supported by a pickup in mining exports and a recovery in consumption. Yet, the Chilean economy remains exposed to elevated external risks tied to the uncertainty around the potentially higher-for-longer interest rate environment in the U.S., a slowdown in China and other key trading partners, and an intensification of regional conflicts in the world. 

“Against this backdrop, the authorities have continued to implement very strong policies which have largely resolved macroeconomic imbalances built during the pandemic. The government’s reform ambitions aim at adding dynamism to the economy, while making it more inclusive and greener. In particular, key efforts seek to expedite investment permits, capitalize on Chile’s opportunities from the global green transition, continue to raise revenues—mainly by enhancing tax compliance—and strengthen social security.

“Chile’s very strong institutional policy frameworks support the economy’s resilience and capacity to respond to shocks. They include a credible inflation-targeting framework with a flexible exchange rate, a debt anchor and structural fiscal balance rule, and effective financial sector regulation and supervision.

“In this context, the Flexible Credit Line (FCL) arrangement will continue to provide a valuable buffer against tail risks and a signal of Chile’s policy and institutional strengths. The authorities remain committed to treating the FCL arrangement as precautionary and gradually reducing access, in the context of their exit strategy, conditional on external risk developments.”

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

[2] 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.