Chile has signed a US$18.5 billion flexible credit line with the International Monetary Fund (IMF) that will allow the country to increase available liquidity by more than 40 percent in the face of an “unfavorable” international scenario, the Central Bank of Chile announced today.
According to the issuer, negotiations with the IMF began last July due to increasing global uncertainty.
In this context, the central bank estimated that the FCL would allow the southern country to respond to “events of great magnitude” that cause “an abrupt deterioration in global financial conditions, a significant deterioration in terms of trade or, in general, a scenario of more complex global activities,” the institution said in a statement.
The central bank explained that the FCL is a precautionary and temporary measure, equivalent to an insurance or second line of protection for adverse scenarios with more significant impact and lower probability.
For its part, the IMF stressed Monday that the Chilean economy “faces a significant increase in global risks after recovering significantly from the consequences of the COVID-19 pandemic.”
In this context, the South American authorities “have continued to pursue very sound policies to mitigate risks, maintain macroeconomic stability, and support the most vulnerable, while advancing far-reaching reforms,” IMF Managing Director Kristalina Georgieva said.
A statement from the international organization said the Andean country meets the criteria for joining the FCL because it has “very sound fundamentals and institutional frameworks for economic policies, a solid track record of implementing very sound policies, and the authorities remain committed to continuing these policies into the future.
Faced with the risk of deteriorating economic conditions related to the health crisis, Chile accessed the FCL in May 2020 for about US$24 billion.
This line was not used and expired in May 2022. Since its establishment in 2009, Mexico, Poland, Colombia, Peru and Chile have accessed this facility.