The Executive Board of the International Monetary Fund (IMF) has completed its mid-term review of Chile’s qualification under the Flexible Credit Line (FCL) arrangement, reaffirming the country’s continued eligibility to access FCL resources.
Chile’s current two-year FCL arrangement was approved by the IMF Executive Board on August 27, 2024. The agreement is for SDR 10.4658 billion, equivalent to about US$13.8 billion or 600 percent of Chile’s quota. According to the IMF, Chilean authorities intend to use the credit line as a precautionary measure and plan to exit gradually from the arrangement depending on developments in external risks.
Following discussions by the Executive Board, Deputy Managing Director Nigel Clarke stated: “The economy is broadly balanced and growing at its potential, supported by a pickup in mining exports and a recovery in consumption. The global trade tensions have not yet significantly impacted the Chilean economy. However, external risks have increased since the approval of the FCL arrangement in August 2024. As a small open economy, Chile’s growth outlook would be negatively affected by a global slowdown, a decline in copper prices, and capital flow volatility, all of which could be triggered by an escalation of trade tensions.”
Clarke further noted: “Against this backdrop, the authorities have continued to implement very strong policies to maintain macroeconomic balance and enhance the economy’s resilience, including through the Central Bank of Chile’s new international reserve accumulation program. The authorities have appropriately focused on a prudent fiscal path to ensure debt sustainability, bringing inflation back to target, and supply-side measures to boost economic dynamism. Notably, the recently approved reform that aims to reduce the processing times for investment permits and improve regulatory predictability is a key step toward further strengthening Chile’s investment environment.”
He added: “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,” Clarke said, “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.”
The FCL was introduced by the IMF in March 2009 as part of reforms aimed at crisis prevention. It allows countries with strong track records like Chile flexibility in drawing on credit without ongoing conditions or phased disbursements.
Exchange rates used for calculating U.S. dollar amounts are based on data as of June 27th, 2024 (1 SDR = US$1.315010), consistent with official IMF staff reports for this FCL request.