SANTIAGO – The International Monetary Fund (IMF) on Friday approved a two-year $24 billion for Chile under the Flexible Credit Line (FCL) as the South American nation battles the growing impact of the coronavirus pandemic.
The announcement came a day after Peru secured a two-year, $11 billion credit line, and as Latin America becomes a growing hotspot for COVID-19.
The Flexible Credit Line is a renewable funding mechanism granted to countries with strong economic policy track records, and Chile is only the fifth country to receive one. Along with Peru, Mexico and Colombia currently have FCLs in place.
Chile qualifies for the FCL by virtue of its very strong fundamentals, institutional policy frameworks, track record of economic performance and policy implementation and commitment to maintain such policies in the future, the IMF said in a statement.
The arrangement should boost confidence, and combined with the comfortable level of international reserves, provide insurance against downside risks. The authorities intend to treat the arrangement as precautionary financing.
“Chile’s very strong fundamentals, institutional policy frameworks, and track record of implementing prudent macroeconomic policies have been instrumental in absorbing the impact of a series of recent shocks,” said Mrs. Kristalina Georgieva, Managing Director and Chair, following the Executive Board’s discussion on Chile.
Peru and Chile are taking important measures to protect the lives and livelihoods of their people during the pandemic. The IMF recognized their very strong economic fundamentals & institutional policy frameworks by approving their requests for a Flexible Credit Line this week. pic.twitter.com/HVR2YWLpOo
— Kristalina Georgieva (@KGeorgieva) May 30, 2020
“The strong policy frameworks are anchored in the structural fiscal balance rule, the credible inflation-targeting framework with the free-floating exchange rate, and a sound financial system supported by effective regulation and supervision. The authorities continue to show strong commitment to maintaining very strong policies and institutional policy frameworks going forward,” she added.
Chile has seen a surge in cases this week, with the total number of infections surpassing 90,000 on Friday. At least 944 people have died from COVID-19 complications in the country.