Chilean authorities have expressed their intention to treat the new agreement as precautionary and to continue to gradually reduce access, subject to the evolution of external risk.
The Executive Board of the International Monetary Fund (IMF) has approved a two-year arrangement for Chile under the Flexible Credit Line (FCL) for an amount of around US$13.8 billion, equivalent to 600% of the quota, while taking note of the cancellation of Chile's previous agreement.
Chilean authorities have expressed their intention to treat the new agreement as precautionary and to continue to gradually reduce access, subject to the evolution of external risk.
This is Chile's third FCL agreement since 2020, where access has been gradually reduced. The first FCL agreement was approved on May 29, 2020, equivalent to 1,000% of the quota. The second agreement, approved on August 29, 2022, was equivalent to 800% of the quota.
IMF Deputy Managing Director Bo Li said the near-term outlook has improved, supported by a rebound in mining exports and a recovery in consumption.
However, the Chilean economy remains exposed to elevated external risks linked to uncertainty surrounding a potentially longer-term higher interest rate environment in the United States, a slowdown in China and other key trading partners, and an intensification of regional conflicts around the world.
"Against this backdrop, the authorities have continued to pursue very sound policies that have largely resolved the macroeconomic imbalances generated during the pandemic. The government's reform ambitions aim to add dynamism to the economy, while making it more inclusive and greener," he added.
Chile's strong institutional policy frameworks support the economy's resilience and its ability to respond to shocks.
These include a credible inflation targeting framework with a flexible exchange rate, a debt anchor and a structural fiscal balance rule, and effective regulation and supervision of the financial sector.
In this context, the Flexible Credit Line (FCL) will continue to provide "a valuable buffer" against extreme risks and a signal of Chile's political and institutional strength. The authorities remain committed to treating the FCL as a precautionary measure and to gradually reducing access, in the context of their exit strategy, based on the evolution of external risks.
