Chile agreed to receive a US$3.5 billion credit line from the International Monetary Fund, about a seventh of the previous level, after the health and economic emergency of the covid-19 pandemic passed.
With this, the country becomes the first to receive its one-year short-term liquidity line established in 2020, replacing its previous two-year flexible credit line of US$23.4 billion, which expired this month, the Fund said with headquarters in Washington in a statement. Chile did not rely on the old line and plans to treat the new one as precautionary, the IMF said.
For its part, the nation’s central bank cited in a statement the normalization of exceptional measures implemented during the pandemic and the perception of lower risks related to the health emergency. He said the new, smaller line will complement its sources of external liquidity.
“After an impressive vaccination campaign and an effective and well-coordinated political response, the Chilean economy has quickly recovered from the consequences of covid-19,” Bo Li, one of the IMF’s deputy managing directors, said in the statement. “The progress made in recalibrating macroeconomic policies and building comfortable liquidity buffers facilitates a successful transition to Llcp,” he said.
The short-term credit line was created by the FMI in 2020 to help countries alleviate moderate liquidity problems before they escalate. The fund predicted when it launched the instrument that demand could reach US$50 billion, but so far it has had no takers. Access to the liquidity line is cheaper than the flexible credit line, at the same level of support on a precautionary basis.
The flexible credit line was established in 2009 to encourage countries to request assistance for any type of balance of payments need before facing an outright crisis. Colombia was the first and so far the only country to tap into such a line of credit when it borrowed $5.4 billion from the IMF in 2020 to help finance the pandemic response.
After markets crashed in early 2020, Chile and Peru joined Mexico and Colombia as the only nations with access.