SANTIAGO – The International Monetary Fund granted Chile a two-year US$24 billion credit line to combat the economic impacts of Covid-19. The credit line is only granted to countries that have strong economic policy track records. The credit line is a preventive measure, as Chile has yet to see the worst of the economic impacts.
Chile has received a US$24 billion credit line to help combat the economic effects of the Covid-19 pandemic. The credit line was granted by the International Monetary Fund (IMF). The IMF is extending credit lines to countries that have strong economic policy track records. Other credit line recipients include Peru, Mexico, and Colombia.
The credit line will last for two years and it will grant Chile’s Central Bank immediate access to approximately 60% of international funds.
The IMF granted this credit to Chile due to its “good trajectory in implementing prudent macroeconomic policies.” The IMF also expressed concern over deteriorating demand for Chile’s exports and a contraction in foreign investors willing to risk their capital on Chilean companies.
Alejandro Werner, Director of the Western Hemisphere Department of the IMF, said during a virtual press conference, “Today Chile doesn’t need this credit … but with the current uncertainty of the global market, the more precautions they take, the better.”
Chile requested a credit line last month, when the economic impacts of the Covid-19 shutdowns and quarantines started being felt. These strains on the national economy only adds to the preexisting economic issues as a result of the October 2019 protests.
Because of the protests, Chile ended 2019 with only a 1 percent growth in Gross Domestic Product (GDP), the lowest in a decade. Experts estimate that the GDP could now contract 2 percent in 2020, and the IMF believes that it could contract as much as 4.5 percent.
Finance Minister Ignacio Briones said that the IMF credit line is a way to strengthen the ministry’s position. The money will not be used as public funds; instead it will be used to pump up the Central Bank’s ability to cushion any external economic blows. This will be especially helpful given the volatile international markets in the months to come.