IMF Executive Board renews Flexible Credit Line to help the country cope with external shocks and support its resilience
Chile’s Flexible Credit Line (FCL) with the IMF has recently been renewed for another two years at a reduced amount of about $11.8 billion. In an interview with IMF Country Focus, incoming mission chief Bikas Joshi discusses how the country increased its resilience, the risks facing a major commodity exporter, and how AI-driven demand for copper and additional reforms could support future growth.
Why does Chile need another Flexible Credit Line? And why has it been reduced?
Bikas Joshi: The Flexible Credit Line is essentially an insurance policy, designed for countries like Chile that have an exemplary track record of very strong economic policies and institutions. It provides unconditional access to financing during periods of uncertainty. As a small and open commodity exporter deeply integrated into global capital markets, Chile remains vulnerable in a world where external shocks have become more frequent. The FCL supports countries while they implement measures to become even more resilient.
In providing this insurance, the FCL considers the strength of economic policy frameworks as well as domestic and external risks, with the chosen level appropriate for a broad range of scenarios. Over the years, Chile has developed stronger buffers against shocks, including from the central bank’s ongoing reserve purchase program. We measure access to IMF resources in multiples of the country’s capital contribution to the IMF, the so-called quota. Chile started with 1000 percent of the quota, in 2020, and has reduced steadily since, now bringing it down to 500 percent (equivalent to around $11.8 billion). This progressive reduction is part of Chile’s exit strategy and in line with the intended use of this credit line.
