The Central Bank of Chile reported on Tuesday on the request to the International Monetary Fund (IMF) for a flexible credit line (FCL) of 23.8 billion dollars to prevent the negative effects on its economy that the health crisis of the pandemic of the coronavirus.
The Chilean issuer’s intention is that the international monetary entity grant the loan for two years, a measure aimed at “protecting economies from possible external shocks by providing broad and advance access to IMF resources,” the Central Bank reported. through a statement.
In this sense, they assured that the request will be “recommended” by the managing director of the IMF, Kristalina Georgieva, to the board of the agency for its future approval.
The FCL is a precautionary measure available to countries that complements each State’s own income and that can be requested to achieve the economic objectives of central banks in situations of sudden external problems, such as the one that is projected to be generated by the crisis health caused by the pandemic.
Among the necessary conditions for the FCL to be accepted by the IMF, the Central Bank reported that the requesting country must be able to guarantee “very solid macroeconomic fundamentals.”
The amount of the credit may not be used to finance the country’s public spending that requires it and does not impose prior actions or post-disbursement conditions, as is the case with IMF programs aimed at countries with crises in their balance of payments.
“It is enough that the country meets the demanding qualification criteria,” they indicated from the Central Bank of Chile.
The billionaire amount requested will increase the availability of immediate access liquidity for the Chilean issuer by more than 60%.
“Access to this line is part of the strategy of the Central Bank of Chile to strengthen its instruments against the risk of adverse economic conditions arising from the health crisis becoming more pronounced or prolonged,” said the Central Bank.
“It provides significant support not only to face more severe external shocks and raise confidence in the markets, but also to expand the set of tools available to the bank to support the transmission of monetary policy and contribute to financial stability” , they added from the national banking entity.
The Central Bank estimates that Chilean GDP will contract up to 2.5% this year due to the influence of the coronavirus health crisis, although international organizations place the drop at around 4%.
Chile currently registers 31,721 infections and 335 deaths from COVID-19 since the first positive case of the disease will be registered in the country on March 3.