IMF to back Chile’s request for $23.8 billion flexible credit line

© Reuters. FILE PHOTO: The logo of the International Monetary Fund (IMF) is seen during a news conference in Santiago © Reuters. FILE PHOTO: The logo of the International Monetary Fund (IMF) is seen during a news conference in Santiago

WASHINGTON (Reuters) – The International Monetary Fund on Tuesday said its managing director would recommend approval of Chile’s request for a two-year, $ 23.8 billion flexible credit line, given the Latin American country’s “very strong fundamentals” and track record.

The IMF said its executive board discussed Chile’s request during an informal session on Tuesday, and Managing Director Kristalina Georgieva would endorse the step when the board met to take a formal decision in coming weeks.

Chilean authorities intended to treat the credit line as precautionary, the Fund said in a statement released late on Tuesday.

The IMF’s Flexible Credit Line helps guard against external shocks by giving countries with very strong policy frameworks and track records of economic performance quick access to large amounts of IMF resources with no ex-post conditionalities.

“On the basis of Chile’s very strong economic fundamentals, institutional policy frameworks, and track record, IMF Managing Director Kristalina Georgieva intends to recommend approval of the FCL arrangement for Chile when the IMF Executive Board meets again to take a decision in the following weeks,” the IMF said.

The Fund said it stood ready to continue to support Chile, the world’s largest producer, as it grapples with the dual challenges of the novel coronavirus pandemic and a massive drop in commodity prices.

Chile’s central bank last week announced that the country’s economic activity dropped 3.5% in March from a year earlier due to economic shutdowns ordered to contain the virus.

The decline in economic activity in March comes after a 2.7% rise reported in February as Chile’s economy rallied after months of protests against inequality that included large marches as well as looting of shops.

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