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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
Chile: Request for an Arrangement under the Flexible Credit Line and Cancellation of the Current Arrangement-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
This paper highlights Chile’s Request for an Arrangement under the Flexible Credit Line (FCL) and Cancellation of the Current Arrangement. The imbalances built during the pandemic have been largely resolved shifting priorities to supporting stronger, more inclusive and greener medium-term growth. The near-term outlook has improved, primarily due to higher copper prices and prospects for increased lithium production. Chile qualifies for the FCL by virtue of its very strong economic fundamentals and institutional policy frameworks, and sustained track record of very strong macroeconomic policies. In the context of the still elevated external risks and a stronger near-term baseline outlook, the authorities have requested a reduction in access. They are committed to gradually lowering access depending on external risk developments and intend to continue treating the arrangement as precautionary. The proposed new commitment and cancellation of the current arrangement would have a net positive impact on the IMF’s liquidity position.
Keywords:
FCL arrangement; July monetary policy meeting; gross international reserves; policy rate cut; inflation pressure; Credit; Debt service; Metal prices; Global; Western Hemisphere
Cover IMF Staff Country Reports
Chile: Review Under the Flexible Credit Line Arrangement-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
This paper highlights Chile’s Review under the Flexible Credit Line (FCL) Arrangement. Chile continues to qualify for the FCL by virtue of its very strong economic fundamentals and institutional policy frameworks, and sustained record of accomplishment of very strong macroeconomic policies. In view of the still elevated external risks, the authorities have expressed a desire to maintain the current level of access and are committed to gradually exit the arrangement conditional on the evolution of external risks. The authorities intend to continue to treat the arrangement as precautionary. External downside risks remain tied to a possible abrupt global slowdown and sharply tighter global financial conditions. Domestic risks relate particularly to potential discontent from unmet social demands and deterioration in security as well as uncertainty related to the health care sector. The FCL has provided a valuable buffer against tail risks and boosted market confidence by reinforcing Chile’s policy and institutional strengths.
Keywords:
FCL arrangement; Chilean peso; rate reduction; inflation expectation; income tax reform; FCL qualification criteria; Inflation; Fiscal stance; Metal prices; Global; Caribbean
Cover IMF Staff Country Reports
Chile: Review Under the Flexible Credit Line Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
The pandemic hit the Chilean economy while it was recovering from the 2019 social unrest. The authorities’ swift and strong economic policy efforts and Chile’s very strong institutional frameworks helped buffer the economic and social consequences. The ongoing economic recovery continues to be supported by ample policy stimulus, a rapid vaccination process, well-anchored inflation expectations, a resilient export base, and continued market confidence.
Keywords:
FCL arrangement; FCL resource; FCL qualification; market confidence; Chilean economy; inflation expectation; COVID-19; Credit; Metal prices; Global
Cover Debt and Entanglements Between the Wars
Debt and Entanglements Between the Wars
Mr. Thomas J Sargent
,
Mr. George Hall
,
Mr. Martin Ellison
,
Mr. Andrew Scott
,
Mr. Harold James
,
Ms. Era Dabla-Norris
,
Mark De Broeck
,
Mr. Nicolas End
,
Ms. Marina Marinkov
, and
Vitor Gaspar

Abstract

World War I created a set of forces that affected the political arrangements and economies of all the countries involved. This period in global economic history between World War I and II offers rich material for studying international monetary and sovereign debt policies. Debt and Entanglements between the Wars focuses on the experiences of the United States, United Kingdom, four countries in the British Commonwealth (Australia, New Zealand, Canada, Newfoundland), France, Italy, Germany, and Japan, offering unique insights into how political and economic interests influenced alliances, defaults, and the unwinding of debts. The narratives presented show how the absence of effective international collaboration and resolution mechanisms inflicted damage on the global economy, with disastrous consequences.

Keywords:
BOOK; government; debt; monetary policy; fiscal policy; successor government authority; W.R. Berkley professor of Economics; gold standard; debt policy; long-term debt; Loans; Bonds; Gold; Global; Australia and New Zealand; Europe; South America; Middle East and Central Asia; North America; Credit; Government debt management; short-term debt; finance minister; market value
Cover IMF Staff Country Reports
Chile: Staff Report for the 2015 Article IV Consultation
International Monetary Fund. Western Hemisphere Dept.
This 2015 Article IV Consultation highlights that the GDP growth of Chile has remained lackluster over the past year. The main force behind the economic slowdown in 2014 has been the sharp fall in private investment, mainly the consequence of the end of the mining boom, but also reflecting the uncertainty and adjustment costs associated with the structural reform agenda. The IMF staff expects growth to increase modestly to 2.5 percent in 2015, mainly thanks to strong fiscal support. Private domestic demand should strengthen somewhat in 2016, primarily as very simulative monetary conditions and a gradual recovery of business confidence sustain private investment.
Keywords:
fund staff calculation; increase market liquidity; housing fund; infrastructure gap; RAS Chile; money market rate; Metal prices; Mining sector; Credit; Global; Europe
Cover IMF Staff Country Reports
Chile: Staff Report for the 2014 Article IV Consultation
International Monetary Fund. Western Hemisphere Dept.
KEY ISSUES Politics: President Bachelet won the Presidential election on a platform to foster inclusive growth and reduce inequality. Her government took office in March 2014 and is launching an ambitious policy agenda that includes important reforms in several areas, including taxation, education, productivity, and energy. Outlook and risks: Chile’s global environment is shifting, with a dimmer outlook for its main export, copper, and normalization of global monetary conditions. Growth has slowed markedly, resulting in a modest output gap. The peso has depreciated, feeding into inflation. Staff projects growth to bottom out in 2014 and then gradually recover. Key risks relate to a large and lasting drop in copper prices and global financial volatility. Policy mix: The freely floating peso is working as a shock absorber and will support the economic recovery. The policy mix with broadly neutral fiscal and accommodative monetary policy is appropriate. Room for further monetary easing has narrowed but space remains if domestic demand flounders, so long as inflation expectations remain well anchored. On fiscal, given the strong public finances, automatic stabilizers should be allowed to operate unimpeded and there is space for stimuli in the event of a major downturn. The commitment to close the structural fiscal deficit by 2018 is appropriate and should be phased in a way that avoids undue drag on the recovery. Should risks materialize, the freely floating currency is the first line of defense. Growth and equity reforms: Achieving strong growth while reducing inequality will require structural reforms. The authorities’ agenda focuses on the right areas but many details remain work in progress. Clarity on the details, timetables, and prioritization will reduce uncertainty and the risk of delays. Financial stability: Risks to financial stability appear contained, but it will be important to push through with regulatory reforms underway, including initiatives currently in Congress. Further effort will be needed to close regulatory gaps, in particular bank capital requirements, relative to international benchmarks.
Keywords:
ISCR; CR; rate; economy; GDP; liability positions vis-à-vis nonresident; monetary policy rate; Chilean authorities; evaluation system; expansionary monetary policy stance; structural surplus; Metal prices; Exports; Global
Cover IMF Staff Country Reports
Solomon Islands: Third Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria—Staff Report; Press Release; and Statement by the Executive Director for Solomon Islands
International Monetary Fund. Asia and Pacific Dept
This paper discusses Solomon Islands’ Third Review Under the Extended Credit Facility (ECF) Arrangement and Request for Modification of Performance Criteria (PC). Program performance under the ECF arrangement has been broadly satisfactory. Reserve buffers have been rebuilt and are at a comfortable level, well above the average of other small states. All PCs for end-December, the indicative targets (ITs) for March, and the continuous PCs were met with considerable margins, except for the IT on government-funded recurrent spending on health and education, which was narrowly missed. Based on Solomon Islands’ program performance, the IMF staff recommends completion of the third review under the ECF-supported program.
Keywords:
ISCR; CR; IMF team; ECF arrangement; government; Solomon Islands government; ECF program; growth outlook; Budget planning and preparation; Currencies; Pacific Islands
Cover IMF Working Papers
What Explains Movements in the Peso/Dollar Exchange Rate?
Mr. Yi Wu
This paper examines the factors affecting the weekly peso/dollar exchange rate movements between 1999 and 2013 using an error correction model. The model fits the historical data well. While copper price is the most important determinant of the peso exchange rate over the long run, other factors including interest rate differential, global financial distress, local pension funds’ derivative position, as well as the Federal Reserve’s quantitative easing also affect the peso in the short run. The Central Bank of Chile’s foreign exchange interventions in 2008 and 2011 had a small impact on the peso.
Keywords:
WP; peso exchange rate; Chilean peso; U.S. dollar; peso movement; carry trade; exchange rate; copper price; data well; movements well; dollar position; Exchange rates; Metal prices; Financial statements; Pension spending; Oil prices; Global
Cover IMF Staff Country Reports
Chile: 2013 Article IV Consultation
International Monetary Fund. Western Hemisphere Dept.
The staff reports for the 2013 Article IV Consultation on the Chile discuss the strong and inclusive growth over the medium term. Technocratic, rules-based, and transparent policy management; monetary policy under a floating exchange rate undertaken by a credible central bank; and prudent fiscal policy, since 2001 under a near-legendary fiscal rule, has enhanced policy clarity, reinforced Chile’s resilience to shocks, and allowed for vigorous policy responses when needed, as after the global financial crisis and the earthquake. The widening current account deficit and the increased reliance on debt financing have increased balance of payments stability risks and Chile’s exposure to sudden stops.
Keywords:
ISCR; CR; current account; holding; SDR Department; widening current account deficit; liability positions vis-à-vis nonresident; fiscal policy; budgetary funds; foreign direct investment; copper price; ballooning current account deficit; capital investment; Metal prices; Current account deficits; Credit; Global
Cover IMF Staff Country Reports
Burkina Faso: Fifth Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for Modification of Performance Criteria—Staff Report; Press Release on the Executive Board Discussion
International Monetary Fund. African Dept.
The number of Malian refugees in Burkina Faso has increased, but the government’s contribution remains in line with earlier estimates. Growth for 2012 has been revised upward to 8 percent. The overall fiscal deficit is significantly lower than anticipated. The current account is expected to improve next year. There is significant improvement in revenue collection. The authorities are stepping up efforts to improve resilience to shocks. Efforts are under way to improve debt management capacity. The mining taxation regime needs to rebalance the interests of investors.
Keywords:
ISCR; CR; ECF arrangement; program; priority investment spending; macroeconomic performance; revenue; IMF's executive board; investment spending; Food security; Gold; Agricultural commodities; Mining sector; West Africa; Sub-Saharan Africa; Global