Chile: Technical Assistance Report-Fiscal Considerations in Managing Stabilization Funds

Author: International Monetary Fund. Fiscal Affairs Dept.

Volume/Issue: Volume 2023 Issue 249

Publication date: July 2023

ISBN: 9798400249037

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Topics covered in this book

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Economics- Macroeconomics , Money and Monetary Policy , Public Finance , International - Economics , Natural Disasters , IMF's Fiscal Affairs Department , Tail risk , public treasury , Mexico budget revenues stabilization fund , support fund , size of stabilization funds , Fiscal risks , Fiscal stance , Natural disasters , Global

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Republic of Congo : 2001 Article IV

Summary

Chile’s strong fiscal framework has served the country well. The fiscal rule has helped insulate the budgets from volatility in resource prices and economic activity. The sovereign wealth fund (SWF)—the Economic and Social Stabilization Fund (ESSF) and the Pension Reserve Fund (PRF)—was established to encourage savings over time and has provided buffers for stabilizing the economy. During the pandemic, Chile has appropriately used the ESSF to provide swift and impactful support to protect people. Recent efforts to upgrade the fiscal framework— adopt a medium-term fiscal path, formalize a prudent debt ceiling, and introduce an escape clause—can further safeguard fiscal sustainability.