During December 2019, the Ministry of Finance withdrew USD $ 1 billion from the Economic and Social Stabilization Fund (ESSF). This recent withdrawal is in addition to the USD $ 563.89 million made in June to finance the annual contribution to the Pension Reserve Fund (FRP) and the USD $ 1 billion withdrawal made in November, following the presentation of the macro-fiscal scenario during the Congressional budgetary discussion. Adding all of the above, a total of USD $ 2,563.89 million were withdrawn from the ESSF.
With respect to the recent withdrawals, the Ministry took into account that fiscal revenues in the last quarter of 2019 were below expectations, mainly due to the decline in economic activity.
According to Chile’s fiscal institutional framework, fiscal policy is guided by the Structural Balance Rule, which reflects the Central Government’s long term financial position, excluding cyclical variations derived from economic activity and copper prices.
In this context, the ESSF is an additional source of financing for the Central Government that may finance fiscal deficits, the annual contribution to the FRP, and the amortization of public debt. Although the Republic of Chile has ample access to international markets in competitive terms, the use of the ESSF has the advantage of avoiding additional issuance of public debt to fund fiscal expenditures.
As anticipated at the presentation of the Employment Protection and Economic Recovery Plan, the use of ESSF resources for approximately USD $ 3 billion will finance the mandatory annual contribution to the FRP, as well as debt amortization in foreign currency and finance the budget of the Nation. This amount could be modified if there were significant changes in government financing needs during the year.