As planned, the Ministry of Finance reports a withdrawal of US$ 1,090 million from the Economic and Social Stabilization Fund (ESSF) in August. This new withdrawal is in addition to the US$ 2 billion that were withdrawn in April of this year. These withdrawals were informed previously in the Public Finance Report of the fourth quarter of 2019.
The US$1,090 million will be used to finance the amortizations of the Treasury's external debt scheduled for the month of August.
At the end of June 2020, the market value of the ESSF was equivalent to US $ 10,569 million. Considering the amount withdrawn in August, it is estimated that at the end of the year the ESSF will have resources of around US$9.5 billion.
It should be noted that additional withdrawals from the ESSF may occur in the event of significant changes in the government's financing needs.
The ESSF within the fiscal institutional framework of the Republic of Chile
In accordance with the Republic of Chile’s fiscal institutional framework, fiscal policy is guided by the Structural Balance, which reflects the Central Government’s estimated long-term situation. Thus, the effect of cyclical fluctuations in economic activity and copper prices are excluded from public finances.
The ESSF is an additional source of financing for the Central Government that allows for the financing of fiscal deficits, the annual contribution to the Pension Reserve Fund, and amortization of public debt. Although the Republic of Chile has broad access to financing in international markets in competitive terms, the use of the ESSF has the advantage of allowing funding of fiscal needs, reducing the need to resort to public debt.
In this context, the Structural Balance rule allowed savingsignificant resources in the ESSF in the past. As a result, Chile is better positioned than many other countries in the world to face the effects that the coronavirus will have on the economy.