Ministry of Finance informs withdrawals totaling US$ 2 billion from the Economic and Social Stabilization Fund in April

Thursday, april 30, 2020

The Ministry of Finance reports withdrawals from the Economic and Social Stabilization Fund (ESSF) for a total amount of US$ 2 billion during the month of April. This amount is part of the US$ 3,160 million that are projected to be withdrawn from the ESSF this year, in line with what was announced in the Public Finance Report of 2019Q4, published in February of 2020. These resources will contribute to the financing of the Nation’s budget and the fulfillment of the Economic Emergency Plan. The withdrawn funds will be eventually auctioned through the recently implemented mechanism for dollar sales, according to the cash financing needs of the Central Government. 

In addition, US$ 1,130 million will be withdrawn from the ESSF in August this year, destined to finance the amortizations of external debt.

The market value of the ESSF was equivalent to US$ 12,334 million at the end of March 2020. Considering the amounts withdrawn during April and the resources that will be used to finance the amortizations of external debt, the expected size of the ESSF by the end of 2020 is forecasted at US$ 9.2 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 fiscal institutional framework of the Republic of Chile, fiscal policy is guided according to 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 saving significant 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.


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