Chile is one of Latin America's most stable democracies but has nonetheless been hit by a depreciating currency and an unexpectedly weak economy.
Chilean authorities intend to treat the credit line as "precautionary" and plan to exit the arrangement when conditions allow, IMF Managing Director Kristalina Georgieva said in a statement.
The IMF's Chile mission chief, Ana Corbacho, told the press in a call after the announcement that there were no limits nor time restraints to accessing the full amount of the facility, which would be available in a scenario of economic shock.
"Again, to emphasize...authorities do not intend to draw (on the line)," Corbacho said.
It will also increase the international liquidity availability of Chile's central bank by more than 40%, the bank said in a statement following the announcement. The finance ministry did not immediately respond to a request for comment.
The credit line is not subject to any additional conditions from the IMF, according to the central bank.
Chile also told the IMF it would cancel an existing short-term liquidity line of around $3.3 billion, the fund said, meaning on a net basis the central bank gained access to some $15 billion after the announcements.
Chile qualified for the flexible credit line due to its "strong economic fundamentals and institutional policy frameworks" as well as its commitment to maintaining strong policies in the future, the IMF said.
However, Chile is now "facing a marked increase in global risks," Georgieva said.
"This announcement is a welcome development that will provide the authorities with near-term breathing room and cheap insurance in a period of heightened domestic uncertainty and volatility," said Santiago Tellez, economist at Goldman Sachs, in a late Monday note.
Tellez cited the central bank's ongoing foreign exchange intervention program, which has partly depleted its international reserves, as well as "a large current account deficit, and elevated political and policy uncertainty."
The credit line is aimed at providing coverage against risks "from a possible abrupt global slowdown; commodity price shocks; spillovers from Russia’s war in Ukraine; or a sharp tightening of global financial conditions," the IMF said.