The IMF approved a two-year $24 billion credit line for Chile on Friday as the South American nation battles the growing impact of the coronavirus pandemic.

The announcement came a day after Peru secured a two-year, $11 billion credit line, and as Latin America becomes a growing hotspot for COVID-19.

The Flexible Credit Line is a renewable funding mechanism granted to countries with strong economic policy track records, and Chile is only the fifth country to receive one. Along with Peru, Mexico and Colombia currently have FCLs in place.

IMF Managing Director Kristalina Georgieva praised Chile for its "very strong fundamentals ... and track record of implementing prudent macroeconomic policies" that have helped the country to weather the economic shocks so far.

However, "Chile's open economy is exposed to substantial external risks as a result of the ongoing COVID-19 outbreak, including a significant deterioration in global demand for Chilean exports, a sharp decline or reversal of capital inflows toward emerging markets, and an abrupt tightening of global financial conditions," she said in a statement.

The IMF has ramped up lending and rolled out a series of new financing tools to help countries deal with the pandemic, which is expected to cause the worst global economic slowdown since the Great Depression.

Chile has had its highest single-day death toll from COVID-19, and the numbers are rising in Peru as well
Chile has had its highest single-day death toll from COVID-19, and the numbers are rising in Peru as well AFP / MARTIN BERNETTI

The backstop should help to boost market confidence and Santiago intends to treat the credit line as "precautionary and temporary," and exit the backstop after 24 months, Georgieva said.

Peru likewise sees the program as precautionary and will consider exiting once the crisis has passed and "the insurance provided by an FCL arrangement would no longer be necessary."

The IMF chief also praised Lima's "very strong policy and institutional frameworks" which, she said, "have helped it achieve impressive macroeconomic outcomes and reduce vulnerabilities."

However, "The COVID-19 shock poses an extraordinary challenge, which is pushing the Peruvian economy into a recession," she said in a statement.

"The authorities have responded decisively by putting in place stringent containment measures and a large policy package to limit the socio-economic fallout."

The country has seen a surge in cases this week, with the death toll topping 4,000.