Economic and Social Stabilization, and Pension Reserve Funds



Goals and objectives


Chile has a fiscal policy designated to contribute to macroeconomic stability and to provide public assets, increasing opportunities and social protection for its citizens. As of 2001, the fiscal policy has been guided by the structural balance rule, which aligns current spending with the trend or long-term revenue of the central government. Thus, the effects of cyclical fluctuations in economic activity, the copper price, and other factors of similar nature are excluded. In this way, public spending is dissociated from the cyclical evolution of the revenue track record, helping to avoid drastic adjustments in the face of adverse economic crisis.

In line with the implementation of a fiscal policy ensuring sustainability of public spending over time, a Fiscal Responsibility Law (FRL) was enacted in September 2006. This law created the Pension Reserve Fund (PRF) and empowered the President of the Republic to create the Economic and Social Stabilization Fund (ESSF), which was officially established in February 2007 under Decree with Force of Law (DFL) N° 1 issued by the Ministry of Finance in 2006. The purpose of the PRF is to supplement the financing needs of future pension contingencies. In the case of the ESSF its objectives are to finance potential fiscal deficits and to amortise public debt.

In accordance with the law, contributions to the PRF must be made each year by a minimum amount equivalent to 0.2 per cent of prior year’s GDP. If the actual fiscal surplus exceeds 0.2 per cent of GDP, the PRF receives a contribution up to a maximum of 0.5 per cent of GDP. The law also authorizes the Government to make annual capital contributions to the Central Bank equivalent to the difference between its contributions to the PRF and the effective fiscal surplus, with an upper limit of 0.5 per cent of prior year’s GDP (until 2010). Lastly, the ESSF gets the remainder of previous year’s effective surplus.

Institutional arrangement

The institutional arrangement of the two funds is clearly defined in the FRL and additional regulations. The Minister of Finance is assisted by a Financial Committee on key issues such as the design and analysis of the investment policy. The committee is integrated by academics and professionals with vast experience in economic and financial fields.

To implement the investment policy, the Minister of Finance appointed the Central Bank as fiscal agent to act on his behalf and in the name of the Republic to manage and invest the funds’ resources. The Central Bank must follow specific guidelines issued by the Ministry of Finance.

The Ministry of Finance reports on the situation of the PRF and ESSF to the Chilean Congress by publishing monthly and quarterly reports.

Investment policy and size

Current investment policy for each fund includes only short-term and low-risk financial instruments. In fact, 30 per cent of the portfolio is invested in money market instruments, 66.5 per cent in sovereign bonds, and 3.5 per cent in inflation-indexed sovereign bonds.


Monthly, quarterly and annual reports are prepared by the Ministry of Finance and made available to the public through its website. The annual report prepared by the Financial Committee is also available on this website. Most of these reports are in the process or already published in English.

Contact Details

Ministerio de Hacienda, Teatinos 120, Piso 11

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