Asean+3 to raise swap funds to $120bn
Asian finance ministers will consider expanding a currency swap scheme to $120 billion at a meeting this weekend to help protect their economies from the global economic downturn, reported Reuters.
The gathering of the finance chiefs of the 10 members of the Association of Southeast Asian Nations (Asean) plus Japan, China and South Korea on the Thai island of Phuket on Sunday will also discuss how they can cooperate to help the region get through the crisis.
Most are heavily reliant on demand from the United States and the euro zone, which have both slumped into deep recessions following the financial storm that swept worldwide following the dismantling of Wall Street last October.
"The biggest issue will be the economic problems, and we will discuss ideas and mutual measures to deal with," host of the meeting, Thai Finance Minister Korn Chatikavanij, told Reuters.
"We are hoping the meeting will find policies and measures among the group to tackle the problems together," Korn said. Last week, Korn said the meeting would discuss raising the size of the fund to $120 billion from $80 billion.
"This should go well because, from discussions with senior officials, everyone thinks the same way," he said, without elaborating.
The Asean members plus Japan, China and South Korea in May last year pledged to pool bilateral currency swap arrangements under the so-called Chiang Mai Initiative in an $80 billion multilateral fund that could be tapped in emergencies.
Under that agreement, Japan, China and South Korea would provide 80 percent of the funding and Asean countries the rest. On Thursday, Asian Development Bank
President Haruhiko Kuroda urged Asian countries to cooperate on foreign exchange rates and make the currency swap network more effective, suggesting they should be able to raise the size of the swaps without the need for IMF-mandated reform programmes.
The idea behind the swap is to allow countries hit by short-term liquidity shortages to borrow foreign reserves from other countries to absorb selling pressure on their currencies.
Most bilateral swap lines in the network are designed to cope with emergencies such as a balance of payments crisis, and 80 percent of the funding is linked to IMF-mandated programmes.
Korn has said the expanded swap scheme would have to be ratified by regional leaders at a summit from Feb. 27 to March 1 in Hua Hin, Thailand. It could then be implemented by the end of the year.
The ministers are also expected to discuss how to deal with the economic downturn and other forms of cooperation to bolster the region's defence against the global crisis. Asian currencies have fallen this year against the dollar after most suffered steep falls last year.
The Korea won, for example, fell more than 25 percent last year and has fallen another 16 percent so far this year. Exports from Asia have crashed in the last few months as demand fell away in developed countries. Japan, Taiwan, South Korea and Singapore have all reported record falls in exports.
Asean groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, countries with vastly different political and economic systems.
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