ASEAN agrees to expand currency swaps
ASEAN agrees to expand currency swaps
BANDAR SERI BEGAWAN (Reuters): Southeast Asian finance
ministers on Sunday shelved a plan to create a regional crisis
fund and agreed instead to expand an existing currency swap deal
to support economies facing balance of payments woes.
"A proposal was made that the existing arrangements within the
swap agreement to meet short-term balance of payments problems
might be expanded," Singapore Finance Minister Richard Hu told a
news conference.
"This will be one of the ways in which short-term balance of
payments facility could be arranged," he said.
Finance officials from members of the Association of Southeast
Asian Nations (ASEAN), meeting for two days in this oil-rich
sultanate, had said earlier the regional grouping was expected to
unveil a watered-down version of a proposed regional financing
fund.
The fund had been proposed as a way to prevent a recurrence of
the financial crisis which hit Asia beginning in 1997, causing
wrenching economic and social change in many countries of the
region.
But ASEAN finance ministers agreed instead to expand the
existing currency swap arrangement, totaling a meager US$200
million, among their central banks and to include Japan, China
and South Korea to enlarge the kitty.
Hu said the response of the three East Asian nations to an
expanded currency swap arrangement was positive.
But he added that details were still to be worked out.
ASEAN's international reserves, combined with those of
economic powerhouses China, Korea and Japan, could be used to
bail out economies facing balance of payments crises.
A joint ministerial statement released at the end of the two-
day meeting said: "Recognizing the need for the availability of
financial resources in times of crisis, they agreed to conduct a
study on the modalities and mechanisms for a regional financing
arrangement to supplement the existing international facilities."
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Officials said the International Monetary Fund (IMF), which
made presentations at the weekend meeting, was lukewarm to the
proposal of a separate Asian fund.
ASEAN secretary general Rodolfo Certeza Severino told
reporters there were divisions within the regional grouping
itself on the issue.
But Singapore's Hu did not rule out the ASEAN finance
ministers re-opening the two-year-old debate over the proposed
Asian Monetary Fund at their next meeting in Thailand's resort
town of Chiang Mai.
Officials said Japan has to provide the initiative for the
controversial AMF, which has been opposed by the United States
and other Western nations.
The U.S. fears a separate Asian financial facility could
undermine the IMF and weaken Asian countries' willingness to
embrace tough reforms advocated by the IMF.
The IMF extended large fiscal and monetary bail-out packages
to Thailand, Indonesia and South Korea in the wake of the Asian
economic crisis.
But Malaysia, a strong proponent of the regional financial
facility, has staunchly opposed the painful economic reforms
advocated by the IMF as part of the rescue packages.
The joint statement said the ministers agreed to set up a
regional monitoring mechanism, as part of an early-warning
system, to keep a close eye on capital flows in ASEAN.
"A study will also be conducted to look at measures that can
mitigate the adverse impact of a sudden shift in capital flows,"
it said. The study will be finished by end-April.
The ministers pledged to sustain the fledgling economic
recovery and achieve the projected regional growth rate of 4.5-
5.0 percent in 2000.
"Our aim is to develop and deepen ASEAN's capital markets,
particularly bond markets. This would provide a better variety of
financing instruments and facilitate better risk management," the
joint statement said.