ASEAN ministers to join hands to stabilize weak currencies
ASEAN ministers to join hands to stabilize weak currencies
KUALA LUMPUR (Reuters): Southeast Asian finance ministers meeting this weekend will pledge to close ranks to stabilize their wobbly currencies in the face of a declining yen and global slowdown.
Thai Finance Minister Somkid Jatusripitak, who was one of the first to arrive on Friday in Kuala Lumpur, said the ministers will also search for a consensus to create a currency safety net to ward off future attacks on Asian currencies.
"We are going to have cooperation among ASEAN nations to stabilize regional currencies," Somkid told reporters ahead of the 10-member Association of Southeast Asian Nations finance ministers meeting on Saturday and Sunday.
Somkid said the Thai baht had been dragged down by falling regional currencies but there was no cause for alarm. The baht hit a 37 month low of 45.72 on Friday.
"I don't think it will be a serious one because our fundamentals are still strong," he said.
Top Japanese finance officials on Thursday propped up the yen from 30-month lows by saying the slide was rapid and authorities would intervene if needed -- but it fell over one percent on Friday on disappointment with a government economic package.
The Southeast Asian ministers hope to extract assurances from Japan that it won't let the yen fall too far, as their currencies are being dragged down to multi-year lows in its wake.
Indonesian Finance Minister Prijadi Praptosuhardjo backed his Thai counterpart, saying a web of Asian currencies would provide insurance against a future currency crisis.
The currency swap plan envisages linking the international reserves of ASEAN countries -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam -- with those of China, South Korea and Japan.
Senior finance officials meeting ahead of the weekend conference said the regional bloc was yet to agree on a role for the International Monetary Fund in the Asian currency swap plan.
The initiative envisages tying disbursements under the scheme to reforms supervised by the Washington-based IMF, a proposal which host Malaysia staunchly objects to.
Thailand threw its support behind Malaysia on Friday. Asked if there was any scope for IMF's participation in the bilateral currency swap plan, Sathit Limpongpan, a senior Thai finance ministry said: "I don't think so."
During the 1997/98 Asian financial crisis, Thailand opted to take a IMF bailout package while Malaysia refused, instead introducing capital controls and a currency peg.
Potential creditor nations have stressed that the swaps would not be activated until IMF programs were already in place or were at the point of being finalized.
Only in cases where a member country was deemed to be suffering a passing cash crunch could the swap deal be triggered without a link to an IMF program. In such a case, a country could borrow no more than up to 10 percent of the swap line.
The officials set-up a panel to iron out differences and propose alternatives to the ministers.
"We plan to set up a special committee which will submit its report here tomorrow," Noor Fuad, secretary general of Indonesia's Finance Ministry, told reporters.
Malaysian officials say ASEAN, the Asian Development Bank and Southeast Central Bank Research and Training Center can be used as alternative institutions to the IMF.
An senior IMF official said on Thursday that while it supports the regional currency swap plan, the arrangement should be consistent with the existing global framework.