ASEAN raises its currency swap deal to US$1 billion
ASEAN raises its currency swap deal to US$1 billion
KUALA LUMPUR (Reuters): Southeast Asian nations have agreed to increase a two-tier currency swap scheme supporting economies facing balance of payments problems to US$1 billion from $200 million, central bank officials said on Monday.
Senior finance ministry and central bank officials from members states of the Association of Southeast Asian Nations (ASEAN) agreed in Brunei last week to strengthen the currency safety net, central bank officials said in Kuala Lumpur.
"We have agreed on setting up a $1.0 billion (line) and hope to sign the agreement at the IMF's Prague meeting in September," a senior Southeast Asian central bank official who asked not to be identified told Reuters.
The official spoke on the sidelines of a regional conference in Kuala Lumpur.
The first tier consisting of ASEAN's six founding members -- Brunei, Singapore, Indonesia, Thailand, Malaysia and the Philippines -- will contribute 80 percent of the total funds.
The remaining 20 percent will be contributed by ASEAN's newer members -- Cambodia, Laos, Myanmar and Vietnam.
Officials said bilateral pacts between the top five Asean nations and Japan, China and South Korea would also be signed later this year. The pacts are designed to offer similar currency swap arrangements but on a bilateral basis.
Officials said 15 bilateral pacts between the top five Asean nations and their big north Asian neighbors Japan, China and South Korea would be signed later this year.
Japan already has a $2.5 billion pact with Malaysia.
"The terms and clauses of the bilateral will be similar in nature as far as the interest rate and maturity are concerned," the official said.
Malaysia's central bank, Bank Negara, took over as the agent bank of the ASEAN scheme from Bank Indonesia earlier this month, and will serve in that capacity for the next year, officials said.
The currency safety net, which many analysts see as laying the foundation of an Asian monetary bloc, was first mooted at a meeting of ASEAN finance ministers in Brunei in March after they shelved plans to create an Asian Monetary Fund.
The plan to extend the existing swap arrangement was given the go-ahead by finance ministers from ASEAN, Japan, China and South Korea during the annual meeting of the Asian Development Bank in Chiang Mai, Thailand, in May.
The idea is that a country that finds itself short of foreign reserves can borrow from its partners to absorb selling pressure on its currency without having to resort, as in 1997, to a damaging devaluation.
"I think it is a good move though somewhat limited," Anwar Nasution, acting governor of the Indonesian central bank, told Reuters in Kuala Lumpur.
"We had agreed on a program of regional economic cooperation in Chaing Mai. I think we need that."
The move by Japan, China and South Korea to work more closely on sharing information and monitoring economic and financial trends is seen as a stepping stone towards an Asian surveillance process to underpin the swap scheme.
Officials are hopeful of getting the backing of international multilateral institutions, whose support for a regional fund has been lukewarm.
The United States fears a separate Asian financial facility could undermine the IMF and weaken Asian countries' willingness to embrace 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 IMF-style reforms.