ASEAN states may revive currency stabilization scheme

ASEAN states may revive currency stabilization scheme

PHUKET, Thailand (Reuter): Southeast Asian finance ministry officials yesterday discussed the possibility of reviving a dormant scheme to stabilize regional currencies tied to the bullish dollar.

Thai Finance Ministry permanent secretary Chatumongkol Sonakul said the Association of Southeast Asian Nations (ASEAN) was considering reviving the now inactive US$200 million ASEAN Swap Arrangement first set up by the regional grouping in 1977.

The senior officials were meeting on this resort island one day ahead of the first one-day ASEAN finance ministers' conference Saturday, which will look at reactivating the dormant swap arrangement.

ASEAN groups Brunei, Malaysia, Indonesia, the Philippines, Singapore, Thailand and Vietnam.

IMF Managing Director Michel Camdessus is due to give a keynote speech on the global economic outlook and regional cooperation here on Saturday.

The currencies of some ASEAN member countries such as Thailand -- whose baht is pegged to a basket of currencies dominated by the dollar -- have been under severe pressure during the dollar's recent bull run.

The Thai baht has come under sporadic but strong selling pressure since early this year by speculators concerned that Thailand may be forced to devalue its currency later this year. The Thai baht is tied 82 percent to the surging U.S. dollar.

Chanchai Musinisakorn, a Thai finance ministry economist, said the officials did not reach a decision on whether or when to revive the currency-stabilizing arrangement, but agreed its size needed to be expanded if it was to be effective.

Any decision to revive the ASEAN instrument would depend on the extent to which its members could tap alternative emergency funds from the International Monetary Fund's New Arrangements to Borrow (NAB), the officials said.

The IMF executive board in January approved the NAB, a $48 billion line of credit to be used in situations that could threaten the stability of the world monetary system.

"ASEAN countries have seen volatile regional capital flows. Our cooperative measures will probably link to IMF's NAB but that does not mean to say that ASEAN members are facing problems," another Thai official said.

Malaysian and Philippine officials added that currency stability would be one of the macroeconomic issues on the agenda for discussion by the ministers.