ASEAN+3 move step closer to FX swap plan: IMF

ASEAN+3 move step closer to FX swap plan: IMF

TOKYO (Reuters): Asian nations took a step towards realizing an ambitious currency swap plan at the weekend by agreeing to involve the International Monetary Fund in the scheme, a senior IMF official said on Monday.

Kunio Saito, the IMF director for Asia and the Pacific, told Reuters in an interview on Monday that the consensus reached by the 10-member Association of Southeast Asian Nations (ASEAN) should promote talks on finalizing bilateral swap agreements (BSA) -- seen as an important first stage for the scheme.

"In my personal opinion, the (ASEAN) statement took care of some dissatisfaction felt among Asian nations over the scheme. I think it will make it easier for them to promote negotiations on bilateral swap agreements," Saito said.

The plan aims to reduce volatility in currency markets by linking ASEAN nations' foreign reserves with the three other regional economic powerhouses -- China, Japan and South Korea.

Over the weekend, ASEAN finance ministers agreed that the planned scheme would aim to complement and supplement IMF lending facilities. The plan has been bogged down by differences over its implementation and the question of the IMF's role.

Malaysia, which hosted the weekend ASEAN meeting, has been especially unhappy at proposals to tie disbursements under the swaps scheme to IMF-monitored reforms.

Saito said the IMF would support Asia's recent efforts to promote regional cooperation with the currency swap plan, adding that the fund also wanted Asian nations to cooperate with the Washington-based institution on the matter.

"Swap arrangements would be related to the job of the IMF and we want Asian nations to set up the arrangements while cooperating with the IMF."

While ASEAN finance ministers said that there was consensus that the bilateral swap agreements would complement and supplement IMF facilities, their weekend statement left it up to individual countries to work out the details.

"To be beneficial to the individual ASEAN countries, the terms and modalities of the BSA should take into account the different economic fundamentals, specific circumstances and financing needs of individual countries," the statement said.

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

While the ASEAN countries favored a loose case-by-case approach to agreeing disbursement, the likely lender nations from northeast Asia were less flexible.

Japan, the driving force behind the plan, has stressed that the linkage to the IMF was necessary for the scheme and hopes to sign as many bilateral agreements as possible before the ASEAN+3 group meets on the sidelines of the Asian Development Bank's annual meeting in Honolulu next month.

Japanese officials have said Japan has made most progress with Thailand so far, adding that they hope to announce the signing before the Honolulu meeting, probably later this month.

Japan's top financial diplomat, Haruhiko Kuroda, last week met Thai Finance Minister Somkid Jatusripitak in Bangkok to put the final touches to a bilateral currency swap deal.

Saito joined a growing list of senior IMF officials warning the fund would downgrade its growth forecast in its next World Economic Outlook due out later this month.

Saito said he expected growth in Southeast Asian economies to vary between 3.0-6.0 percent this year, compared with a previous forecast of above six percent.

But he added that their growth would pick up in the second half of this year because the current inventory adjustment for information technology-related products would end and the benefits of a recent series of credit easings in Japan and the United States would appear later this year.

But although the IMF will downgrade its global economic forecasts, "that does not mean there is a global recession and nobody now thinks there will be another Asian crisis," he said.