IMF, ADB and WB to support Asian monetary fund

IMF, ADB and WB to support Asian monetary fund

MANILA (AFP): International financial institutions have
expressed support for a proposed Asian monetary fund to cushion
crisis-ridden regional economies, despite earlier reservations, a
Philippine official said yesterday.

The International Monetary Fund (IMF), the Asian Development
Bank (ADB) and the World Bank have expressed support for the
regional initiative, Finance Secretary Roberto de Ocampo said.

He said all three institutions would attend a meeting of vice
finance ministers from Japan and the Association of Southeast
Asian Nations (ASEAN), to be held in Manila Nov. 18-19, to
discuss the creation of the fund.

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

The Asian monetary fund has been proposed by Southeast Asian
nations and Japan to supplement the IMF and alleviate the effects
of economic problems such as the currency crisis sweeping the
region.

Regional currency and stock markets have been beset by turmoil
since Thailand effectively devalued its currency, the baht, on
July 2.

The IMF has previously warned against the proposed Asian
bailout fund, saying it could undercut conditions attached to its
economic assistance programs.

However, de Ocampo said the IMF had expressed support for the
fund after being informed that it would be used to complement IMF
facilities.

He added that the IMF had written to finance ministers of
Southeast Asia to inform them of its support.

De Ocampo also released a letter from IMF first deputy
managing director Stanley Fisher outlining the principles the IMF
proposed to govern the establishment of the fund.

In the letter, Fisher said it was "desirable to set up a
regional surveillance group, to meet regularly" to watch for any
impending crisis. The IMF Tokyo office could serve as the
secretariat of such a group.

Although the IMF and other multilateral agencies would
normally finance adjustment programs, a large-scale crisis would
require supplemental funding and this could come from "a
cooperative financing initiative," the letter said.

This would include getting legislative authority from each
country to contribute to a fund in support of an IMF program for
any besieged member of the group, the letter added.

The members of the group would also be decided by the
countries concerned, the IMF added.

The letter, which was sent last month, conceded that there
were "several variants of these principles" which could be
applied.

De Ocampo said the meeting in Manila would take up the IMF's
proposals as well as other details such as who will contribute to
the fund and how much as well as discussing the conditions in
which a country could draw on the fund.

Also at the meeting, the World Bank will submit a paper on how
to deal with surges in short-term capital that can be easily
withdrawn, destabilizing developing economies.

De Ocampo cited Chile's system in which portfolio investors
were required to make a deposit with its central bank to ensure
their investments will not be pulled out of the country for a
certain period.