IMF: Asian Bond Fund A Positive Step But Details Unclear
IMF: Asian Bond Fund A Positive Step But Details Unclear
Dow Jones
Bangkok
The International Monetary Fund (IMF) on Tuesday welcomed the
creation of the Asian Bond Fund as a step toward greater regional
cooperation but noted that there were still several uncertainties
regarding implementation and future development.
"It's a good first step to the extent that it succeeds in
strengthening the regional bond market, but it's unclear how it
will develop from what we have now," Alessandro Zanello, IMF's
division chief for the Asia Pacific Department, said at the end
of a mission to Thailand.
Asia-Pacific central banks on Monday announced plans to pool
US$1 billion out of their foreign reserves to buy Asian
government bonds in a bid to promote the region's bond markets
and reduce dependence on foreign capital.
The group of the region's central banks known as Executives'
Meeting of East Asia and Pacific Central Banks said the fund will
buy "a basket of U.S. dollar-denominated bonds issued by Asian
sovereign and quasi-sovereign issuers" from China, Hong Kong,
Indonesia, South Korea, Malaysia, the Philippines, Singapore and
Thailand.
"The view is to create and enforce the capital markets within
the region," Zanello said. "How they will achieve that still
remains to be seen and a lot of details, complex facts, (and)
issues remain to be resolved."
He said the fund's appeal lies in the idea that it will help
recycle a pool of reserves from central banks to keep them within
the region instead of investing them in U.S. Treasurys.
"But if you look down the line in life of the Asian Bond Fund,
you see a system where perhaps an Asian bond will come to life, a
security backed by a basket of other high quality bonds. Nobody
really knows how that will happen and how soon."
The central banks said they will consider buying bonds
denominated in regional currencies once the fund is set up to
further broaden and deepen bond markets in the region.
Thai Prime Minister Thaksin Shinawatra on Monday said the IMF
has agreed to include funds invested in Asian dollar-denominated
bonds under the Asian Bond Fund in overall central bank foreign
reserves but it remains unclear whether local currency bonds
would also qualify as reserves.
"It's a technical issue which assets should be counted as
reserves," Zanello said. "The general rule of thumb is that you
need something that is liquid and marketable."