World

ASEAN+3’s $120b swap
deal put in place

Finance Ministers and central bank governors from ASEAN+3 nations have officially signed an agreement to set up a US$120 billion currency swap fund under the Chiang Mai Initiative Multilateralization (CMIM).

Finance Ministry spokesman Harry Z. Soeratin said in a statement that the signing of the agreement was a follow-up to the preliminary deal by 10 Southeast Asian nations plus China, Japan and South Korea during the ASEAN+3 finance ministers’ meeting in Bali, in May.

The ministers then agreed to promote the CMIM to establish a regional financial arrangement to enhance the existing international facilities.

“The CMIM scheme will definitely strengthen economic capacity in the region in order to face a more challenging global economy in the future,” Harry said.

The scheme offers emergency balance support via bilateral swap arrangements (BSAs) for any member country hit by extreme devaluation and capital flight.

“This will address short-term liquidity difficulties in the region and supplement the existing international financial arrangements,” Harry said.

Under this agreement, any of the 13 countries has the right to swap its currency for US dollars up to a certain amount, starting effectively next year.

“The maximum amount of funds that can be swapped by a country is the fund it has contributed  multiplied by a purchasing multiple number set for the particular nation,” Harry explained.

For example, Japan, which contributes the most to the CMIM with $38.4 billion or 32 percent of the total funds, gets a 0.5 purchasing multiple.

That means Japan can swap its yen up to only $19.2 billion.

Indonesia, with $4.77 billion of contribution to the CMIM (3.97 percent), gets a purchasing multiple of 2.5, meaning that Indonesia can swap rupiah up to $11.93 billion.

Japan, China and South Korea control 80 percent of the pooled funds while the remaining 20 percent are contributed by ASEAN countries.

Five ASEAN nations — Indonesia, Thailand, Malaysia, Singapore, and the Philippines — each contribute $4.77 billion or 3.97 percent. Vietnam pools $1 billion (0.83 percent), Cambodia $120 million (0.1 percent), Myanmar $60 million (0.05 percent), Brunei and the Lao PDR. $30 million (0.02 percent) each.

Apart from this regional swap agreement, Indonesia already signed arrangements with Japan for bilateral currency swap up to 1.5 trillion yen ($16.39 billion) in June.

Indonesia signed a similar arrangement with China in March amounting to $15 billion. (bbs)

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