FINANCE Secretary Carlos Dominguez III has asked Japan to support a proposal of the Association of Southeast Asian Nations to raise the International Monetary Fund’s de-linked portion for its $240-billion currency swap mechanism from 30 percent to 40 percent.
Dominguez, in his speech at the recent Finance Ministers and Central Bank Governors’ Meeting between Asean and Japan held at the Pacifico Yokohama Conference Center, sought the support to further strengthen the region’s financial safety nets in the face of global market uncertainties.
The proposal pertains to the Chiang Mai Initiative Multilateralization mechanism, which is a currency swap agreement among the finance ministries and central banks of the Asean + 3 (China, Japan and South Korea) economies that aims to provide financial support for short-term liquidity problems.
Under the agreement, each Asean mmember can swap its local currency with US dollars based on certain conditions. The size of the CMIM doubled from $120 billion to $240 billion and the IMF-delinked portion increased from 10 percent to 30 percent, which means members can now draw up to 30 percent of their maximum borrowing amount without requiring IMF lending conditions.
The Asean finance ministers and central bank governors have been discussing since 2012 to raise the de-linked portion to 40 percent. Dominguez also cited the decades-old “symbiotic relationship” between Asean and Japan. He noted that Japan remained the Philippines’ biggest aid provider and a major source of investments and remittance from overseas Filipino workers.
The meeting was attended by finance and central bank officials from the Philippines, Japan, Indonesia, Singapore, Brunei, Malaysia, Lao PDR, Myanmar, Cambodia and Vietnam.
“This will strengthen the region’s financial safety nets, project a positive signal in the global markets, and enhance the credibility of the CMIM,” Dominguez said.
He said “the increase in the IMF de-linked portion will also minimize the downside risks from the normalization of US monetary policy and the Brexit, among other external factors.”