Japan urged to back ASEAN proposal for higher IMF currency swap

May 16, 2017

Finance Secretary Carlos Dominguez III has asked Japan to back an Association of Southeast Asian Nations (ASEAN) proposal to raise the International Monetary Fund (IMF)'s de-linked portion for its $240-billion currency swap mechanism from 30 percent to 40 percent to strengthen the region’s financial safety nets in the face of global market uncertainties. This proposal pertains to the Chiang Mai Initiative Multilateralization (CMIM) 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, the finance department said Tuesday in a statement. Under the agreement, each ASEAN member 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, who sought Japan’s support for the proposal during the recently concluded Finance Ministers and Central Bank Governors’ Meeting between ASEAN and Japan, also cited the decades-old “symbiotic relationship” between ASEAN and Japan. The meeting was attended by finance and central bank officials from the Philippines, Japan, Indonesia, Singapore, Brunei, Malaysia, Lao PDR, Myanmar, Cambodia and Vietnam. He likewise noted that Japan remains the Philippines’ biggest aid provider and a  major source of investments and remittance from overseas Filipino workers. “On the ASEAN +3 Finance and Central Bank Process, I would also like to seek the support of Japan for the increase in the IMF de-linked portion (IDLP) from 30 percent to 40 percent for the CMIM," said Dominguez in his speech at the Finance Ministers and Central Bank Governors' Meeting between ASEAN and Japan, which was held at the Pacifico Yokohama Conference Center. "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.”