Finance Secretary Carlos Dominguez 3rd has asked Japan to support higher drawing rights under the currency swap arrangement of the Chiang Mai Initiative Multilateralization (CMIM).
The deal involves the Association of Southeast Asian Nations (Asean) and its trading partners China, Japan and South Korea, or Asean+3.
“On the Asean+3 Finance and Central Bank Process, I would also like to seek the support of Japan for the increase in the International Monetary Fund de-linked portion (IDLP) from 30 percent to 40 percent for the CMIM,” Dominguez was quoted as saying in his speech during the May 5 Finance Ministers and Central Bank Governors’ Meeting between Asean and Japan, which was held at the Pacifico Yokohama Conference Center.
The amount covered is $240 billion, the Department of Finance (DoF) said in a statement on Tuesday.
The Chang Mai Initiative is a financial safety net developed in light of the 1997-1997 financial crisis.
Under the agreement, each Asean member can swap local currency with US dollars based. 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 DoF said higher IDLP for the currency swap mechanism is aimed to further strengthen the region’s financial safety nets in the face of global market uncertainties.
“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.
Since 2012, Asean finance ministers and central bank governors have been discussing how to raise the de-linked portion to 40 percent.
Dominguez noted “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.”
The DoF also noted the joint statement issued after the Asean+3 meeting emphasized on the “significant progress that has been made in working towards the potential increase of the IMF De-Linked Portion.”
The joint statement cited the “revision of the CMIM Operational Guidelines to clarify the activation process of the IMF De-linked Portion of the CMIM, as well as the progress in the preparation of the CMIM Conditionality Framework and the endorsement by the finance and central bank deputies of the “assessment methodology on the increase in the IMF De-linked Portion,” it said.
The finance and central bank officials also said they “look forward to further progress on this issue,” it added.