Korea, China and Japan and 10 Southeast Asian countries are poised to become more aggressive in their joint action in response to possible currency volatility.
The ASEAN Plus Three group plans to endorse an increase in their access to a regional fund during the meeting of finance ministers and central bank governors, slated for May 3 in Manila, according to Bank of Korea officials.
Participants are expected to approve a proposal approved by their deputies who earlier agreed to double the size of the Chiang Mai Initiative Multilateralization fund to $240 billion.
Among the $240 billion won in funding, a member country has been allowed to use up to $24 billion in the event of a foreign exchange crisis.
The 13 Asian countries are considering raising the ceiling by 300 percent to $96 billion during this gathering, a Japanese newspaper reported.
But BOK officials declined to comment on the exact figure of increase. They neither confirmed nor denied the news report.
A BOK official said the level of increase was still under discussion and would likely be finalized at the ASEAN Plus Three meeting of finance and central bank chiefs.
The Chiang Mai initiative fund, which was set up soon after the 1997 crisis, was expanded into a multilateral fund in 2010 from what was a web of bilateral currency swap agreements.
In March, the ASEAN Plus Three agreed to double their reserve pool to $240 billion to better absorb shocks against possible crises from Europe
The deal, designed to buffer the region from external shocks, allows member countries to reduce their foreign exchange reserves. It works as a safety net should members experience liquidity shortages from fast outflow of capital. The ASEAN Plus Three up to now had 20 percent of the $120 billion to tap without linkage to loans by the International Monetary Fund.
The ASEAN Plus Three are also expected to raise the portion of available fund independent of IMF in the coming months to prevent possible shocks from the European debt crisis.
Rapid inflow of capital has been a shared concern among emerging markets as Europe and the U.S. have been keeping ultra-loose monetary policies.
The proposed increase in CMI fund will be a fraction of the reserves held by Asian nations, holder of more than half of global reserves. China has accumulated more than $6.5 trillion won of reserves, followed by Japan who has about $1.2 trillion won.
Korea, the world’s seventh-largest holder of foreign exchange reserves, has more than $315 billion set aside for crisis prevention.
By Kim Yon-se (
kys@heraldcorp.com)
