East Asian countries will create a new US$120 billion currency swap fund in March to ensure sufficient dollar liquidity in the event of a financial crisis, officials said yesterday.
The fund will be launched on March 24, South Korea’s finance ministry said in a statement.
The new pact is an upgrade of the Chiang Mai Initiative created in 2000 by five ASEAN nations — Thailand, Malaysia, Indonesia, Singapore and the Philippines — as well as by Japan, China and South Korea.
The deal will help Asian nations jointly deal with external currency speculation and allow financially troubled countries to borrow foreign currency from others in the group, the ministry said.
It is designed to address “balance of payment and short-term liquidity difficulties in the region, and to supplement existing international financial arrangements,” it said.
Currently, South Korea, China, Japan and five of the 10 ASEAN members have bilateral currency swap agreements.
In the future the other five members — Vietnam, Cambodia, Laos, Brunei and Myanmar — will be able to use part of the fund if they face short-term liquidity difficulties.
The size of the fund will be expanded to US$120 billion from US$78 billion, the ministry said.
Japan and China including Hong Kong will contribute US$38.4 billion each, while South Korea will chip in US$19.2 billion or 16 percent.
The remaining US$24 billion will be shared by the ASEAN member countries.
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