ADB sees role for Asian monetary fund

The president of the Asian Development Bank said there may be a role for a new Asian monetary fund to help countries hit by financial problems, but the International Monetary Fund should continue to take the lead in responding to future crises.

The issue is a highly sensitive one for the Manila-based development bank, whose major shareholders are Japan, which is sympathetic to the proposed Asian fund, and the United States, which opposes any moves that could undermine the influence of the IMF or weaken the resolve of Asian countries to pursue the often-tough reforms advocated by the IMF.

"I think the concept (of an Asian fund) is one of the ideas which Asian countries could consider over the medium term," ADB President Tadao Chino said in an interview.

"But I believe the IMF should be the lead agency for handling liquidity crises," Chino added.

Asia's 1997-99 economic crisis raised the question of how the international financial system can best provide short-term financing to countries hit by massive currency swings and withdrawals of foreign investment.

"We need a system that can provide an adequate amount of short-term equity," Chino said.

"If we cannot be assured that the IMF will be able to provide sufficient liquidity in cases of need, multilateral lender banks like the World Bank and ADB, in close collaboration with the IMF, will have to contribute -- just as we did in the Asian crisis in 1997," Chino said.

Chino, however, said proposals for an Asian monetary fund "may not be a very urgent idea at this moment given the ongoing recovery of Asian economies."

The basic idea for an Asian fund was proposed a few months after the outbreak of the 1997 currency crisis.

It was dropped on the insistence of the United States and other Western governments and replaced in late 1998 by Japan's $30 billion Miyazawa fund, which was set up to spur the recovery of crisis-hit Asian countries.

Meanwhile, Chino said the current debate over the future role of multilateral banks will affect the ADB.

Some people have suggested that the World Bank cede its work in Asia entirely to the ADB to help avoid duplicating poverty-alleviation programs.

Noting that Asia is home to nearly 900 million impoverished people, or two-thirds of the world's poor, Chino said the ADB's anti-poverty challenges "demand the fullest participation of many donors."

And the ADB, he said, "strongly supports the continued partnership of the World Bank in Asia."

Late last year, the ADB forged a new strategy to make poverty reduction its "overarching" goal, and recently signed loan agreements with Bangladesh and Mongolia setting specific targets for reducing poverty in areas such as health, nutrition and education.

Similar agreements are expected to be signed with Indonesia and Nepal later this year, while all the ADB's borrowing members are expected to participate in similar programs by the end of 2002, Chino said.