Asean hikes swap facility to $1 billion

The country has forged a swap arrangement with other members of the Association of Southeast Asian Nations (ASEAN) that enables it to avail itself of emergency liquidity assistance of as much as $300 million.

Finance Secretary Alberto Romulo, who recently attended the fifth ASEAN Finance Ministers Meeting in Kuala Lumpur, Malaysia, said the ASEAN Swap Arrangement (ASA) is part of the Chiang Mai Initiatives (CMI) adopted by member-countries to cope with the regional financial crisis that hit most countries in the region in 1997.

Romulo said a new agreement was reached during the meeting in Malaysia wherein the original swap fund of $200 million was expanded to $1 billion.

"The swap mechanism is even more important now given the perceived slowdown in the economies of the US and Japan," major trading partners of the Philippines, Romulo said.

Romulo said the country put in $150 million into the common fund and, in return, it can avail itself of as much as $300 million or twice its original contribution whenever necessary.

The CMI also includes a parallel agreement entitling ASEAN countries to independently pursue bilateral liquidity or loan arrangements with Japan, China or South Korea.

"Countries that need more can get from the swap fund while pursuing additional loans from the three countries on a bilateral basis," Romulo explained.

The finance chief said these facilities represent supplementary liquidity sources from other initiatives offered by the World Bank and the International Monetary Fund.

To ensure that member countries availing themselves of the liquidity assistance keep their payment schedules on track, ASEAN members will undergo a "peer surveillance review," a mechanism that allows neighbor economies to monitor the performance of its neighbors and warn them of potential risks or danger to prevent their economies from collapsing.