RP, China near accord on $1-B currency swap

As more countries are exiting from the tutelage of the International Monetary Fund (IMF), Asian countries are eyeing a bigger part in stabilizing regional currencies by allowing countries like the Philippines greater access to the funds under the so-called Chang Mai Agreement.

This developed as the Philippines and China entered the final stages of negotiations for the $1-billion bilateral currency swap agreement under the Chang Mai facility, inching the agreement towards completion within the year.

The increase in bilateral cooperation between Asian countries especially in currency stabilization has opened discussions on the declining importance of the IMF in the region, ushering initiatives to set up a regional counterpart, the proposed Asian Monetary Fund.

Although Asian finance officials are careful not to play-up the IMF’s declining role in the region, there are moves to expand access to the Chang Mai bilateral currency swap agreements as an alternative to the IMF for funds during times of currency upheaval.

Finance Undersecretary Juanita Amatong revealed yesterday that the recent Asean Finance Ministers Meeting (AFMM) led to these initiatives, taking into consideration the fact that more and more Asian countries were emerging from decades of IMF tutelage.

According to Amatong, there were discussions on the possibility of raising the availment ceiling for countries that were no longer under any IMF program from 10 percent to as much as 20 percent.

Under the Chang Mai Agreement, the parties had agreed that Asian countries could access the bilateral swaps up to 100 percent if they were under an IMF program, to ensure that the country would stick to economic programs prescribed by the IMF.

However, Amatong said using the IMF as a trigger might no longer be relevant especially since more and more countries in the region are no longer under any IMF program.

The Philippines, in particular, has been out of the IMF tutelage since 1999 and so has not been able to fully access the Chang Mai facility since it has no IMF program to trigger 100 percent availment.

"Initially, there was discussion to increase the availment to 20 percent," Amatong said. "With many countries exiting from the IMF, that requirement might be dropped altogether although the discussions did not go that far."

As a safeguard, Amatong said it was possible for the Chang Mai parties to do the monitoring themselves although this would require a more formal structure for the facility.

The Philippines itself has a pending bilateral swap agreement with China and has already completed two agreements with Japan and South Korea.

Amatong said the proposed AMF itself was not discussed during the AFMM meeting but it was a proposal that would continue to gain ground as more countries emerge from IMF tutelage.

Following the 1997 currency crisis that sent Asian economies crashing, the IMF’s role has been repeatedly questioned as well as its ability to respond quickly, let alone anticipate similar crises in the future.

The IMF has brushed off suggestions that it should be replaced with the proposed AMF saying that there was no need to duplicate efforts.