ASEAN+3 putting up fund to tap during emergencies, crises

TBILISI — The Association of Southeast Asian Nations and the neighboring economies of China, Japan and Korea (ASEAN+3) have agreed to establish a new financing facility that members can tap in times of emergency shocks and other crises.

Finance ministers and central bank governors of the ASEAN+3 held its 27th meeting on the sidelines of the 57th Asian Development Bank meeting here where they endorsed the creation of the Rapid Financing Facility (RFF).

This will include the incorporation of eligible freely usable currencies (FUCs) as its currencies of choice as a new facility under the Chiang Mai Initiative Multilateralization (CMIM).

“This will enable members to access emergency financing during periods of urgent balance of payments needs, possibly arising from sudden exogenous shocks including pandemics and natural disasters,” the ASEAN+3 joint statement said.

As such, the facility will be extended without conditions in case of crises with ASEAN+3 states expected to work on relevant regulations to implement the facility next year.

The CMIM is a multilateral arrangement among ASEAN+3 with a $240 billion contribution size that can be tapped via currency swap deals during crises in the region.

According to the ASEAN+3, the Executive Level Decision Making Body will confirm that the urgent balance of payments difficulties have stemmed from sudden exogenous shocks and are not attributable to weak economic fundamentals or domestic policy management before it approves any financing.

Meanwhile, finance ministers are in agreement that the region will grow at a faster pace of 4.5 percent this year from the 2023 expansion of 4.3 percent driven by resilient domestic demand, recovering investment and firm consumer spending.

Export recovery, driven by global semiconductor upcycle, robust consumer spending on goods in major economies, continued tourism recovery and sustained demand for modern services are also expected to boost growth.

The ASEAN+3 region is seen contributing around 45 percent of global growth this year until 2030.

Further, inflation in the region is projected to moderate but governments warned that downside risks remain.

These include geopolitical tensions, spike in global commodity prices and transportation costs, slowdown in the growth of major trading partners and heightened foreign exchange market volatility.

Nonetheless, ASEAN+3 said the positive outlook should provide an opportunity for the region to rebuild policy space lost during the pandemic.

“The priority for fiscal policy across the region is to restore fiscal buffers and strengthen fiscal sustainability while providing targeted support for the economy,” ASEAN+3 said.

“We view that monetary policy should remain relatively tight as necessary in many member economies to ensure inflation expectations are firmly anchored in view of the continued upside risks to inflation,” they said.