From Chiang Mai with love
THE $120-billion Asian liquidity booster known as the Chiang Mai Initiative (CMI)has morphed into a multilateral agreement from the bilateral, and is now governed by a single pact instead of several.
In a joint statement, finance ministers and central-bank governors of the Associaiton of Southeast Asian Nations plus 3 (Asean+ 3) announced on Wednesday the mutation of the CMI’s multilateral nature takes effect that day.
In the event of a liquidity crunch, a country in the initiative can draw a percentage of its contribution. China and Hong Kong together, plus Korea and Japan, contributed a total $96 billion to the pool, while the 10 Asean members contributed an aggregate $24 billion.
This means any member with a need of foreign currency may tap from the communal pool for balance-of-payments support as and when necessary. The resource was planned after the region plunged into the 1997 financial crisis, but the first steps were done bilaterally.
A press statement of the CMI participants said, “Each participant is entitled, in accordance with the procedures and conditions set out in the agreement, to swap its local currency with US dollars for an amount up to its contribution multiplied by its purchasing multiplier.”
