Finance Secretary Carlos G. Dominguez III has asked Japan to back an Asean
proposal allowing the 10 plus 3-nation consortium to obtain supplementary financing from the International Monetary Fund (IMF) without each having to submit to a formal IMF
borrowing program.
This so-called delinked portion of the $240-billion currency-swap mechanism known as the Chiang Mai Initiative Multilateralization (CMIM) allows member-countries to borrow as much as 40 percent of their maximum borrowing amount without triggering highly restrictive
IMF covenants.
The CMIM was established in the wake of region-wide, as well as global financial crises that left balance of payments-challenged countries unable to access foreign-exchange resources to address trade or loan obligations.
According to the Department of Finance, the CMIM currency-swap mechanism binds the finance ministries and central banks of the Asean+3 nations as China, Japan and South Korea economies to a swap mechanism for short-term liquidity needs.
“On the Asean+3 finance and central bank process, I would also like to seek the support of Japan for the increase in the IMF delinked portion from 30 percent to 40 percent for the CMIM,” Dominguez said in his speech at the Finance Ministers and Central Bank Governors’ Meeting between the Asean and Japan, held in Yokohama, Japan.
Under the agreement, each Asean member can swap its local currency with US dollars based on certain conditions.
The size of the CMIM doubled from $120 billion to $240 billion, and the IMF-delinked portion (IDLP) was raised from 10 percent to 30 percent, effectively allowing members to draw up to 30 percent of their maximum borrowing amount without requiring IMF lending conditions.
The finance ministers and central bank governors of the Asean have been discussing the proposal since 2012 to raise the delinked portion to 40 percent.
Dominguez said Japan remains the Philippines’s biggest aid provider and a major source of investments and remittance from overseas Filipino workers.
“This will strengthen the region’s financial safety nets, project a positive signal in the global markets and enhance the credibility of the CMIM.
The increase in the IMF-delinked portion will also minimize the downside risks from the normalization of US monetary policy and the Brexit, among other external factors,” he added.
In a statement issued after meeting with Asean finance ministers and central bank governors, Japan proposed to set up a yen-based fund that will provide up to $40 billion or
approximately ¥4 trillion, to Asean economies under a bilateral currency swap arrangement.
Dominguez also welcomed Japan’s Expanded Partnership for Quality Infrastructure initiative, which aims to provide financing of approximately $200 billion over the next five years tfor infrastructure projects across the globe.