Asean+3 agree on new financing facility to boost resilience

DEPUTIES of the Asean+3 group of nations agreed on Thursday (Dec 7) to set up a new regional lending facility to respond to emergencies in the region amid rising uncertainty over a global economic slowdown and elevated US interest rates.

The Asean+3 grouping tags on Japan, China and South Korea to the Association of Southeast Asian Nations. It is co-chaired by Japan and Indonesia for this year.

“The deputies agreed on the establishment of the Rapid Financing Facility (RFF)...and in principle its modalities as below for endorsement by the ministers and governors in May 2024,” the group said in a statement.

“The deputies further agreed to discuss concomitantly ways to incorporate freely usable currencies for the RFF,” read the statement released after the group’s two-day meeting in the city of Kanazawa, northwest of Tokyo.

The new facility was meant to complement the existing webs of multilateral currency swaps known as Chiang Mai Initiative Multilateralisation (CMIM) which can be used during times of crisis.

It will be placed under the umbrella of CMIM, the deputies said in the statement.

“CMIM was created by all of us for the sake of financial stability,” Masato Kanda, Japan’s vice-minister of finance for international affairs, told reporters.

“To our regret, though, it was never mobilised even amid Covid-19.”

“You never know when natural disasters or pandemics may occur. Member economies are craving for a facility that would meet the demand for balance of payments in such a situation.”

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Japan is keen to realise a facility that enhances the use of existing currency swap lines, which should be more accessible, allowing members to tap funds in emergencies.

The Asean+3 group created the currency swap lines in 2000, following the Asian financial crisis of the late 1990s, and revamped it into a multilateral network in 2010 to help each other forestall or combat sharp capital outflows.

While Asian policymakers stress their countries have sufficient foreign reserves and buffers to fend off another crisis, they also see scope for improvements to arrangements.