ASEAN countries and Japan, the Republic of Korea and China have decided to double their foreign exchange reserve pool, set up to defend their currencies in times of turmoil following the Chiang Mai Initiative, from 120 billion USD to 240 billion USD.

UN economists and the International Monetary Fund said on March 28 that the decision aims to reduce Asian reliance on traditional backstops such as the IMF, as Europe saps resources.

The proposed increase in the Chiang Mai Initiative will be a fraction of the foreign currency holdings that Asian nations have accumulated, totalling more than 6.5 trillion USD.

The pool also widens access to reserves that will allow ASEAN countries to defend their currencies in times of turmoil.

According to economists, there are two reasons for a larger reserve pool.

The first is the widespread impact of the economic crisis in the region, which may weaken the regional financial security network. The second is that amidst economic crises, Asia continues to lead the world in terms of economic growth. As a result, regional security systems need to be strengthened.

The Chiang Mai Initiative supplements existing international financial arrangements through currency swap transactions among member nations if needed, or can act as a backstop for those facing balance of payments or short-term liquidity difficulties. The swap agreements have not yet been tapped.-VNA