ASEAN countries and Japan, the Republic of Korea and China have decidedto double their foreign exchange reserve pool, set up to defend theircurrencies in times of turmoil following the Chiang Mai Initiative, from120 billion USD to 240 billion USD.
UN economists andthe International Monetary Fund said on March 28 that the decision aimsto reduce Asian reliance on traditional backstops such as the IMF, asEurope saps resources.
The proposed increase in the Chiang MaiInitiative will be a fraction of the foreign currency holdings thatAsian 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 theregion, which may weaken the regional financial security network. Thesecond is that amidst economic crises, Asia continues to lead theworld in terms of economic growth. As a result, regional securitysystems need to be strengthened.
The Chiang Mai Initiativesupplements existing international financial arrangements throughcurrency swap transactions among member nations if needed, or can act asa backstop for those facing balance of payments or short-term liquiditydifficulties. The swap agreements have not yet been tapped.-VNA
UN economists andthe International Monetary Fund said on March 28 that the decision aimsto reduce Asian reliance on traditional backstops such as the IMF, asEurope saps resources.
The proposed increase in the Chiang MaiInitiative will be a fraction of the foreign currency holdings thatAsian 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 theregion, which may weaken the regional financial security network. Thesecond is that amidst economic crises, Asia continues to lead theworld in terms of economic growth. As a result, regional securitysystems need to be strengthened.
The Chiang Mai Initiativesupplements existing international financial arrangements throughcurrency swap transactions among member nations if needed, or can act asa backstop for those facing balance of payments or short-term liquiditydifficulties. The swap agreements have not yet been tapped.-VNA
