Finance Ministers agree to expand currency pool

East Asian finance ministers will finalise the upgrading of the region's bilateral currency-swap arrangement into a US$120 billion (Bt4.34 trillion) multilateral facility at their next meeting in May.

"In order to ensure regional market stability and to foster confidence in the markets, we stress the importance of operationalising the multilateralisation of the Chiang Mai Initiative," Finance Minister Korn Chatikavanij said at the close of a special Asean plus Three Finance Ministers' Meeting here.

The move is aimed at deepening cooperation among the 10 Asean member countries and the grouping's partners - China, Japan and South Korea - amid the global financial crisis.

Finance ministers from Asean and the three partner countries agreed to expand their currency pool from $80 billion to $120 billion.

The agreement, which is an extended version of the Chiang Mai Initiative, which was set up in the wake of the 1997 financial crisis, will be effective after Asean governments give their official endorsement.

Korn chaired the meeting of the Asean plus Three finance ministers to discuss economic collaboration under the threat of global recession.

Asean will contribute 20 per cent of the proposed $120-billion facility while China, Japan and Korea will be responsible for the remaining 80 per cent, he said.

The ministers will finalise key elements of the agreement, including each country's contribution, at their next meeting in May in Bali, Indonesia.

An independent regional surveillance unit will also be established to promote objective economic monitoring.

In the first phase, the fund will be coupled with International Monetary Fund (IMF).

When a country asks for help due to capital flight during a financial crisis, 80 per cent of the financial aid will be tied to the IMF's reform prescription while only 20 per cent will not be subject to the stringent conditions.

When the surveillance system of the Chiang Mai Initiative becomes fully effective, the regional fund would be de-linked from the IMF, he said.

The ministers also agreed to expand the Asian bond market by promoting the issuance of local currency bonds, he said.

A source said that Laos would next year raise funds via baht-denominated bonds to finance infrastructure projects in that country.

The East Asian finance ministers also agreed to increase substantially the capital of the Asian Development Bank (ADB) as the countries in the region need more funds to invest.

The source said ADB wants to increase its capital base by 200 per cent from the current $56 billion.