$3.68B in reserves tied to Asian fund

The government has parked $3.68 billion equivalent to a tenth of the country’s total foreign exchange reserves as contribution to the $120-billion so-called Asian Monetary Fund (AMF).

Last March, President Arroyo volunteered the amount, which is equivalent to all of P213 billion, for the country to immediately contribute to the fund despite the worsening effects of the global recession in the economy.

The Bangko Sentral ng Pilipinas (BSP) said it would contribute another $1 billion to the AMF if the foreign currency stock increases.

“We have to meet our quota of $4.77 billion as we build up our foreign reserves,” BSP Deputy Governor Diwa Guinigundo said.

The AMF was supposed to be a quick-disbursing buffer for the region against the global financial turmoil similar to the scheme being adopted under the Washington-based International Monetary Fund (IMF).

The fund was conceptualized among the Association of Southeast Asian Nations and its dialog partners China, Japan and South Korea or Asean+3 and it is expected to be fully in place before the end of the year.

Guinigundo described the AMF as a fund that would address potential liquidity problems in the region similar to what happened during the 1997 Asian financial crisis.

 
Among the most affected by the crisis then were Indonesia, Thailand and South Korea which drew a total of $100 billion from the IMF.

The Philippines that escaped the full impact of that crisis managed not to draw the full stand-by program with the IMF worth over $1 billion.

“Now is the best time to put up a program like this so that when peacetime transforms to wartime then we have something to draw from,” Guinigundo said.

Guinigundo and BSP Governor Amando Tetangco Jr. were recently in Indonesia to meet with peers the ASEAN+3.

The AMF was launched during the meeting after three years of constant dialogues and consensus gathering.

The AMF “is supposed to be complementary to the IMF,” Guinigundo said.

China and Japan will contribute the bulk or 64 percent of the fund totaling $76.8 billion, or $38.4 billion each while South Korea put in $19.2 billion and Indonesia, Thailand, Malaysia and Singapore each gave $4.77 billion.

Vietnam had set aside $1 billion, Cambodia $120 million, Myanmar $60 million while Lao People’s Democratic Republic and oil-rich Brunei were allotted $30 million each.

Both China and Japan may borrow up to half of their contribution under the initial agreement while South Korea may access up to 100 percent.

Cambodia, Myanmar, Laos and Brunei may access five times their individual contributions while the five biggest ASEAN countries that include the Philippines, Malaysia, Singapore, Indonesia and Thailand were allowed to draw up to 2.5 times their contributions.

Countries without a program with the IMF, however, can secure funds from the AMF only up to 20 percent of its allowable loan entitlement.

“The fund would be for balance of payments assistance which is not supposed to be permanent. The loan is supposed to be transitory or a liquidity problem rather than a solvency issue,” Guinigundo said.

Prior to her attending the Asean leaders’ meeting, Mrs. Arroyo was proclaiming that the country under her able fiscal management was among the few to have escaped, thus far, a global recession epidemic.

The crafting of the emergency fund was agreed upon in the Chang Mai Initiative (CMI) after the 1997 Asian Financial Crisis as a “standby facility” that would immediately address liquidity problems of Asean member countries.

Leaders of the 10-member Asean ended their annual summit yesterday with a call for the expeditious conclusion of the Asian regional pool of foreign reserves. –Ruben Hortelano, Daily Tribune