Asian nations will form a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies in an expansion of efforts to battle fallout from the global financial crisis, Bloomberg reported.
Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations agreed to the fund at a summit yesterday in Phuket, Thailand. The amount is 50 percent more than was proposed last May, and a broadening of the current arrangement called the Chiang Mai Initiative that allows only bilateral currency swaps. No date was set for completion of the new pool.
A regional currency agreement is vital "in ensuring market confidence in the Asian economies," Thailand Finance Minister Korn Chatikavanij told reporters. "It is one of our highest priorities."
The fund is aimed at ensuring central banks have enough to shield their currencies from speculative attacks such as those that depleted the reserves of Indonesia, Thailand and South Korea during financial crisis a decade ago. Many Asian currencies have tumbled in the past year, threatening regional stability, as the global downturn spreads through their export- dependent economies.
Japan, China and South Korea will provide about 80 percent of the currency pool with the 10 Association of Southeast Asian nations contributing the rest, the statement said. How much each country will supply will probably be decided by the next meeting in May, the ministers said yesterday.
Thailand, Indonesia, Malaysia, Singapore and the Philippines, the five-biggest Southeast Asian nations, will contribute $3.5 billion each to the pool, Malaysia's state news service Bernama reported, citing Deputy Prime Minister Najib Razak who attended the meeting.