A $120 billion multilateral currency swap arrangement involving the Association of Southeast Asian Nations plus Japan, China and South Korea will be launched March 24, according to Finance Ministry officials.
The inception date was determined after a large majority of the countries’ finance ministers and central bank governors had signed the agreement as of last Thursday, the officials said.
The Asian countries currently have a network of bilateral currency swap deals, known as the Chiang Mai Initiative.
Last May, the ASEAN-plus-three finance ministers agreed in Bali, Indonesia, to expand the existing network to enhance the region’s capacity to safeguard against global economic challenges.
Each participating country will be able to swap its local currency for dollars in the event that it requires immediate support to address short-term liquidity difficulties.
The new framework also enables the participation of the five smaller ASEAN economies — Brunei, Cambodia, Laos, Myanmar and Vietnam.
Japan, which has the world’s second-largest foreign reserves after China, will commit $38.4 billion to the Chiang Mai Initiative Multilateralization.
China, combined with $4.2 billion from Hong Kong, will provide the same amount as Japan, while South Korea will offer $19.2 billion. The three countries will each be entitled to withdraw $19.2 billion.
The financial contributions of the three countries will account for 80 percent of the total and the rest will be funded by all ASEAN members, including Indonesia, Malaysia, the Philippines, Singapore and Thailand.
To help shield the region from a repeat of the 1997-1998 Asian financial crisis, the five major ASEAN countries plus China, Japan and South Korea set up a prototype framework in 2000 after reaching an agreement in the Thai city of Chiang Mai.
Unlike the web of bilateral currency swap deals, the new framework will help financial authorities to make necessary arrangements easier and faster in the event of a liquidity crunch, the officials said.