East Asia to boost crisis fund amid Europe threat

MANILA, Philippines – East Asian nations are Thursday, May 3, set to double the money in a currency swap pact to $240 billion in an effort to shield the region from the European debt crisis, according to a draft communique.

Finance ministers from China, Japan, South Korea and the 10-member Association of Southeast Asian Nations are expected to sign the deal at the end of their one-day meeting in Manila.

“We strongly believe that our agreement made today on strengthening the (pact), including doubling its total size… will serve as another important step forward to strengthen the regional financial safety nets,” a draft says.

The pact, named the Chiang Mai Initiative after being created in the northern Thai city following the 1997 Asian meltdown, allows countries to swap their local currencies for US dollars in times of crisis.

The draft communique, a copy of which was obtained by AFP, emphasized the importance of expanding the currency swap arrangements given the current financial problems in Europe.

“We are fully aware of the potential downside risks to the region’s economic performance in 2012,” it said.

“The prolonged sovereign debt crisis in the eurozone could continue to weigh on ASEAN+3 economies through trade and financial channels.”

The 13 countries will also agree to increase the amount of money available for lending to troubled members without conditions set by the International Monetary Fund, the draft said.

The IMF-delinked portion, now at 20 percent of the total, will rise to 30 percent next year with a view to raising it to 40 percent in 2014 if conditions warrant, according to the draft.

The current ratios of contributions and voting powers of the signatory countries will remain the same, it added. – Agence France-Presse