MANILA, Philippines — Members of the Association of Southeast Asian Nations (ASEAN) are expected to benefit from a stronger currency swap arrangement and better financial safety net now that the amended Chiang Mai Initiative Multilateralization (CMIM) agreement is already in effect, according to the Department of Finance (DOF).

In a statement, the DOF’s International Finance Group (IFG) said the amended CMIM took effect on June 23.

The agreement was signed by all finance ministers and central bank governors of the ASEAN and its “Plus 3” partners, South Korea, Japan and China, along with the Hong Kong Monetary Authority.

According to the IFG, the CMIM first came into effect in March 2010. It aims to address balance-of-payments (BOP) and short-term liquidity difficulties in the ASEAN region and its partners Korea, Japan, China and Hong Kong.

The IFG said the size of the CMIM has since doubled to $240 billion, while its International Monetary Fund (IMF)-delinked portion has since been raised to 30 percent. This means member-economies could draw up to 30 percent of their maximum borrowing amount, without being subjected to lending conditions set by the IMF.

Under the amended agreement, signatories are offered flexibility on the supporting period for financing linked to IMF conditions, the IFG said.

“This will be done by allowing multiple renewals to match the supporting period of the IMF-supported programs,” it said.

”Adjustments of the other financing terms under the CMIM, such as the disbursement date, have also been made to secure consistency with the IMF-supported program, in the case of co-financing arrangements,” the IFG said.

The amended agreement also strengthened the CMIM’s coordination with the IMF by establishing a set of operational guidelines, which aims to create a shared view on economic and financial situations, financing needs and policy recommendations, according to the IFG.

The IFG said the amendments also introduced a legal basis for conditionality that applies to both facilities under the IMF-delinked portion – the Precautionary Line and the Stability Facility. Before, the conditionality only covered the Precautionary Line.

“Moreover, in the case of co-financing with the IMF, the CMIM now requires that the conditionality should be consistent with that of the relevant IMF-supported program,” the IFG said.

As a signatory to the CMIM, the Philippines may borrow up to $22.76 billion from the facility to help avert an impending or actual BOP crisis.

In turn, the Philippines is also able to provide liquidity assistance to other CMIM members if needed.

Under the CMIM, each member-state may also swap its local currency with US dollars based on certain conditions when faced with short-term liquidity or BOP problems.

Source: https://www.philstar.com/business/2020/06/24/2023008/asean-benefit-currency-swap