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ASEAN+3 finance leaders meet in Incheon, South Korea,
Tuesday
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Japan hopes to propose strengthening currency swap lines
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Expansion will offer better safeguards vs pandemic,
disasters
By Leika Kihara and Jihoon Lee
INCHEON, May 2 (Reuters) - Asian finance leaders on
Tuesday will debate ways to beef up regional safeguards to
better address emergency funding needs during pandemics and
natural disasters, as global recession fears and volatile
financial markets cloud the economic outlook.
The impact of U.S. interest rate hikes on the region's
capital flows may also be discussed when finance ministers and
central bank chiefs of ASEAN+3 - which groups the Association of
Southeast Asian Nations (ASEAN) plus Japan, China and South
Korea - meet on Tuesday.
Japan, which co-chairs this year's meeting of ASEAN+3
nations with Indonesia, hopes to discuss strengthening currency
swap lines, Finance Minister Shunichi Suzuki told reporters on
Friday.
Japan is keen to propose a facility that enhances usage of
existing currency swap lines, and allows members to tap funds in
times of emergencies such as pandemics and natural disasters,
said three sources with direct knowledge of the matter.
After being hit by the Asian financial crisis in the late
1990s, the ASEAN+3 group created a network of currency swap
lines called the Chiang Mai Initiative Multilateralisation
(CMIM) in 2000, and revamped it into a multilateral network in
2010, to help each other forestall or combat sharp capital
outflows.
But the swap lines have never been used, including during
the COVID-19 pandemic, giving rise to calls from within the
group to make the system more easily accessible in the event of
shock events.
While Asian policymakers stress their countries have
sufficient foreign reserves and buffers to fend off another
crisis, they may see scope to make enhancements to the existing
arrangements to combat potential market upheaval, analysts say.
"The fact CMIM has never been tapped since being created
shows countries find it hard to use," said Toru Nishihama, chief
emerging market economist at Dai-ichi Life Research Institute.
While it was important to make CMIM more flexible, countries
should also ensure they have a strong surveillance scheme in
place to avoid causing moral hazard, he added.
The recent failures of two U.S. banks have heightened alarm
among policymakers about vulnerabilities in the global banking
system and potential market turbulence that could re-emerge from
aggressive U.S. interest rate hikes.
Developing Asia is expected to achieve strong economic
growth of 4.8% in 2023, faster than 4.2% growth in 2022 thanks
to China's rebound, according to the ADB's projections.
The ASEAN+3 finance leaders, including Suzuki and Bank of
Japan (BOJ) Governor Kazuo Ueda, are meeting on the sidelines of
the Asian Development Bank's (ADB) annual meeting in Incheon in
South Korea this week.
(Reporting by Leika Kihara; Additional reporting by Tetsushi
Kajimoto in Tokyo; Editing by Sharon Singleton)
