Asian Monetary Fund Debuts Today

By Yoon Ja-young

Staff Reporter

An Asian version of the International Monetary Fund (IMF) created by ASEAN member countries and Korea, China and Japan will make its official debut today, the Ministry of Strategy and Finance said Tuesday.

Under the Chiang Mai Initiative Multilateralization Agreement (CMIM), signed 90 days ago by finance ministers of the member states, Korea is now allowed to open a credit line of up to $19.2 billion from the $120 billion fund whenever it faces a dollar shortage.

The fund was originally based on the Chiang Mai Initiative, in which Asian countries agreed to support each other with dollar liquidity in times of crisis.

It was a bilateral swap arrangement between Vietnam, Cambodia, Laos, Brunei and Myanmar, and Korea, China and Japan, but was upgraded to the multilateral CMIM financial support program incorporating the 10 ASEAN members - Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam - plus the three Northeast Asian countries.

Asia became keenly aware of the need for such a safety net following the Asian financial crisis that hit the continent in 1997 and 1998.

The Asian Monetary Fund (AMF) aims at helping member countries cope with short-term foreign currency volatility. The $120 billion fund will provide financial support through currency swap transactions.

If a member requests support, the central banks of other member countries will provide dollars in exchange for the domestic currency of the recipient country.

Korea, which contributed $19.2 billion, or 16 percent of the fund, can receive up to the same amount in support. China and Japan each provided 32 percent of the fund ― ASEAN countries shouldered the other 20 percent.

The country with the dollar shortage can get support within a week after the request, upon approval by two thirds of member states.

The AMF is expected to make other countries aware of the need for global financial safety nets.

President Lee Myung-bak had suggested building up a system to protect emerging economies against the volatility of international flows, at the World Economic Forum held in Davos, Switzerland, in January. The issue is expected to be discussed at the G-20 summit in November, hosted by Korea.

chizpizza@koreatimes.co.kr