labels: Economy - general
ASEAN + 3 to launch $80 billion Asian Monetary Fund news
05 May 2008

Mumbai: Finance ministers of China, Japan, South Korea and the 10-nation Association of South East Asian Nations (ASEAN) have agreed to set up an Asian Monetary Fund (AMF) with a corpus of at least $80 billion.

China, Japan and South Korea will provide $64 billion – about 80 per cent - while the ASEAN will contribute the remaining $16 billion of the regional fund, to be used in the event of a regional financial crisis, the finance ministers said in a joint statement issued on the sidelines of an Asian Development Bank meeting in Madrid.

The fund would be self-managed and governed by a single contract that will be legally binding, the statement added.

Member countries will be extended loans for up to two years with the initial expiration period of three months. Interest rates will be London Interbank Offered Rate (LIBOR) plus 1.5 to 3 per cent.

"We are committed to further accelerate our work in order to reach consensus on all of the elements which include concrete conditions eligible for borrowing and contents of covenants specified in borrowing arrangements," the statement said. The 13 nations are now working on developing a way to monitor the fund, Vietnam's finance minister Vu Van Ninh, who co-chaired the Madrid meeting, said. "We think it is very important to have a rigorous surveillance system, especially in the context that regional economies have made an important and big integration into the world economy," he said.

The agreement comes a year after the ASEAN + 3 decided at a meeting in Kyoto, Japan, to use parts of their foreign exchange reserves to set up an Asian Monetary Fund (AMF) to head off  a repeat of the 1997 Asian financial crisis.

The idea of an Asian Monetary Fund, floated nearly a decade ago, was then opposed by the United States as it was concerned that the creation of the AMF might weaken the role of the International Monetary Fund and with it the financial clout of the US.

Asian economies, including China, maintains over $1.5 trillion in foreign reserves. Asian nations also often face attack by hedge funds at times of liquidity crisis and the AMF is expected to help prevent it.


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ASEAN + 3 to launch $80 billion Asian Monetary Fund