MANILA,
Philippines --- The Philippines is
reviewing existing bilateral swap arrangements (BSAs) with Korea and China
after renewing the $6 billion currency swap contract with Japan earlier this
month.
Bangko
Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo, who left it to
the government of Japan to make the announcement for the extended BSA, said the
BSA with Korea and China worth $2 billion each has yet to be renegotiated.
The BSP
signed its second BSA with the central bank of China in 2003 amounting to $1
billion and its third was in 2007 which was double or $2 billion. The last BSA
with Korea was in 2008, which was raised from $1.5 billion to $2 billion.
The
most updated currency swap agreement was with Japan, which both governments
renewed on the sidelines of the annual ASEAN Finance Ministers Meeting in
Manila recently.
Currency
swaps are standby liquidity support – or agreements between countries to mutually
provide loans in foreign currencies for emergencies such as foreign currency
fund shortage. It is part of the Chiang Mai Initiative of 2000, as a way of
protecting regional dollar reserves after the 1997 Asian financial crisis.
Guinigundo
said that while gross international reserves or GIR are healthy and robust at
$75 billion, liquidity support for emergencies is a good backup. GIR are
foreign assets that are readily available to and controlled by the BSP for
direct financing of payments imbalances and for managing the magnitude of such
imbalances. GIR consists of holdings of gold, special drawing rights, foreign
investments, and foreign exchange, including reserves with the International
Monetary Fund.
The
ASEAN block plus Korea, China and Japan earlier this month agreed to double
size of the Chiang Mai Initiative Multilateralization (CMIM) from $120 billion
to $240 billion.
Guinigundo
said ASEAN, and for the Philippines in particular, fund resources are healthy
enough that reserves is not too much of a worry. “We have been doing this,
shoring up reserves for a long time and it’s been there (the funds) all this
time to help member countries in crisis.”
The
ASEAN block has also introduced a crisis prevention fund called the CMIM
Precautionary Line. To this crisis fund, Korea, Japan and China are
contributing a combined $192 billion while the 10 original ASEAN members are
putting in $48 billion.
The
Philippines is contributing $9.1 billion to the CMIM, double from its 2010
accounts of $4.5 billion. It is the same amount committed by Indonesia,
Thailand, Malaysia and Singapore. Vietnam is contributing only $2 billion while
Cambodia, Myanmar, Brunei, and Lao PDR have $240 million, $120 million, and $6
million each for the last two.
LEE C.
CHIPONGIAN
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