Asean Plus Three approves no-strings-attached emergency financing program

The 26th Asean+3 Finance Ministers and Central Bank Governors’ Meeting decided to introduce the Rapid Financing Facility to quickly provide support in emergency situations.

From left: Bank of Korea Gov. Rhee Chang-yong, Korea's Finance Minister Choi Sang-mok, Laotian Minister of Finance Santiphab Phomvihane and Laotian central bank Gov. Bounleua Sinxayvoravong during a press conference held on Friday in Tbilisi, Georgia [MINISTER OF ECONOMY AND FINANCE]

The Asean Plus Three, consisting of Korea, China and Japan alongside 10 member states in the Southeast Asian economic bloc, has agreed to bolster the group’s currency swap arrangement with a new loan program.

The goal is to strengthen the financial safety net in the region with the Rapid Financing Facility (RFF), a short-term loan initiative, amid persisting external uncertainties such as the recent increase in exchange rate volatility.

The decision was made on Friday during the 26th Asean+3 Finance Ministers and Central Bank Governors’ Meeting held in Tbilisi, Georgia.

Attendees included economic policy leaders from 12 countries — except Myanmar — such as Korea’s central bank chief Rhee Chang-yong and Economy Minister Choi Sang-mok as well as Asia Development Bank (ADB) President Masatsugu Asakawa. Choi co-chaired the meeting alongside his Laotian counterpart.

During the meeting, members approved the establishment of the system under the Chiang Mai Initiative Multilateralization (CMIM), a multilateral currency swap arrangement established in 2010 worth $240 billion that is designed to provide liquidity support in emergencies among Asean Plus Three members.

The quick financing initiative will enable prompt, short-term and small-sized support without conditions in case of urgent situations such as natural disasters. The program will officially be launched next year.

Moreover, the financing structure of the currency swap arrangement will be changed to be based on paid-in capital, meaning that the loan will be issued using money raised from the member states in advance. Under the current system, financing begins based on the financial risk level of a member country, making the funding process slow and inefficient.

Meanwhile, the Asean Plus Three forecast the region’s economy to grow at a solid pace through the year, thanks to the rebound in the semiconductor sector and strong domestic demand, with a gradual slowdown in inflation. However, risk factors remain, including raw material price hikes, geopolitical uncertainties and increased volatility in foreign exchange rates.

The group's next meeting will be held in Milan, Italy, with China and Malaysia as co-chairs.

Meanwhile, Choi and Rhee also attended the 24th Trilateral Finance Ministers and Central Bank Governors Meeting with their counterparts from Japan and China. In a joint message issued on Friday, the three countries' economic chiefs expressed "support" for the RFF, saying that "the establishment of this new facility under the CMIM will significantly bolster regional resilience."

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]