Sun, 23 Apr 2000 09:39:13 EDT
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From the Guardian interactive
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Tokyo backs plans to set up Asian IMF
Charlotte Denny
Saturday April 22, 2000
Japan is backing a plan by Asian governments to set up a multibillion-dollar
emergency fund to defend their currencies from speculative attacks of the
kind which triggered the global financial crisis in 1997.
A Japanese newspaper reported yesterday that Tokyo has thrown its weight
behind the fund, which was approved in principle last month by finance
ministers from the Association of South East Asian Nations, Asean.
Under an existing $200m (£126m) currency stabilisation arrangement, Asean
central banks can draw on credit lines with each other to prop up their
currencies when speculators attack. But with trillions traded daily on the
world's foreign exchanges, the existing fund is too small to take on the
might of the markets when they target a currency.
The new fund could mobilise ten of billions of dollars, according to a report
yesterday in the Tokyo-based Sankei Shimbun newspaper.
Japan, China and South Korea, which are not Asean members, have been invited
to join, to beef up the kitty.
Policymakers hope it will prevent a repeat of the spectacular currency
crashes which swept through the region in the summer of 1997.
Speculators trained their sights first on the Thai baht, which lost half its
value in a few weeks, and then the Philippine peso, the Malaysian ringgit,
the Indonesian rupiah and the Korean won which all plunged to record lows.
The currency swap facility was set up after the crisis after plans for a
fully fledged Asian Monetary Fund to bail out stricken economies ran into
opposition from the West. The US, other western nations and the International
Monetary Fund fear an AMF - first mooted by Japan - would undermine the IMF's
role as the world's emergency lender.
The beefed-up emergency fund is intended to compliment the fund's role by
helping countries stabilise their currencies in advance of IMF programmes.
But Washington is likely to renew its objections on the grounds that a rival
mechanism will devalue the IMF.
hkanteh
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