The financial safety net established by ASEAN and South Korea, China, and Japan is being strengthened. A new system will provide short-term liquidity support without pre- or post-conditions in the event of sudden external shocks such as natural disasters or pandemics.
The Bank of Korea announced on November 11 that the amended agreement for the Chiang Mai Initiative Multilateralization (CMIM), a regional financial cooperation framework among ASEAN+3, has come into effect.
CMIM is a multilateral currency swap agreement designed to support member countries facing a shortage of foreign currency liquidity due to foreign exchange crises. Launched in March 2010, the total support capacity amounts to $240 billion.
The key feature of this amendment is the establishment of the Rapid Financing Program (RFF). This program allows for the swift provision of small-scale short-term funds in response to crises triggered by temporary external shocks such as natural disasters and pandemics. Unlike existing crisis prevention and resolution programs, it provides funds without any pre- or post-conditions.
The loan limits for the RFF are set at 50% of the total limit when linked to an International Monetary Fund (IMF) program, and 20% when not linked. Donor countries can provide funds in eligible freely usable currencies (FUC) up to a maximum of 50% of the total contribution limit.
This amendment reflects the agreement reached at the ASEAN+3 Finance Ministers and Central Bank Governors Meeting in May 2024 regarding the establishment of the RFF. The amended agreement was approved in May of last year, and on November 4, 27 institutions from the 13 member countries completed the signing, allowing it to take effect seven days later. The implementation was delayed due to the domestic approval processes of some member countries.
The total resources of CMIM amount to $240 billion, with South Korea contributing 16%, or $38.4 billion. China and Japan each bear 32%, contributing $76.8 billion, while ASEAN member countries contribute $48 billion, accounting for 20% of the total.
The maximum withdrawal amount, determined by each country's contribution and withdrawal multiplier, is $38.4 billion for South Korea. Japan also has a maximum of $38.4 billion, while China, including Hong Kong, has $42.6 billion. The total withdrawal capacity for ASEAN member countries is $126.2 billion.
With this amendment, CMIM will now include rapid financing capabilities in addition to existing crisis prevention and resolution funding, expanding the tools available for member countries to respond to short-term foreign currency liquidity crises.
* This article has been translated by AI.
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