The 10-member Association of Southeast Asian Nations (ASEAN) together with Japan, China and South Korea are discussing creating a pool of reserves to be tapped by Asian nations if the need arises for them to protect their currencies from financial crisis. The fund would be an expansion of a current agreement called the Chiangmai Initiative that only allows for bilateral currency swaps.

 

Finance ministers from the 13 Asian countries are talking about expanding the facility from US$80 billion to $120 billion, said the ASEAN Secretary General Surin Pitsuwan in Jakarta on Monday (15^th December). He also added that the ministers may meet in Bali, Indonesia, before the year ends to talk about the reserves pool.

 

Asian governments want to avoid having to rely on institutions like the International Monetary Fund (IMF), which forced them to adopt harsh economic policies in return for bailouts during the 1997-98 financial crisis. During 1997-98 crisis these nations were forced to turn to the IMF for more than $100 billion of loans to shore up their finances. In return, the governments had to cut spending, raise interest rates and sell state-owned companies.