Asian ministers plan Feb meeting on currency pool

Written by Bloomberg | Updated: Feb 1 2009, 03:50am hrs
Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations plan an unscheduled meeting next month to forge a pact to pool $120 billion of foreign exchange reserves to help defend their currencies.

The grouping plans to increase the pool from the $80 billion proposed last May in Madrid in an expansion of an arrangement that allows only bilateral currency swaps known as the Chiangmai Initiative. The meeting might take place on February 22 in Thailand, said to two Japanese finance ministry officials on condition of anonymity. Asian governments have pledged more than $685 billion in fiscal stimulus and injected billions more into their financial systems to spur lending as the global recession worsens.

The reserve pool, like its predecessor, is designed to ensure central banks have enough to shield their currencies from speculative attacks such as those that depleted the reserves of Indonesia, Thailand and South Korea in the 1997 Asian financial crisis.

"It's not likely that any of the countries will need to tap the fund in this crisis, but it's there as a safety net if required," said V Anantha-Nageswaran, chief investment officer for Asia Pacific at Bank Julius Baer in Singapore. "That said, Asean should be addressing issues pertaining to this current crisis instead of looking at the rear-view mirror." Asian economies have largely escaped a credit crunch that toppled banks in the US and Europe and forced others to eliminate thousands of jobs. Still, growth in the region is slowing as demand for exports shrinks and developing Asia will probably expand 5.5% this year, the slowest since 1998, the International Monetary Fund said this week.