Finance ministers and central bank governors from the Association of Southeast Asian Nations (ASEAN), Japan, China, and South Korea have agreed to enhance their financial cooperation by providing mutual emergency funds during pandemics and natural disasters. The agreement was reached during the Asian Development Bank events held recently in Tbilisi, Georgia.
The collaborative decision is set to extend existing currency swap arrangements, which previously focused on the United States dollar and its counterparts, at a time when the dollar’s strength has increased following aggressive monetary policies aimed at curbing inflation. This strengthening of the dollar poses additional challenges for countries with dollar-denominated debts, increasing their financial burdens.
The new financial safety net, discussed by the “ASEAN Plus Three” group, builds upon the foundations set by the Chiang Mai Initiative, which was originally formed in response to the 1997 Asian financial crisis. The need for such a mechanism has become more urgent following the COVID-19 pandemic, which underscored the importance of rapid response capabilities to meet urgent funding requirements.
In a separate meeting, finance leaders from Japan, China, and South Korea deliberated on the prevailing financial circumstances. Additionally, Japan and eleven Pacific island nations convened for the first time to discuss financial issues ranging from climate change to debt sustainability, leading up to their leaders’ summit scheduled for July in Tokyo. (NNT)
