CMIM Strengthened to Buffer ASEAN+3 Economies from Liquidity Difficulties
Latest Update: AMRO Director Toshnori Doi speaks with ABS-CBN News Channel anchor Cathy Yang on the amended CMIM Agreement and its role as ASEAN+3 region’s financial safety net.
Role of amended CMIM
CMIM is a regional financial arrangement among ASEAN+3 countries.
Designed to provide USD liquidity in times of need for the member countries.
The recent COVID-19 situation posed a large challenge for the member countries in the region; massive capital outflow around Feb to Mar period and tightening of financial conditions. Some countries experienced weakness in their currency.
CMIM is designed to provide liquidity to countries in need.
The latest amendment is to enhance operational readiness; to make it easier and more accessible for the countries.
How does the amended version work?
The Philippines is a major member of the arrangement.
Through its central bank, the Philippines provides liquidity to other members and can receive USD from other countries.
The Philippines commits more than USD 9 billion. At the same time when in crisis, the Philippines can receive close to USD 23 billion.
CMIM is a swap arrangement.
It is how ASEAN+3 members help out each other.
Has CMIM ever been used?
CMIM is an insurance policy for the region.
The region has learned lessons well from the Asian Financial Crisis. Over the years, ASEAN+3 countries have built up enough forex reserves, built up policy buffers, and engage in sound macroeconomic policies.
This region is able to buffer the shock with existing resources.
It is fortunate that CMIM has never been activated.
How will that work if all members draw down simultaneously?
ASEAN+3 is well diversified. Some countries have no issues with liquidity shortage.
Countries in the region are prepared to meet this kind of shock.
The Philippines has massive capital outflow around Feb and Mar period but capital returned after that. Foreign exchange of the pesos has also been strengthening.
By and large, CMIM will be able to provide enough liquidity to any country in need under extremely stressful circumstances.
How has the fund grown since?
A total of USD 240 billion has been pledged by all countries.
A large part can be co-financed with the IMF; another part, about 30% can be activated without any IMF involvement.
The latest amendment improves operational readiness in the IMF-Linked portion. Ensures IMF-Linked portion activation can be done smoothly.
All countries are in a comfortable position in handling the COVID-19 situation.
We do not see any immediate request for CMIM funding.