CMIM Strengthened to Buffer ASEAN+3 Economies from Liquidity Difficulties

2020-08-06T14:44:05+08:00June 30, 2020|Interview|

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.