ASEAN+Han-Jung-Il Agree to Provide Emergency Funds in Case of Pandemic or Natural Disasters

Meeting of Finance Ministers and Central Bank Governors
Establishment of Rapid Financial Support System... Strengthening Regional Financial Safety Net
Transition of CMIM Funding to Paid-in Capital Method

South Korea, China, Japan, and the 10 ASEAN countries have agreed to provide emergency liquidity support in the event of crises caused by external shocks such as the COVID-19 pandemic or natural disasters, aiming to maintain financial stability within the region.

On the 3rd (local time), the Ministry of Economy and Finance announced at the '27th ASEAN+3 Finance Ministers and Central Bank Governors Meeting' held in Tbilisi, Georgia, that member countries agreed to improve the funding method of the Chiang Mai Initiative Multilateralization (CMIM) and to establish a Rapid Financing Facility (RFF) within the CMIM.

The CMIM is a regional financial arrangement (RFA) launched in March 2010 with the purpose of stabilizing regional financial markets by providing foreign currency liquidity support to ASEAN+3 member countries.

The meeting was attended by finance ministers and central bank governors from a total of 12 countries including South Korea, China, Japan, and ASEAN, as well as the President of the Asian Development Bank (ADB), the Deputy Managing Director of the International Monetary Fund (IMF), and the Director of the ASEAN+3 Macroeconomic Research Office (AMRO).

In the first session, which reviewed the regional economic situation, international organizations such as the ADB presented recent global and regional economic trends and risk factors, and member countries spoke about and discussed their own economic trends and policy directions.

Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, is delivering a greeting at the 'ASEAN+3 Finance Ministers' Joint Press Conference' held on the 3rd (local time) at the Josiah Tbilisi Pullman Hotel.

Member countries forecasted that the ASEAN+3 economies will achieve favorable growth rates and continued easing of inflation due to export recovery driven by the semiconductor market rebound and a robust domestic market. However, they agreed that rising commodity prices, escalating geopolitical tensions, and increased volatility in foreign exchange markets remain risk factors.

Members recognized that the current positive outlook could be an opportunity to restore policy space for future contingencies, agreeing on the need to ensure fiscal sustainability, maintain tight monetary policies, and enhance growth potential. They also reaffirmed their commitment to a multilateral trading system based on open, free, and fair rules.

In the second session, which discussed regional financial cooperation agendas, the focus was mainly on strengthening the regional financial safety net, the Chiang Mai Initiative Multilateralization (CMIM).

Members agreed on the importance of strengthening the regional financial safety net amid ongoing uncertainties surrounding the global and regional economies, gave final approval for the introduction of a new lending program to enhance the effectiveness of the CMIM, and concurred on the benefits of restructuring the funding framework to a paid-in capital basis.

First, member countries approved the establishment of a Rapid Financing Facility (RFF) that can provide funds in the event of sudden external shocks such as pandemics or natural disasters. They also agreed to expand the currencies used in the RFF to include eligible freely usable currencies (FUC). They agreed to complete the amendment of the agreement within this year and officially launch the RFF at next year’s ministerial meeting.

Meanwhile, all member countries agreed on the benefits of changing the funding structure of the current multilateral currency swap CMIM to a paid-in capital basis to enhance its effectiveness. To materialize this, they agreed to analyze the pros and cons of various models and decide on a specific model by 2025.