CURRENCY SWAP: US $4 bn in credit sought
May 19, 2001
Thailand is expected to request US$4 billion (Bt182.06 billion) in standby
credit from China as part of a currency-swap agreement designed to ward
off future financial turmoil.
Prime Minister Thaksin Shinawatra will be making this specific request
during talks with Chinese Prime Minister Zhu Rongji, who today begins
a four-day official visit to Thailand.
"We intend to ask for more standby credit from China than the $3
billion agreement we have agreed with Japan," Finance Minister Somkid
Jatusripitak said yesterday, adding that he expected the figure to be
Thailand has been negotiating with other Asean countries plus China,
Japan and South Korea to form a regional currency-swap arrangement. The
deal would allow member countries to borrow dollar reserves from each
other to defend their currencies during financial upheavals.
However, China will be opening the credit line of $4 billion to Thailand
unilaterally because of its huge foreign-exchange reserves of more than
$120 billion. The same unilateral principle applies with Thailand's $3-billion
swap arrangement with Japan.
But the Thai-South Korean currency swap arrangement of $500 million will
be bilateral, with both countries opening an equal standby credit of this
amount to each other in time of crisis.
The Association of Southeast Asian Nations has agreed to set up a regional
fund of $1 billion to defend currencies in the region. This fund will
be supplemented by individual bilateral currency-swap arrangements between
Asean member countries.
To add clout to the regional fund, China, Japan and South Korea were
invited to join in this arrangement, dubbed the Chiang Mai Initiative.
Analysts broadly consider the regional currency-swap agreement as the
first step towards creation of an Asian Monetary Fund.
Somkid said that during his meeting with Paul O'Neill, the US treasury
secretary, in Honolulu on the sidelines of the Asian Development Bank
meeting last week O'Neill had expressed his support for the regional currency-swap
However, O'Neill reportedly cautioned that the arrangement should not
supersede the role of the International Monetary Fund, which acts as chief
guardian of the stability of the international financial system.