The Finance Ministers of the ASEAN Members States1 , China, Japan and Korea (ASEAN+3) approved the increase in the contribution commitment of the Philippines, through the Bangko Sentral ng PIlipinas, to the Chiang Mai Initiative Multilateralization (CMIM) Agreement, in its meeting on 2 May 2010, in Tashkent, Uzbekistan.
The adjusted contribution commitment of the Philippines is now at US$4.552 billion (from the initial commitment of US$3.68 billion), keeping the total size of the CMIM at US$120 billion, and equal to the commitments of Indonesia, Malaysia, Singapore and Thailand. CMIM parties are not required to make an outright transfer of the committed amount until a swap request has been approved.
Under the implementing agreement of the CMIM, the Philippines can source up to 2.5 times its contribution, equivalent to US$11.38 billion, from the facility through currency swaps in the event of short-term liquidity or balance-of-payments difficulties. This provides an ample source of liquidity support that can supplement the country’s foreign exchange position comprised of the gross international reserves (GIR), currency swaps with local commercial banks, foreign currency assets under the Philippine foreign currency deposit system and other bilateral currency swap arrangements with foreign central banks. These sources of foreign currency liquidity support will further sustain the country’s resilience by keeping the external position strong and robust amidst escalating sovereign risk concerns in Europe.
The country’s GIR rose to US$47.0 billion as of end-April 2010, which could cover 9.3 months of imports of goods and payments of services and income. It is also equivalent to 11.8 times the country’s short-term external debt based on original maturity and 5.3 times based on residual maturity. The BSP also has substantial currency swaps with local commercial banks as of 31 March 2010. Philippine commercial banks with foreign currency deposit unit licenses have US$25.6 billion worth of assets as of 31 December 2009, comprised mostly of accounts of domestic residents.
The CMIM replaces the network of bilateral swap arrangements (BSAs) among ASEAN+3 member countries, including the three BSAs of the Philippines with China, Japan and Korea which, prior to the effectivity of the CMIM would allow the Philippines to draw as much as US$2.0 billion, US$6.0 billion, and US$2.0 billion, respectively. The CMIM, however, does not rule out the negotiation of new BSAs with other CMIM parties that would provide additional liquidity support on top of the CMIM facility in the event of unfavorable balance of payments position.
1 Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.