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Plan for pool of $80 billion to be studied

(Agencies)
Updated: 2008-05-05 11:04

Japan, South Korea and China are discussing creating a pool of $80 billion in Asian foreign-exchange reserves to be tapped by nations in case they need to protect currencies, Japan's Finance Minister Fukushiro Nukaga said.

Contributions from Japan, China and South Korea may total 80 percent of the pool, while the 10 member countries of the Association of Southeast Asian Nations may make up the rest, South Korea's Deputy Finance Minister Shin Je Yoon said in Madrid yesterday. Exact contributions haven't been decided, he said.

"We are negotiating in that direction," Nukaga said, referring to the amount of funds to be set aside and the contribution. He spoke after meeting China's Xie Xuren and South Korea's Kang Man Soo on the sidelines of the annual meeting of the Asian Development Bank.

Ministers last year agreed to set aside part of their $3.4 trillion of foreign reserves for emergencies, without deciding the size of the pool and when they would start the fund, Bloomberg News said.

The reserve pool is an expansion of a current arrangement that only allows for bilateral currency swaps. It is designed to ensure central banks have enough to shield their currencies from speculative attacks like those that depleted the reserves of some countries during the Asian financial crisis a decade ago.

Asian governments are trying to avoid relying on international bodies like the International Monetary Fund, which forced them to adopt harsh economic policies in return for bailouts in 1997 and 1998. During the crisis, Indonesia, Thailand and South Korea spent most of their foreign reserves to prop up their currencies.

The three nations had to turn to the IMF for more than $100 billion of loans to shore up their finances when investors sold their currencies. The IMF forced governments to cut spending, raise interest rates and sell state-owned companies.