RP, Japan enter into new talks on currency swap

MANILA, Philippines - The Philippines has entered into discussions with Japan for the possibility of opening a new bilateral currency swap agreement that would supplement the facility provided by the Chiang Mai Initiative.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. told reporters yesterday that the new facility would be an improved version of the existing $6-billion bilateral swap facility that has since been folded into the CMI.

Tetangco said no amount has been agreed upon but said the new facility would improve on the existing swap agreement and possibly also offer better terms than the CMI.

Tetangco explained that under the CMI agreement, existing bilateral swaps between its members have been folded into the multilateral swap facility of the CMI.

But Tetangco said members of the CMI could still discuss separate and additional swap facilities that would be in addition to the facility available under the CMI.

Swap facilities allow countries to get foreign exchange to support their reserves should the need arise. Bilateral swaps normally offer better terms since these were private agreements between two countries with close ties.

Tetangco has just returned from Japan where he met with his counterparts as part of the Arroyo administration’s no-deal roadshow in preparation for the government’s issuance of about $1 billion worth of Samurai bonds.

Tetangco said the specific details of the new facility are still being discussed although he said it is certain that the amount would be bigger than the existing $6 billion.

“This would be for liquidity and balance of payment support as usual, with bigger amounts and better terms involved,” Tetangco said although he was quick to point out that the swap facility would only be a stand-by facility.

“We use it only if we will ever need it,” Tetangco said. “Just because it’s there doesn’t mean we will tap it. But it adds another level of comfort.”

Tetangco said the swap facility was part of Japan’s commitment made earlier during the G20 meeting, to provide assistance to countries that might need to be tided over the global recession.

The central bank chief said the terms and conditions of the facility are still being discussed but said it would go a long way in improving confidence level.

“We’ll have access to more facilities and it is good to know that it is there and that it is available,” Tetangco said.

Tetangco said ongoing discussions and consultations were not likely to drag on, expressing optimism that the facility could be launched within the year.