A multilateral currency-swap contract covering all the ASEAN member states plus China, Japan and Korea has come into effect today, the Monetary Authority says.

The pact, known as the Chiang Mai Initiative Multilateralisation Agreement, is US$120 billion in size. It addresses balance-of-payment and short-term liquidity difficulties in the region, and supplements existing international financial arrangements.

It will provide financial support through currency-swap transactions among the participants in times of liquidity need. Each participant is entitled, in accordance with the agreement, to swap its local currency with US dollars for an amount up to its contribution multiplied by its purchasing multiplier. Click here for details.

The pact is developed from the current Chiang Mai Initiative bilateral swap network to facilitate prompt and simultaneous currency-swap transactions by establishing a common decision-making mechanism under a single contract.

Its launch, together with an independent regional surveillance unit to be established, demonstrates the participating member countries' solid commitments and concerted efforts to enhance regional capacity to safeguard against downside risks and challenges in the global economy.