CHANGES to the Chiang Mai Initiative Multilateralization (CMIM) agreement took effect on Wednesday, allowing members to use their local currencies for liquidity support for swap agreements should the need arise.

The Bangko Sentral ng Pilipinas (BSP) said in a statement on Wednesday that the revised CMIM agreement will institutionalize members’ use of local currencies, apart from the dollar, for financing on a voluntary and demand-driven basis.

The facility, which was launched in 2010, is meant to service its members in times of short-term crises. The agreement includes finance ministers and central bank governors within the Association of Southeast Asian Nations (ASEAN), China, Japan, and Korea, as well as the Hong Kong Monetary Authority.

Revisions to the pact will also hike the International Monetary Fund (IMF) De-linked portion to 40% from 30%. This means members can obtain up to 40% of their maximum borrowing amount without being subjected to IMF’s lending conditions.

Members of the CMIM agreement also agreed to address technical issues, including the revisions related to the London Interbank Offered Rate. The international benchmark interest rate used by global banks for international interbank short-term loans will be phased out by June 30, 2023 and will be replaced by secured overnight financing rate.

The Philippines’ contribution to the CMIM through the BSP is at $9.104 billion. Under the agreement, the country can borrow up to 2.5 times its commitment or around $22.76 billion. — LWTN