MANILA (Reuters) - The Philippine central bank and the Bank of Japan have signed an agreement to extend for a second time a two-way bilateral swap arrangement aimed at providing extra liquidity should their currencies come under attack.
Under the 3-year arrangement that took effect on May 2, the Philippines may borrow as much as $6 billion (3 billion pounds) from Japan if its currency comes under stress and it encounters a balance of payments deficiency. Japan, on the other hand, may borrow up to $500 million from the Philippines.
The arrangement, signed by the central bank governors of Japan and the Philippines on the sidelines of the Asian Development Bank meeting in Manila, was originally part of a network of bilateral swap agreements Southeast Asian countries forged with its richer neighbours Japan, South Korea and China.
ASEAN +3 countries agreed on Thursday to boost the size of an emergency currency protection fund, Chiang Mai Initiative Multilateralisation (CMIM), to $240 billion by November, while cutting the amount tied to an IMF programme to 70 percent from 80 percent and extending the maturity of currency swaps.
The programme, created in 2000 initially as a network of bilateral currency swaps, has never been put to use because of the stigma associated with the IMF that angered the region for its insufficient bailouts during the Asian currency crisis.
Apart from the swap deal, the Philippines also obtained a $208 million development aid loan from South Korea to fund part of a massive river development project in the central Iloilo province.
South Korea's Ministry of Strategy and Finance said in a statement the loan marks the single biggest aid provided by its Economic Development Cooperation Fund set up in 1987 to support its overseas development projects.
It said the loan, which would carry an interest rate of 1.5 percent and repayable for 40 years, would finance the Jalaur river project aimed at boosting rice output in one of the Philippines' biggest rice producing provinces.
(Reporting by Rosemarie Francisco and Choonsik Yoo; Editing by Jacqueline Wong)