Arroyo’s statement on a standby facility for Asean countries

Yesterday, Gloria Macapagal-Arroyo twice said that the World Bank had in principle agreed to commit $10 billion to a standby fund for Asean countries in crisis. The World Bank, however, has come out with a statement that basically says they have not made any such commitment for a regional fund. They are willing to help on a per country basis.

This was a portion of Arroyo’s speech yesterday, during the oath-taking of ULAP officials in Malacanang:
“Per my instruction also, in Washington last October 11, secretary gary teves, who is there with nonoy andaya in the IMF-WB meeting, with the ASEAN plus three finance ministers and their representatives, together with the WB, the IMF, and the ADB senior officials. And they, this is very important results, they reached an understanding to establish a standby facility to assist ASEAN countries who have severe liquidity problems – thank God we’re not one of them yet. The facility can also be used to purchase what the bankers call toxic assets and recapitalized troubled financial institutions and private companies.
The ASEAN plus three members and the multilaterals welcomed our initiative not only in providing access to financing but also more importantly in boosting confidence in the Asean economies. The WB and the IMF will draft the implementing mechanism as soon as possible, in consultation with ASEAN finance ministers and central bank governors. Immediately thereafter, they will convene another meeting to discuss the guidelines for the facility which suggested should be quick disbursing with minimal conditionalities.
And another very important element here, the WB indicated that it could initially commit to $10 billion as its contribution to the standby facility. Hopefully the IMF, ADB, Japan, China and the rest of ASEAN will contribute an equivalent or even larger amount.”

It is very clear here that: one, there was an understanding to put up a standby fund; two, the WB had agreed to help draft the implementing mechanism for the fund; and that three, the WB had “indicated” it could commit as much as $10 billion for the fund.

She said it again during a dinner yesterday in Malacanang:

“Along the same line, this past week, I instructed our Finance Secretary Gary Teves to meet with the ASEAN+3 Finance Ministers and their representatives together with the World Bank, IMF and ADB senior officials in Washington, to hammer out a deal to aid our region if it should become
necessary
. As a result, they reached an understanding to establish a standby facility to assist ASEAN countries who would need to cope with severe liquidity problems.

I keep talking about the subjunctive because we don’t have an ASEAN economy in that condition yet, but it’s always important to be prepared. The facility can also be used to purchase toxic assets and recapitalize troubled financial institutions and private companies. The World Bank
indicated that it can initially commit to 10 billion dollars as its contribution to the facility
.”

Arroyo was clear about the World Bank having “indicated” willingness to contribute money for the standby facility.

The World Bank statement, issued today, is just as clear: There was no discussion about a regional standby facility, or the commitment of funds at the regional level. The discussions were with “individual governments” and support would be given “at the country level.”

“While we do not anticipate the establishment of a regional facility and have not discussed commitments of funds at the regional level, numerous discussions with individual governments were held during the recent Annual Meetings of the World Bank and IMF on the impacts of the financial crisis and possible ways we might be able to provide support at the country level.” (Click here for the full press release).

Asked about the discrepancies between Arroyo’s statement and that of the World Bank, Trade Secretary Peter Favila it was best to wait until Finance Secretary Gary Teves comes home (click here for the news story).
In the meantime, I will keep in mind that story about an editor who had this sign pasted above his desk: If your mother says she loves you, check it out, check it out.

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