CMI Conditionality and Post-CMI Architecture

The CMI (Chiang Mai Initiative) is designed to provide regional liquidity facility after Asian financial crisis of 1997. The current setting of the CMI is centered on four areas: swap network, regional surveillance, monitoring capital flows, and training personnel. However, since the size of bilateral swap is around 1-3 billion dollars and only 10 percent of the drawings available to a nation can be provided for a limited period without an IMF agreement, the CMI cannot be enough to counteract sudden capital flights or volatile movements of regional exchange rates. Based on the evaluation of IMF program, CMI conditionality needs to satisfy a certain set of requirements that address the local issues. Therefore, in modeling the post-CMI architecture, it is essential to consider the institutional issues to implement numerous agendas for regional cooperation. The role of the institution should be focused on overcoming structural deficiencies in the regional capital markets. It is important that the issues of surveillance and conditionality need to be discussed in the context of implementing region-wide inflation targeting, which can help to stabilize the real exchange rate. The success of the post-CMI would depend on how effectively the arrangement addresses the local issues that could not be handled by the IMF program.