In the early months of 2023, Prime Minister Anwar Ibrahim advocated for a revival of the idea of the “Asian Monetary Fund” at the Future of ASEAN programme in Bangkok. This suggestion came at a time of economic and political turmoil throughout the globe, particularly in Asian region. Recently, the dream of envisioning of the Asian Monetary Fund has been gaining traction. An Asian Monetary Fund would structurally operate to promote regional economic cooperation and provide support in policy coordination in a way that strengthens and fortify the economies of Asian nations by promoting greater economic understanding.

The idea of an Asian Monetary Fund was initially suggested by Japan in 1997 so as to combat the Asian Financial Crisis, an event that significantly destabilized economies throughout Asia—causing the stagnation of national output, inhibiting export and causing the dilution of the value of currencies; injuriously weakening their economic integrity which required years of gradual recovery. In spite of Asian advocacy, the idea of the Asian Monetary Fund was rendered obsolete and it has ever since remained distant from the grasp of Asian nations. The rejection and opposition of the proposed financial institution in question was as a consequence of the perceived threat it was speculated it could direct towards the International Monetary Fund. In what critics have characterized as the implication of an American-centric hegemony on the global order, the claim that was advanced against the Asian Monetary Fund was that it could dilute the significance of the International Monetary Fund.

The International Monetary Fund is a financial agency—coordinated internationally by representatives from each of the 190 member countries—to, in principle, is to afford economic assistance and stability. It serves to fulfil primary functions—surveillance and data collection of the global economies, initiate capacity-building programmes to provide technical financial assistance and policy consultation to member nations and is able to extend financial loans to nations that are ensnared by economic hardship. Member nations contribute towards the IMF financial reservoir; the funds of which are strategically compartmentalized and deployed through financial assistive measures when necessary.

The IMF also assumes a proactive approach to this issue by brokering agreements with affected nations, recommending economic policies that act further to improve economic situations. Think of the IMF as both a consultant and a leading, licensed bank—it offers loans on the condition that strict economic policies it recommends are adhered to.  A prominent example of the IMF offering assistance to a country ravaged by economic chaos was Greece. In 2010, Greece inadvertently experienced a dwindling economy—spiralling into debt and an unsustainable budget deficit. The IMF sought to economically stabilize Greece by offering a multi-billion dollar loan, stipulating that the country had to abide by its policy suggestions.

The IMF’s efforts yielded considerable fruit as their financial assistance ensures that Greece evaded the economic catastrophe. Many criticized the IMF’s severe austere economic and over-extending policies that lead to considerable backlash from the people of Greece. The IMF continues to nevertheless play an extensive role in the international economy and its assistance remains to be depended upon by countries across the world, its function providing to be unequivocally necessary. The suggestion of the Asian Monetary Fund’s role as an international financial institution is a desirable reality for Asian nations sceptical of IMF policies.

Critics have argued that an Asian Monetary Fund could better accommodate the needs of the Asian region by extending an enhanced economic safety net for these nations; allowing them to avoid the structural defects of a western-centric global order such as a global recession and stagnation in international trade.

The IMF’s western-centric perspectives on certain economic issues and its high dependence on the thriving of dollarization may inadvertently cause countries to default on their domestic policies as a form of state-protectionism, causing ruptured geopolitical divides, weakening economic cooperation and creating economic turbulence. The Asian Monetary Function, in its functional operations, is ideal in that it is able to establish appropriate exchange rate policies, monitor currency unions and local currency settlements—minimising reliance on the US dollar, allowing financial trade to prosper and economic activity to operate in a way that is minimally hindered by issues relating to the dollar itself. Through this initiative, Asian economies can focus interruptedly on development.

An Asian Monetary Fund could better gauge the economic interest of Asian nations, establishing an assistive framework that promotes health economic coordination. The Asian Monetary Fund could provide an avenue by which Asian nations could decouple from its economic chastity to the American dollar, establishing a form of economic independence—ensuring that they benefit from the stability of a suitable alternative to the IMF.  Prime Minister Anwar Ibrahim has been quoted to have said that “Asian countries cannot have the international infrastructure being decided by outsiders. We can work with them but we should have our own domestic, regional and Asian strength.” An Asian Monetary Fund ought to have a localized regional focus, ensuring that provides the necessary support aid to Asian nations ravaged with economic difficulty. Such an institution would proactively cooperate with member nations to solve underlying structural challenges of Asian nations in a way that strengthens these networks of nations, avoiding any impositions of any one nation—allowing for a multi-polarity.

The Prime Minister has emphasised the need to have a “buffer” against economic crisis. The looming threat of an economic cold war between the influential global superpowers is placing greater pressure on Asian nations to adapt to the changing climate, exacerbating the volatility of the global economy. The Asian Monetary Fund could allow for the activation of certain policies which would improve economic cooperation, reduce the dependence on other currencies and embolden and enhance monetary policy coordination throughout Asia—strengthening the Asian bloc from threats to its economic security by fortifying itself with regional support and strengthened financial protections. The notion that the AMF could inadvertently create a competitive divide with the IMF is less compelling given the opportunities present for two to serve as mutually complementing entities—serving to assist in a way that is accommodating of the differing economic interest of its member nations. Analysts have observed that the funding capacities of the IMF could restrict the degree of economic assistance afforded, this could be offset through the supplemental monetary aid from the Asian Monetary Fund, diversifying the series of available financial schemes to be accessed.

The global order has seen the transformative decoupling from the American dollar and its global leadership and a progressive vision of an economically stable Asia is inviting significant interest. The effectuation of an Asian Monetary Fund could ensure a multi-polar international order, one that isn’t inherently and structurally prejudiced. The revision that the Prime Minister proposes could be a great safety net for Asia as it heads towards an uncertain future that is susceptible to the challenges of a globalization and a paradigm shift in the global order.

Pravin Periasamy 
Student Researcher, Sunway University

This article was first published in Business Today, 14 May 2023.