These challenges are more apparent in Asia than anywhere else. While it is comparatively large compared to other regions, the safety net in Asia is fragmented and patchy in its coverage. As of 2016, it consists of the IMF, the Chiang Mai Initiative Multilateralisation (CMIM), the BRICS currency reserve pool, bilateral currency swap lines, domestic foreign exchange reserves and, potentially, the World Bank and the Asian Development Bank, which provided liquidity support during the 1997 Asian financial crisis.
This fragmentation has increased the cost and reduced the efficiency of the safety net in Asia. Issuing high-yielding local currency debt to buy foreign exchange reserves is a costly exercise, which, the Bank of England says, results in an annual cost to emerging economies of about 0.5 per cent of gross domestic product.
Bilateral swaps, while more flexible than institutional arrangements, are selective in terms of which countries receive them, raise moral hazard problems and are less effective when crises afflict multiple countries in the region.
Regional arrangements like the CMIM make imposing conditionality on neighbouring countries politically difficult. Their resource base is far narrower than global institutions, the cost of raising capital is greater, moral hazard is more perverse and their surveillance is less effective.