JAKARTA (TheInsiderStories) - Bank Indonesia (BI) signed Bilateral Currency Swap Arrangement (BCSA) with Reserve Bank of Australia (RBA) worth AUS$10 billion (US$7.3 billion). The BCSA was signed by BI Governor Agus Martowardojo and Governor of RBA Glen Stevens on Dec. 15.
The International Department Head of Bank Indonesia Aida Budiman told reporters at the press conference on Tuesday, based on the agreement, both countries can use their currencies to finance the trade and investment transaction starting from the signing of the agreement.
In 2014, total exports of Indonesia to Australia were equivalent $5 billion and import $5.6 billion.
This agreement is designed to promote bilateral trade for the economic development of the two countries. In particular, the agreement will ensure that trade between the two countries can continue to be settled in local currency even in times of financial stress. The agreement can also be used for other, mutually agreed, purposes.
Last month, BI and China also agreed to top up the BCSA valued from $15 billion to $20 billion. The new arrangement is expected to be signed in first quarter of 2016. The current BCSA was renewed for the second time in 2013 after it was established in 2009.
So far, Indonesia has signed BCSA with four countries, namely People’s Bank of China, Bank of Korea, Australia and Japan. All BCSAs last for three years period. The value of BCSA with South Korea valued at $10 billion was signed in 2014, while the value of bilateral swap arrangement with Japan reached $22.76 billion.
Beside BCSA, Indonesia also has signed Bilateral Signed Agreement (BSA) with Bank of Japan valued at $22.76 billion for cash advances and for crisis function in 2013.
“The fund will be used for trade, investment and liquidity support. This action is part of our long-term policy to guard our monetary policy,” she stated.
Aida explained that the step is part of the central bank’s efforts to reduce the US dollar currency in the transaction. Later on, BI will release the rule how to implement the agreement.
Indonesia needs to strengthen its foreign exchange reserves to anticipate the impact of The Federal Reserves normalization policy, to be held this week.
Data from BI show that forex reserves stood at $100.7 billion in October, falling from this year’s peak of $115.5 billion in February and from $112 billion in October last year.
If necessary, the country can access additional funding through the Chiang Mai Initiative Multilateralization scheme — involving ASEAN members, China, Japan and South Korea — and through the World Bank’s deferred drawdown option. (*)