JAKARTA (TheInsiderStories) – Bank Indonesia (BI) and the Monetary Authority of Singapore (MAS) officially extend bilateral swap agreement worth of US$10 billion for one year period, the central bank announced on Tuesday (11/05). The cooperation includes local currency bilateral swap agreement with a total amount $7 billion.
The Banks also signed a bilateral repo line worth of $3 billion. With this agreement, the central banks could obtain US Dollar liquidity by guaranteeing G3 government bonds, such as US treasuries, Japanese and German government bonds.
Last September, BI Governor Perry Warjiyo and Bank Negara Malaysia’ governor Nor Shamsiah Yunus also signed the same agreement. Both also signed memorandum of understanding to forge closer cooperation on innovation in payments and digital financial services, as well as surveillance on anti-money laundering and counter financing of terrorism.
With this arrangement, will allowed the central banks to exchange local currencies up to Rp28 trillion ($1.99 billion). This will complement efforts to support the wider usage of local currencies to facilitate cross-border economic activity between Malaysia and Indonesia. The effective period of the arrangement is three years and it can be extended by mutual agreement of the central banks.
The central banks also has signed local currency settlement (LCS) agreement with Thailand’ central bank and gave positive impact on bilateral trade between the two countries. Total transactions in the first two months of 2019 reached THB272 million ($9.01 million). The transactions increased sharply from the same period last year amounting to THB69.5 million.
Through this scheme, Indonesian importers wishing to import goods from Thailand can make transactions using the baht currency through the bank operations of the LCS framework. Conversely, Indonesian exporters can be paid in Rupiah, without convert it into US Dollar.
This cooperation framework will reduce the transaction costs of foreign exchange against the rupiah with a direct price quote between the Rupiah and the partner country’ currency. This is expected to be able to develop financial markets based on local currencies, encourage diversification of currency exposure, and expand access to business actors across the region.
Warjiyo said, since it was implemented on Dec. 11, 2017, the total trade transactions through LCS have shown an increase. Throughout 2018, trade transactions through LCS reached an average of THB130 million per month.
US$1: Rp14,000, THB30.20
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