JAKARTA (TheInsiderStories) – Bank Indonesia (BI) and the Monetary Authority of Singapore (MAS) agreed to extend bilateral swap agreements with worth of $10 billion for another year. The extension of this collaboration will be carried out starting November 2019.
The agreement was signed after Annual Leaders Meeting between President Joko Widodo and Singapore Prime Minister Lee Hsien Loong on Tuesday (10/08). Head of state said the continuation of bilateral swap cooperation was one of the three agreements reached with Singapore. He hopes that this collaboration could increase the stability and economic development around the region.
While Lee revealed, this cooperation includes bilateral swap agreements in local currency and repo in US dollars, which BI and MAS signed in November last year. This collaboration is expected to support monetary and financial stability in both countries.
He added, the collaboration between the two central banks also carried out to respond the external conditions in global financial markets that affect all markets in the world including Southeast Asian countries (ASEAN) and Indonesia.
Last September, BI governor Perry Warjiyo and Bank Negara Malaysia’ (BNM) governor Nor Shamsiah Yunus has signed the local currency bilateral swap agreement (LCBSA), which will enable both central banks to access foreign currency liquidity from each other if needed. 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.
The LCBSA allows the central banks to exchange local currencies between up to Rp28 trillion (US$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 bank 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 ($8.96 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: Rp14,100 and THB30.33
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