JAKARTA (TheInsiderStories) - Governor of Bank Indonesia, Agus D.W. Martowardojo, Indonesia’s Finance Minister, Sri Mulyani, and Japan’s Deputy Prime Minister and Minister of Finance, Taro Aso, agreed to extend the bilateral swap arrangement (BSA) between the two countries. The arrangement was made while attending the IMF and World Bank Annual Meeting in Washington DC, USA, on Oct. 7.
This cooperation also supports the effort to maintain macroeconomic and financial stability in the region and complement existing financial safety net at the regional as well as the global level. The amount of the cooperation is US$22.76 billion.
“The agreement to extend the BSA shows the strengthening of financial cooperation between the two countries. Furthermore, this cooperation indicates the commitment of both authorities to maintain regional financial stability amidst the lingering uncertainty in the global financial market,” according to the governor.
Last year on December, BI has signed Bilateral Currency Swap Arrangement (BCSA) with Reserve Bank of Australia (RBA) worth AUS$10 billion (US$7.3 billion). 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.
Earlier in Nov. 2015, 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.
Indonesia needs to strengthen its foreign exchange reserves to anticipate the impact of The Federal Reserves normalization policy, to be held this week. The country’s foreign exchange reserves rose to $115.7 billion at the end of Sept. 2016, from $113.5 billion at the end of the previous month. Agus sees that Indonesia’s forex reserves could surge to $151.5 billion by the end of 2017, partly because of inflows generated by the tax amnesty program. (*)