Indonesia, Singapore central banks extend bilateral financial arrangement again

THE central banks of Indonesia and Singapore have extended their US$10 billion bilateral financial arrangement for another year.

Bank Indonesia and the Monetary Authority of Singapore said in a joint statement on Thursday that the extension has been endorsed by Indonesian President Joko Widodo and Singapore Prime Minister Lee Hsien Loong.

The extension will support monetary and financial stability in both countries amid the Covid-19 pandemic, they said.

This is the second extension to take place since the bilateral financial arrangement's establishment in November 2018 to allow the central banks to access foreign currency liquidity from each other, if needed, to preserve monetary and financial stability.

The arrangement comprises two agreements. The first is a local currency bilateral swap agreement that allows for the exchange of local currencies between the central banks of up to S$9.5 billion or 100 trillion rupiah.

The other is a bilateral repo agreement of US$3 billion that allows for repurchase transactions between the two central banks to obtain US dollar cash using G3 government bonds as collateral. These include US treasuries as well as Japanese and German government bonds.

Bank Indonesia intervened to smooth volatility in the rupiah on Sept 2, as the currency came under pressure on worries about central bank independence, following a proposal to give the government more authority in monetary policy decisions.