Govt to extend currency swap agreement with China

September 08, 2016, 07.54 PM  | Reporter: Asep Munazat Zatnika, Hasyim Ashari, Uji Agung Santosa
Govt to extend currency swap agreement with China


JAKARTA. Government decided to extend the Bilateral Currency Swap Agreement (BCSA) with China until 2019. The extension is expected to strengthen Indonesia resilience in anticipating potential external fluctuation that may drive capital outflow.

Governor of Bank Indonesia, Agus Martowardojo said that Indonesia has signed BCSA with China in 2013. The agreement was initialy scheduled to expire this year, and to be extended until 2019.

“Both countries still need the agreement," Agus told KONTAN on Wednesday (7/9).

Agus plans to have a discussion with Governor of People’s Bank of China (PboC) on the sideline of annual AMF World Bank meeting in Washington DC, the US in October this year.

During presidential visit to China last week, Indonesia has agreed to extend BCSA to the period of 2016-2019. Two countries also agreed to increase the amount of BCSA from RMB100 billion during 2013-2016 period to RMB150 for the period of 2016-2019.

The increase in BCSA value is expected to strengthen national foreign exchange reserves, as well as to increase trading activities between Indonesia and China.

Economist of Bank Permata Josua Pardede said that the BCSA extension will enhance national foreign exchange reserves, mainly in anticipating a condition that may lead to significant capital outflow. For an example, the increase in The Fed’s interest rate. “BCSA may be a buffer to stabilize Rupiah,” Josua said.  Josua projected that Rupiah will be stable at the level of IDR 13,000 - 13,300 per US dollar.

Aside of with China, Bu has also signed an AU$10 billion of BCSA with Reserve Bank of Australia. This agreement had taken into effect since 15 December 2015 until three years after, and can be extended under both partie agreement.

Currently, Indonesia and South Korea are still running BCSA with a worth of 10.7 trillion Won or equivalent with US$10 billion. (Translator: Muhammad Farid)

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