Indonesia Extends Bilateral Swap Agreement with the Bank of Korea

Bank Indonesia (BI) and the Bank of Korea signed an extension of their bilateral currency swap arrangement (BCSA) on Monday (March 6). The agreement, worth 10.7 trillion won (approximately Rp 115 trillion), was signed by BI Governor Agus D.W. Martowardojo and Bank of Korea Governor Juyeol Lee.

This bilateral agreement guarantees the settlement of trade transactions in local currencies between the two countries, even during times of crisis. This is done to support regional financial stability. The agreement is effective for three years and can be extended by mutual agreement. Its purpose is to maintain rupiah stability in anticipation of potential US Federal Reserve (The Fed) interest rate hikes that could strengthen the US dollar.

In addition to the Bank of Korea, BI also has swap agreements with the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ). In December 2016, BI also signed a memorandum of understanding with Bank Negara Malaysia (BNM) and the Bank of Thailand (BOT) to promote bilateral trade settlement and direct investment in local currencies (local currency settlement). Meanwhile, the bilateral cooperation with the People's Bank of China (PBOC), worth Rp 175 trillion, which expired in December 2016, has not been renewed.