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BI, Bank of Korea renew currency swap agreement to boost trade, financial stability
Bank Indonesia and Bank of Korea have extended a bilateral currency swap agreement to strengthen their currencies and promote trade.
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The logo of Bank Indonesia marks the gate of the central bank's building in Jakarta. (JP/Rafaela Chandra)
B
ank Indonesia (BI) and Bank of Korea have extended a bilateral currency swap agreement (BCSA) to strengthen the rupiah and the South Korean won and to promote trade.
The arrangement, which was signed by Bank of Korea Governor Juyeol Lee and BI Governor Perry Warjiyo, allows for the exchange of their currencies between the two central banks for up to Rp 115 trillion (US$8.14 billion) or 10.7 trillion won, according to a statement released by BI on Thursday.
The facility will be effective from March 6, 2020, to March 5, 2023, and can be extended by mutual consent.
“Similar to the previous agreement, the purpose of the BCSA is to promote bilateral trade and financial cooperation for economic development of the two countries,” the statement reads.
“In particular, the arrangement will ensure the settlement of trade in local currency between the two countries even in times of financial stress and thus support regional financial stability,” it added.
Trade between the two countries amounted to $1.12 billion in January, making South Korea one of Indonesia’s main trading partners.
South Korea has been hit hard by the COVID-19 outbreak, as more than 5,700 people are infected in the East Asian country as of Thursday and almost 100 nations have limited arrivals from the country. Bank of Korea defied expectations for a cut and instead kept interest rates unchanged in late February even as the pneumonia-like illness spread rapidly and threatened the country’s growth.
Meanwhile, the Indonesian government says it expects the country’s economic growth to slow by between 0.3 to 0.6 percentage points as Chinese expansion is projected to slow by up to 1 percentage point.
Perry projected on Wednesday that Indonesia’s economic growth would slow to 4.9 percent in this year’s first quarter as the virus hit tourism, exports and imports.
“That’s not a doomsday scenario but based on the V-shape scenario we project,” he said. “Recovery is likely to take place in the next six months after bottoming out in February and March.”
The country’s economy, the largest in Southeast Asia, grew by 4.97 percent in last year’s fourth quarter, the slowest pace in three years, as investment and exports cooled. (prm)
