Indonesia Signs Currency Swap Deal with Korea
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Bank Indonesia (BI) and the Bank of Korea signed a bilateral currency swap arrangement (BCSA). Through the deal, both central banks will be able to swap currencies for a value of KRW 10.7 trillion or Rp115 trillion.
The agreement was signed by BI governor Agus D.W. Martowardojo and Bank of Korea governor Lee Ju-Yeo, March 6. Agus said the BCSA extension will economic ties between the two nations through the use of their respective currencies.
“The goal is to reduce our dependency on using a certain currency,” Agus said on Monday, March 6, 2017.
According to Agus, the BCSA is part of the government’s initiative to deepen the financial market and support economic defense “especially in facing today’s economic uncertainties,” Agus said.
The BCSA also guarantees the use of Indonesia and South Korea’s currencies in trading, to support the regional financial stability.
Agus said the deal is valid for three years and can be extended if the two countries agree.
The first BCSA between BI and Bank of Korea was signed on March 6, 2014, based on economic ties—especially in trade—between the two nations.
South Korea is Indonesia’s fourth import destination with an average market share of 6.5 percent a year from 2010-2015. Korea is also Indonesia’s sixth export destination, with an annual market share of 6.8 percent in the same period.
However, most transactions are denominated in US dollar. “That’s why we need to diversify the use of our own currency when trading with regional countries, to stabilize the rupiah,” Agus said.
Questions & Answers
Q.What is the primary value of the currency swap arrangement between Indonesia and Korea?
What is the primary value of the currency swap arrangement between Indonesia and Korea?
The bilateral currency swap arrangement allows the central banks to exchange currencies up to a value of KRW 10.7 trillion or Rp115 trillion. This facilitates transactions and trade between the two nations.
Q.When was this specific currency swap agreement signed and for how long is it valid?
When was this specific currency swap agreement signed and for how long is it valid?
This agreement was signed on March 6 by both central bank governors. It is valid for three years and can be extended if both countries agree, continuing the earlier arrangement.
Q.What is the main goal of this currency swap arrangement for Indonesia?
What is the main goal of this currency swap arrangement for Indonesia?
The primary goal is to reduce Indonesia's dependency on a single currency, supporting economic defense and market deepening. It aims to diversify currency use for trade, especially with regional partners.
Q.Why is diversifying currency use important for Indonesia, according to Governor Agus?
Why is diversifying currency use important for Indonesia, according to Governor Agus?
Diversifying currency use when trading with regional countries helps stabilise the rupiah. Most transactions between Indonesia and South Korea are currently denominated in US dollars, which this deal aims to change.
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