RI TURNS TO SWAP DEALS TO BOLSTER FINANCIAL SYSTEM

By Andi Abdussalam          Jakarta, Oct 14 (Antara) - With the global economic climate remaining uncertain, Indonesia has been extending or finalizing agreements on currency swap deals worth US$37 billion with several countries in an effort to shore up its financial system.          Indonesia has extended its bilateral currency swap agreement with China worth 100 billion yuan, or about US$15 billion, and signed similar swap deals with South Korea and Japan. RI's swap deal with South Korea is valued at US$10 billion. The deal with Japan is pegged at US$12 billion.          "By signing currency-swap agreements with the three economic partner countries, the government has received commitments worth US$37 billion for protecting the resilience of foreign exchange reserves," said Difi A Johansyah, Executive Director of the Communication Department of the Indonesian central bank, Bank Indonesia (BI).          BI has adopted the policy as a stand-by measure to strengthen its forex reserves, he added.      "We need to take anticipatory steps in the face of uncertain global economic conditions in the future, including providing a guarantee on the adequacy of foreign exchange reserves," Difi said.          The government has also obtained a standby loan worth US$5.5 billion from multilateral partners to maintain the economic growth rate and ensure macroeconomic stability.            According to Bank Indonesia Deputy Governor Perry Wirjio, BI and the Chinese central bank recently extended their Bilateral Currency Swap Agreement (BCSA) - signed in 2009 - in an effort to strengthen their countries' financial systems.          The agreement extends the previous swap deal, worth Rp175 trillion, between Bank Indonesia and the People's Bank of China. The deal will be valid for three years and can be extended.         On the sidelines of a working meeting with the House Budgetary Body here on October 2, Wirjio had said, "The document for the extension of the agreement was signed yesterday evening."    He said the BCSA was extended to guarantee ready availability of foreign exchange reserves for partner countries, particularly when reserves are needed quickly.         BI Governor Agus Martowardojo has voiced hope that the extension of the Bilateral Currency Swap Agreement with the People's Bank of China will increase the market's confidence in the country's economic standing.          "This cooperation reflects the regional commitment toward facing the current global (economic) uncertainty and will contribute positively toward maintaining domestic macroeconomic and financial stability," he said in a press statement released on the BI website.          The BCSA is a concrete realization of the strengthening of financial cooperation between the Indonesian and Chinese central banks with regard to monetary policy and financial system stability, he added.          Meanwhile, Indonesia and South Korea last week agreed to sign a swap deal worth US$10 billion, or about Rp115 trillion.          "The Bilateral Currency Swap Arrangement is aimed at promoting bilateral trade and strengthening financial cooperation between the two countries," Difi Johansyah said on Sunday.          According to South Korean News Agency Yonhap, the agreement was made between South Korea's Finance Minister Hyun Oh-seok and his Indonesian counterpart during a meeting in Washington on Saturday (local time). Hyun was there to attend the annual meetings of the International Monetary Fund and the World Bank.          "In the face of deepening global economic uncertainty, both sides expect the currency swap line will help stabilize regional financial markets and strengthen economic and financial cooperation between the two countries," it added.          The swap deal with South Korea will also be effective for three years and can be extended if both sides agree, according to the government. The central banks of the two countries will officially sign a deal for the swap line "sooner or later."      The two countries have also agreed to use the currency swap line to settle payments linked to their bilateral trade. They hope the move will reduce their dependence on the US dollar.          The agreement comes as emerging countries, including Indonesia, struggle to curb excessive cross-border capital outflows and currency weakness, sparked by rising speculation over U.S. monetary tapering.          Finance ministers from the two countries had previously discussed the issue at the recent meeting of the G20 group. At the time, the two countries' central banks had not yet reached an agreement on the deal.          Indonesia has also extended its swap deal agreement with Japan recently. The deal came into effect on August 31.          According to Bloomberg.com, Indonesia has extended the US$12-billion swap line with Japan as policy makers try to bolster the rupiah, which has fallen 11 percent this quarter. It has been the worst performer among 24 emerging-market currencies.          Tempo.co online media reported Finance Minister Chatib Basri signed the bilateral swap agreement between Bank Indonesia and the Bank of Japan during the recent G-20 Summit between finance ministers in Moscow, Russia.          The deal was made to protect the Indonesian economy amidst continuing pressure on the trade balance and the rupiah. The government can use the funds when the foreign exchange reserves deplete and there are huge capital outflows.          "The government is also preparing a (contingency fund of) US$5.5 billion," Chatib said.          Speculations that the U.S. Federal Reserve may stop or slow the pace of its bonds and securities purchases have fuelled concerns in the market. Such a policy could easily increase the rate of the dollar outflow, but Chatib calculated that a reserve of $93 billion is still sufficient.     ***3*** (T.A014/INE/H-YH) EDITED BY INE (T.A014/A/BESSR/A/Yosep) 14-10-2013 20:1