The Monetary Authority of Singapore (MAS) and Bank Indonesia (BI) yesterday announced that they have established a US$10 billion (S$13.8 billion) bilateral financial arrangement to enable the two central banks to access foreign currency liquidity from each other, if needed, to preserve monetary and financial stability.
Two agreements were signed by MAS managing director Ravi Menon and BI governor Perry Warjiyo, following earlier announcements by Prime Minister Lee Hsien Loong and Indonesian President Joko Widodo at the Singapore-Indonesia Leaders' Retreat on Oct 11.
The two leaders had asked BI and MAS to work out a bilateral financial arrangement that can build confidence in each other's economies.
Said Mr Menon: "Economic fundamentals in the regional economies remain sound. But markets can sometimes overreact in the face of heightened uncertainty. This bilateral financial arrangement will instil confidence among investors. It also reflects the close relationship between Indonesia and Singapore."
Mr Warjiyo said: "The initiative reflects the strengthened bilateral monetary and financial cooperation between Singapore and Indonesia, and indicates the commitment of the authorities of Indonesia and Singapore to maintain financial stability amid the lingering uncertainty in the global financial market."
The arrangement, which will be in place for one year, comprises two agreements. The first is a new local currency bilateral swap agreement that allows for the exchange of local currencies between the two central banks of up to $9.5 billion or 100 trillion rupiah.
The second agreement is an enhanced bilateral repo agreement of US$3 billion that allows for repurchase transactions between the two central banks to obtain USD cash using government bonds of major countries as collateral.
These include US Treasuries as well as Japanese and German government bonds. The amount is a tripling from the current size of US$1 billion.