According to a statement from BI received here on Tuesday, the arrangement will enable the two central banks to access foreign currency liquidity from each other, if needed, to preserve monetary and financial stability.
The bilateral financial arrangement, which will be in place for one year, comprises two agreements.
It includes a new local currency bilateral swap agreement, which allows for the exchange of local currencies between the two central banks of up to SGD 9.5 billion or Rp100 trillion (about $7 billion equivalent).
It also includes an enhanced bilateral repo agreement of $3 billion, which allows for repurchase transactions between the two central banks to obtain dollars using Government Bonds of major countries as collateral. This is an increase from the current size of $1 billion.
The two agreements were signed by BI Governor, Perry Warjiyo, and MAS Managing Director, Ravi Menon. This follows the earlier announcements by Indonesian President Joko Widodo and Prime Minister Lee Hsien Loong 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 serve to build confidence in each others` economies.
"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," Warjiyo noted.
Meanwhile, Menon remarked that economic fundamentals in the regional economies remain sound.
"Markets can sometimes overreact in the face of heightened uncertainty. This bilateral financial arrangement will instill confidence amongst investors. It also reflects the close relationship between Indonesia and Singapore," Menon pointed out.
(A063/INE)
Editing by Sri Haryati
Reporter: Azis Kurmala
Editor: Suharto
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