Bilateral Swap Cooperation Between BI and Japans Central Bank

TEMPO Interactive, Jakarta:Bank Indonesia (BI) and Japans central bank have started a bilateral swap cooperation under they will provide liquidity shortage support of up to US$3 billion. This cooperation is intended to support the central bank when there is a balance of payments problem. So, both banks support each other, Jannes Hutagalung, Deputy to the Coordinating Minister for Economy, told reporters at the Finance Ministry in Jakarta on Thursday (30/1). He said the two sides reached the agreement in Bali recently as a follow up to the Chiang Mai Initiative, an agreement between several Asian countries. Jannes went on to say some Asian countries feel that an exchange program or the provision of short-term liquidity is necessary to support central banks following the Asian financial crisis. The swap is considered as debt, so if a central bank has enough foreign exchange, it will pay [the debt], he said. Jannes said the swap initiative was not included in the IMF program but there have been similar cooperation agreements between Asian countries, such as Japan, Thailand and Korea. The amount of liquidity assistance depends on the condition of each central bank. According to Jannes, the short-term liquidity would increase foreign exchange supply at the Bank Indonesia. However, it will less work for a long-term liquidity, especially if IMF ends its term in Indonesia. In order to increase the supply of foreign exchange, we have to increase exports and capital flows, he said. (Dara Meutia Uning --- TNR)