Bank Indonesia and Bank of Korea have agreed to renew a bilateral local currency swap agreement. This is said to be up to 115 trillion rupiahs or a value of 7.52 billion dollars. Apart from that, the Indonesian Central Bank also added that the agreement will last until 2026.

The Indonesian central bank said in a statement on Monday that an agreement will last until March 2026. This statement summarizes that South Korea and Indonesia have renewed their currency swap agreement worth more than 8 billion US Dollars.

This agreement is designed to help promote trade between countries and impact financial stability. The Bank of Korea is said to be reasonably confident about this. Meanwhile, it will help the exchange up to 10.7 trillion won or 8.26 billion dollars.

The swap deal was first approved in 2014 and renewed in 2017 and 2020. Because the effect of the economic cooperation between the two central banks has had quite a good impact, this cooperation extended again, at least until March 2026, starting Monday.

Bank Indonesia and Bank of Korea Renew Bilateral Local Currency Swap Agreement

The local currency swap aims to prepare the countries for liquidity crunches. This cooperation also made the two central banks borrow money with their currencies. Meanwhile, the Korean Central Bank does not only carry out this cooperation only with Bank Indonesia.

South Korea also has currency swap agreements with seven other countries, including China, Canada, Switzerland, Australia, Turkey, United Arab Emirates, and Malaysia.

The impact of this cooperation is that transactions borrowing money from Won or Rupiah do not have to be in Dollars. BI Governor Perry Warjiyo and Bank of Korea Governor Chang Yong signed this agreement on Monday.

With the extension of the Bilateral Currency Swap Arrangement / BCSA agreement, transactions between the two countries can only use their respective currencies.

This makes using the Rupiah and Korean Won more frequent, and the use of Dollars in these two countries becomes smaller. However, from this latest collaboration, there are transaction limits.

The two central banks agreed to limit the transaction limit to 10.7 trillion Won or 115 Trillion Rupiah. In its statement, Bank Indonesia stated that this agreement aims to encourage bilateral trade.

It also will strengthen financial cooperation that is beneficial for the economic development of Indonesia and South Korea, including cooperation in the financial sector.

"Specifically, this cooperation will support the completion of trade transactions, especially the use of local currencies between the two countries, even though they are in a crisis. However, this will be useful for supporting regional financial stability," wrote the BI website.

Various economic experts also welcomed this news positively because it was seen as a sign of the strong economic relations. However, the Indonesian bank is also not expected to be too confident because it is stated that Indonesia's inflation rate is still alarming.

Indonesia's Inflation Remains at More than 5% in the First Half, Which is not Good News for Indonesia

This time, the focus of attention is Bank Indonesia's projects related to annual inflation in the first half of this year. It is stated that it will still hover above 5% in a year-on-year comparison. This projection is said to be a setback for a sense of optimism from BI.

The Bank Indonesia governor also stated that the central bank must work hard to reduce the inflation rate. This is focused on food-related price surges. Furthermore, as predicted, it could go up to 5.1 per cent due to consumer spending and high exports to India and China.

Bank Indonesia and Bank Korea agreed to continue economic cooperation. This collaboration is carried out by borrowing money between Rupiah and Won, which does not require US Dollars. It is also stated that this agreement will last until March 2026, 3 years from now.