Indonesia, Malaysia Strengthen Local Currency Exchange Agreement

Jakarta, VIVA – Bank Indonesia and the Central Bank of Malaysia have officially strengthen their bilateral swap arrangement in local currencies (Local Currency Bilateral Swap Arrangement - LCBSA).

With this renewal, local currency exchanges can reach up to RM24 billion or IDR 82 trillion.

The agreement was signed by Bank Indonesia Governor Perry Warjiyo and Bank Negara Malaysia Governor Dato' Seri Abdul Rasheed Ghaffour during a high-level bilateral meeting.

"The renewal of the LCBSA allows local currency exchanges between the two central banks up to RM24 billion or IDR 82 trillion for the next five years," Warjiyo said in his statement on Friday (Sept 27).

During the bilateral meeting, the leaders of the two central banks discussed policy directions covering macroeconomic, monetary, and financial issues, payment systems and digitalization, as well as strategies to advance Islamic finance.

"Bank Indonesia looks the enhancement of the bilateral swap arrangement in local currencies (LCBSA) with the Central Bank of Malaysia as representing the important role of international cooperation as part of Bank Indonesia's policy mix supporting its key policies," Warjiyo remarked.

He added, "The key policies span monetary, macroprudential, and payment systems, while at the same time contributing to the development of local currency transactions between the two countries,"

At the same time, Bank Negara Malaysia Governor Dato' Seri Abdul Rasheed Ghaffour welcomed the agreement to continue cooperation with Bank Indonesia.

This is due to the increasing trade and financial interconnectivity between Malaysia and Indonesia.

"We welcome the agreement to continue cooperation with BI through the renewal of this LCBSA," Ghaffour said.

"The LCBSA cooperation complements the existing Local Currency Transaction (LCT) framework, which is now the main scheme for settling trade and investment transactions in the currencies of each country," he continued.

The strengthen of the LCBSA between Bank Indonesia and the Central Bank of Malaysia reflects the shared aspirations of both parties, after the LCBSA cooperation was first implemented in 2019 and extended in 2022.

It's part of ongoing efforts to strengthen the longstanding cooperation between the two central banks.

This agreement reflects collaborative efforts to bolster external resilience while supporting the use of local currencies in trade and investment transactions between the two countries.