BI wants currency swap deal not tied to IMF program
Dadan Wijaksana, The Jakarta Post, Yogyakarta
ASEAN central bankers will negotiate for more lenient conditions in the planned multibillion dollar currency swap agreement with Japan, China and South Korea, Bank Indonesia Governor Sjahril Sabirin said on Monday.
Speaking at the end of the first ASEAN Central Bank Governors Forum meeting, Sjahril said that the region's central bankers felt that some conditions under the Asia-wide currency safety net, aimed at fending off future financial crises, would prove hard to bear by certain countries.
"The agreement with Japan for example -- once it is signed -- would only allow us to cash in up to 10 percent of the agreed value of the swap arrangement, while the remainder would be subject to Japan's consideration whether or not Indonesia is committed to its economic reform agreed to with the IMF," he said, referring to the International Monetary Fund.
Indonesia is tied to a three-year US$5 billion reform program.
"We are trying (to negotiate) so that the swap agreement would no longer be tied with such conditions. And other countries seem to endorse our stance," Sjahril said.
The currency swap agreement is part of the Chiang Mai Initiative, which is aimed at setting up a regional currency network to prevent a recurrence of the 1997 Asian economic crisis.
The plan aims to link the international reserves of the 10 Association of Southeast Asian Nations countries -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Singapore and Vietnam -- with Japan, South Korea and China through a set of bilateral foreign exchange deals.
Indonesia, according to Sjahril, is in the process of finalizing $3 billion bilateral currency swap deal.
He said that the negotiation was expected to be concluded in August.
Sjahril said that the agreement would enable the country to ask Japan to provide a certain amount of its dollar reserves whenever Indonesia felt it necessary to strengthen its foreign reserves, currently standing around $30 billion.
When asked if the signing could be sometime in August, Sjahril replied: "Yes, I think it's possible. We're close to finalizing it now."
He added that the country was also planning to make similar deals with China and South Korea.
Japan has signed bilateral currency swap deals with several ASEAN members including Malaysia, Thailand and South Korea.
ASEAN members are still struggling to recover from the regional economic crisis which started in Thailand in July 1997 with the devaluation of the baht.
Meanwhile, the one-day central bankers meeting here was aimed at setting up a special forum for ASEAN central bank governors.
The governors reached a consensus to support the proposal on the establishment of the ASEAN central bank governors meeting, officially called the ASEAN Central Bank Governors Meeting (ACGM). The next meeting will be held in Bangkok.