Jakarta and Manila sign repo pact

Jakarta and Manila sign repo pact

JAKARTA (JP): The central banks of Indonesia and the
Philippines signed a memorandum of understanding yesterday,
establishing a repurchasing agreement line which will provide an
alternative source of liquidity for both parties.

The memorandum was signed by Bank Indonesia Governor
Soedradjad Djiwandono and Gabriel C. Singson, Governor of the
Philippine central bank.

A statement from Bank Indonesia said the agreement with the
Philippine central bank was the sixth similar accord concluded
with central banks in the Asia-Pacific region.

Bank Indonesia signed repo agreements with the central banks
of Malaysia, Singapore, Hong Kong, Thailand and Australia last
year.

The repo agreements seem to have been prompted by the massive
speculative attacks on the currencies of Indonesia, Thailand,
Malaysia and Hong Kong early last year which were set off by the
financial crisis in Mexico late in December, 1994.

The agreements increase the ability of the central banks to
intervene in foreign exchange markets by giving them additional
sources of liquidity to draw on to curb speculative attacks on
their own currencies.

Bank Indonesia reiterated the importance of macro-economic
stability for coping with the impact of big capital flows.

"We have also maintained an adequate amount of foreign
reserves, including a standby loan, to meet our international
obligations," the central bank said.

But given the accelerated globalization process of the economy
and the financial markets, the management of economic and
currency stability has now become more complicated, it added.

The repo agreements thus serve as an additional source of
liquidity which can be drawn on whenever required, Bank Indonesia
said. (vin)