Sept. 24 (Bloomberg) -- Indonesia said it will seek to enlarge bilateral swap agreements with its north Asian neighbors as Southeast Asia’s biggest economy battles a slumping currency.
The country plans to boost swap arrangements to almost $40 billion by signing deals with China and South Korea and increasing an existing agreement with Japan, Industry Minister M.S. Hidayat told reporters in Jakarta after meeting with the central bank today. It may sign an agreement with China next month when President Xi Jinping visits Indonesia, he said.
Indonesia’s rupiah fell to the weakest level since April 2009 today, extending a slump that’s made it the worst-performing emerging-market currency this year as a record current-account deficit and the prospect of reduced U.S. stimulus spurred outflows. The government will also unveil an easing of investment rules in a few weeks, Finance Minister Chatib Basri said separately today.
No discussion on a bilateral swap agreement with Indonesia is taking place, according to two officials at Korea’s finance ministry, who asked not to be named because of the potential sensitivity of the issue. The two officials spoke after the Indonesian minister’s remarks today.
Bank of Korea Governor Kim Choong Soo said Sept. 12 he wasn’t aware of any request from Indonesia for a currency swap line, and his country will make a decision if such a proposal comes up.
“The central banks of the two countries have been in a pretty close relationship,” Kim said then. “We share the need of more exchanges at the central bank level in line with growing economic ties.”
The People’s Bank of China didn’t immediately respond to a faxed request for comment. Indonesia may extend a bilateral swap agreement with China, Bambang Brodjonegoro, head of fiscal policy at the finance ministry, said earlier this month.
The rupiah declined 0.2 percent to 11,470 per dollar as of 5:42 p.m. in Jakarta, after reaching 11,586 earlier, prices from local banks show.
Indonesia extended a $12 billion swap line with Japan last month as policy makers tried to bolster a rupiah that has fallen 16 percent this year, the worst performance among 24 emerging-market currencies tracked by Bloomberg. India also reached an agreement with Japan this month to more than triple its bilateral currency-swap line as it seeks to buoy the rupee.
Indonesia and China in 2009 agreed on a three-year 100 billion yuan ($16 billion) currency swap to ease foreign-exchange shortages and aid bilateral trade and investment. Xi is due to visit Indonesia to meet President Susilo Bambang Yudhoyono on Oct. 2, according to the Indonesian presidential office.
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