The central banks of Indonesia and Singapore said last week that they had agreed to a bilateral deal for a $10 billion backstop to help maintain monetary and financial stability after a recent bout of turbulence in markets. The pact, which will be in place for one year, comprises a local currency swap agreement of around $7 billion equivalent and another $3 billion that allows for repurchase transactions between the two central banks to obtain United States dollar cash using government bonds of major countries as collateral.
Bank Indonesia has been recently intervening to stabilize its rupiah, which fell to 20-year lows against the US dollar amid a global rout in emerging markets.
“Economic fundamentals in the regional economies remain sound. But markets can sometimes overreact in the face of heightened uncertainty. This bilateral financial arrangement will instill confidence amongst investors,” said Ravi Menon, managing director of the Monetary Authority of Singapore.