Indonesia and China Extend $55 Billion Currency Swap Agreement

JAKARTA, Investortrust.id – Bank Indonesia, the country central bank, and the People’s Bank of China, or PBOC, have agreed to extend their Bilateral Currency Swap Arrangement, BCSA, for another five years, with a total value of $55 billion. The agreement, signed by Bank Indonesia Governor Perry Warjiyo and PBOC Governor Pan Gongsheng, officially took effect on Jan. 31, 2025.

According to Ramdan Denny Prakoso, Head of Bank Indonesia’s Communication Department, this agreement allows both central banks to exchange local currencies, enabling smoother trade and investment transactions between the two nations. 

He stated that this extension continues a partnership that began in 2009 and has been renewed multiple times, complementing the Local Currency Transaction (LCT) framework introduced in 2021, which has become the primary settlement mechanism for bilateral trade and investment.

Enhancing Bilateral Trade and Financial Stability

Both central banks are committed to boosting trade and direct investment in local currencies while reinforcing financial market stability. The extended BCSA also aligns with Bank Indonesia’s broader policy mix, particularly in strengthening foreign exchange reserves and external sector resilience.

"Renewing this agreement underscores the significance of international cooperation as part of BI’s broader monetary, macroprudential, and payment system policies. It also plays a crucial role in developing local currency-based transactions between the two nations," said Denny.

Record High Foreign Exchange Reserves

The currency swap renewal comes as Indonesia’s foreign exchange reserves reached a new record of $156.1 billion at the end of January 2025, up from $155.7 billion in December 2024. The increase was driven by government global bond issuance and tax and service revenue, amid ongoing rupiah stabilization measures in response to persistent global financial market uncertainty.

As of January 2025, Indonesia’s forex reserves are sufficient to cover 6.7 months of imports or 6.5 months of imports and government foreign debt payments, well above the international adequacy standard of three months of imports.

Bank Indonesia views this reserve level as sufficient to support external sector resilience and maintain macroeconomic and financial stability. "Going forward, BI expects that positive export prospects and a continued surplus in the capital and financial account—driven by investor confidence and attractive investment returns—will sustain external resilience," Denny concluded.

BI also continues to work closely with the government to strengthen external resilience, ensuring economic stability and supporting sustainable economic growth.