Jakarta. The central banks of Indonesia and Australia recently renewed their bilateral currency swap arrangement by another five years.

The deal allows Bank Indonesia (BI) and the Reserve Bank of Australia (RBA) to acquire each other's currency for up to 10 billion Australian dollars, or the equivalent of $6.2 billion. The swap ensures both countries can settle trade in local currencies, thus reducing their reliance on American dollar.

"The renewal reflects the long-standing financial cooperation between BI and RBA. [It] indicates the strong commitment of both central banks to further promote bilateral trade and investment ... [as well as] contribute to financial stability," RBA wrote on a recent press release.

The swap arrangement with Australia dates back to 2015 -- the year the initial deal got signed. The central banks at the time agreed to have an exchange of up to 10 billion Australian dollars or around Rp 100 trillion for three years. The deal was renewed for three years in 2018 and 2022. This marks the first time the facility has gotten a five-year extension. The banks never raised the 10 billion Australian dollar cap in each renewal. 

Government data shows Indonesia-Australia trade had soared from about $12.5 billion in 2023 to nearly $15.4 billion the following year. But Indonesia is importing more than it exports to its close neighbor. The Southeast Asian country recorded a nearly $5.5 billion deficit when trading with Australia in 2024.

BI has struck currency swap arrangements with its counterparts around the world. Just last month, BI extended a similar deal with its Chinese counterpart, the People's Bank of China, for another five years. They agreed to exchange local currencies with a value of up to 400 billion Chinese yuan ($55 billion) and the corresponding Indonesian rupiah.

China is Indonesia's top trading partner. Bilateral trade almost reached $135.2 billion throughout 2024, the government reported.