Jakarta, Sep 27 : The central banks of Indonesia and Malaysia here on Friday renewed their local currency bilateral swap agreement, also known for its abbreviation as LCBSA, of up to $5.42 billion.

According to a joint statement released by Bank Indonesia (BI) and Bank Negara Malaysia (BNM) on Friday, the agreement renewal is effective for five years, Xinhua news agency reported.

The renewal reinforces the ongoing cooperation between the central banks.

The banks' first agreement was signed in 2019 and was extended in 2022.

"Bank Indonesia views the enhancement of cooperation in the LCBSA agreement with BNM as representing an important role of international cooperation as part of Bank Indonesia's policy mix that supports key policies in the monetary, macroprudential, and payment systems sectors, while at the same time contributing to the development of local currency-based transactions in both countries," BI Governor Perry Warjiyo said in a statement.

In the bilateral meeting, BI and BNM also discussed policy directions covering macroeconomics, monetary and finance, payment systems and digitalization, as well as strategies to advance Islamic finance.

"As trade and financial interconnection between Malaysia and Indonesia increases, we welcome the agreement to continue cooperation with BI through the renewal of the LCBSA agreement. The LCBSA cooperation complements the existing Local Currency Transaction (LCT) cooperation and is currently the main scheme in settling trade and investment transactions in each country's currency," BNM Governor Dato Seri' Abdul Rasheed Ghaffour said.

/IANS