February 09th, 2009 | Shanghai Daily Central banks agree to US$12b swap pact
The Chinese and Malaysian central banks agreed on a 80-billion-yuan (US$12 billion) currency swap after the ringgit weakened and Malaysia’s foreign reserves slumped 26 percent in less than six months.
The three-year arrangement with China, which has the world’s largest currency reserves at US$1.95 trillion, may be extended, Bank Negara Malaysia, the country’s central bank, said in a statement on its Website yesterday.
The agreement comes less than three weeks after China’s central bank and the Hong Kong Monetary Authority agreed on a 200-billion-yuan currency swap to help ease cash shortages. Malaysia is bolstering its access to funds as it seeks to avoid joining neighboring Singapore in recession, Bloomberg News said.
“This arrangement is designed to promote bilateral trade and investment for economic development of the two countries,” Malaysia’s central bank said in its statement. The People’s Bank of China’s Website published the same details of the swap.
Malaysia’s gold and foreign exchange reserves fell to US$91.3 billion on January 30 from US$123.7 billion on August 15 last year. The ringgit has lost 8.2 percent in the past six months against the US dollar.
Finance ministers from 13 Asian nations, including South Korea, Japan and China, agreed in May to create a pool of at least US$80 billion in foreign-exchange reserves to be tapped to protect their currencies. In December, South Korea agreed on bilateral currency swap accords with Japan and China. The won has tumbled 25.7 percent against the US dollar in the past six months.
Malaysia’s government is planning a second stimulus package for the US$181-billion economy after announcing measures worth 7 billion ringgit (US$2 billion) in November. Citigroup Inc expects the domestic economy to enter recession in the first half of this year.
Malaysia may miss the government’s forecast for 3.5 percent growth this year and the economy may start to contract, the Edge weekly newspaper reported yesterday, citing Zeti Akhtar Aziz, governor of the country’s central bank.