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India-Japan to sign currency swap agreement
New Delhi, March 28, 2008
The government Thursday approved a proposed currency swap
agreement with Japan to exchange USD 3 billion to safeguard
the economy from any future balance of payment of crisis.
The government will authorise the reserve bank to sign a
currency swap agreement with Bank of Japan to exchange USD 3
billion against rupee or yen for mitigating short term balance
of payment problem.
"It is an additional arrangement outside IMF (International
Monetary Fund) to meet for short term liquidity in USD during
a balance of payment crisis," an official spokesperson told
reporters after the cabinet meeting.
In August 2007, during the visit of then Japanese Prime
Minister Shinzo Abe to New Delhi, India and Japan had agreed
to sign a bilateral agreement on currency swap, which will add
to a regional network of such accords designed to provide
emergency financial liquidity to either or both parties in
times of currency market or other turbulence.
Sources said with around USD 300 billion Forex reserves, there
is distinct possibility that provisions of proposed agreement
would be ever operationalised in near future, but it will
provide a cushion to the government to face any financial
crisis like the one happened in eastern countries in late 90s.
As per the proposed agreement, India and Japan will help each
other if their currencies were to come under the attack of
speculators.
Japan has swap deals with other Asian countries like Thailand,
Korea, China, Malaysia, Philippines, Singapore and Indonesia.
In some cases, the swap is one way, while in some others it is
two-way.
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