Jakarta (Indonesia Window) - Bank Indonesia (BI) and Bank Negara Malaysia (BNM) have agreed to exchange local currencies up to 1.91 billion US dollars (RM8 billion or Rp28 trillion).

The two parties signed the bilateral exchange agreement for the local currencies  on Friday, which will allow BI and BNM to access each other's liquidity if needed.

"This will complement efforts to support the wider use of local currencies to facilitate cross-border economic activities between Malaysia and Indonesia," BNM said in a statement reported by Malaysia’s Bernama news agency.

This arrangement is effective for three years and can be extended by mutual agreement.

The agreement, which was signed by BNM governor Nor Shamsiah Yunus and Bank Indonesia Governor Perry Warjiyo, aims to further strengthen bilateral monetary and financial cooperation.

The governors also inked a memorandum of understanding to establish closer cooperation in developing payments and digital financial services, as well as overseeing anti-money laundering and counter terrorism financing.

The agreement reaffirms the commitment of both parties to supporting the development of payment systems and digital financial innovation along with the increasing interdependence in financial service technology.

Recent economic and financial developments, including in the areas of Islamic finance, social financing and financial market development, were discussed at a bilateral meeting held in Kuala Lumpur.

"The central banks expressed their commitment to

strengthening cooperation between the two countries to further enhance financial sector development in achieving sustainable economic progress," BNM said.

Reporting by Indonesia Window