Brunei-Singapore Currency Interchangeability Agreement

Currency Interchangeability Agreement

Brunei (in green) and Singapore (in orange) on the world map
Effective	12 June 1967
Parties	Brunei Malaysia (Withdrew in 1973) Singapore

The Brunei-Singapore Currency Interchangeability Agreement, officially as the Currency Interchangeability Agreement, is a monetary agreement between Brunei and Singapore, allowing currencies from the two countries, the Singapore Dollar and the Brunei Dollar, to be exchanged "at par and without charge". The agreement was established in 1967, formerly alongside with Malaysia. Malaysia withdrew from the agreement in 1973.

Under the agreement, the Brunei Darussalam Central Bank and the Monetary Authority of Singapore are required to accept the other currency board's issued currency notes and coins, exchanging them at par and free of charge into their own currencies. Businesses are however not obligated to do so, which they may refuse the other country's currency since, for both nations, the foreign currency is regarded merely as "customary tender."

History

In January 1952, the Board of Commissioners of Currency of Malaya and British Borneo was established to act as the sole currency issuing authority for the Federation of Malaya, Singapore, Brunei, North Borneo, and Sarawak. It issued the Malaya and British Borneo dollar for these countries to share and use.

On 31 August 1957, the Federation of Malaya gained independence from Britain, which later Singapore, North Borneo, and Sarawak were allowed to join the federation to form Malaysia in 1963. Malaysia and Brunei continued to use the Malaya and British Borneo dollar still issued by the Board of Commissioners of Currency of Malaya and British Borneo. Singapore was later expelled from union in 1965, with the now independent country continuing to use the same dollar it had used.

On 12 December 1964, Malaysia decided that it would issue its own currency through Bank Negara Malaysia from 12 December 1966 onwards, meaning that it would withdraw itself from the Board of Commissioners of Currency of Malaya and British Borneo. Malaysia later invited Brunei to accept its currency, which was rejected.

On 12 June 1967, the three countries, Brunei, Malaysia, and Singapore came to agreement of the Currency Interchangeability Agreement, which Brunei and Singapore agreed upon establishing their own currency boards and issue their own currencies, effectively abolishing the Board of Commissioners of Currency of Malaya and British Borneo. A system of free interchangeability of their respective currencies was also agreed upon, which the banks in each country were obliged to accept, at par and without charge, the notes and coins of the other countries. The three countries also agreed to repatriate the currencies of each other's and to receive at par the equivalent in sterling or some other currency agreed upon.

In May 1973, the free interchangeability arrangement between Malaysia and Singapore was terminated by Malaysia unilaterally, with the decision supported by the devaluation of the US dollar against gold and the termination of the Bretton Woods system of fixed exchange rates, to be later known as the Nixon shock. Brunei later decided to continue with the arrangement with Singapore and terminate its arrangement with Malaysia.

In 2007, the 40th anniversary of the agreement was celebrated by the two countries, with both countries jointly issuing a set of two $20 commemorative polymer notes. The set consisted of one Singapore $20 note and one Brunei Darussalam $20 note, with both notes having matching serial numbers. The 50th anniversary was similarly celebrated in 2017, except with $50 notes being issued.

Effects

Besides from the bilateral trade, investment and tourism that was encouraged between the two countries under the Currency Interchangeability Agreement, strong political cooperation was also fostered.

See also

• Singapore Dollar
• Brunei Dollar
• Malaysian Ringgit