Wahyu Dwi Anggoro
IDXChannel - Bank Indonesia (BI) and the Bank of Korea (BOK) announced another milestone on10 December 2023, to promote the wider use of local currencies in bilateral transactions at the sideline of a high-level bilateral meeting in Indonesia.
During the meeting, BI and BOK agreed to establish the Operational Guidelines for the local currency transactions framework as a first step, following the signing of a Memorandum of Understanding (MoU) on a cooperation framework to promote bilateral transactions in local currency by both central banks in May 2023.
The framework, scheduled to be operationalized in 2024, will facilitate the settlement of trade transactions between Indonesia and Korea in their local currencies, reducing exposure to exchange rate risks and costs for businesses and other users.
Banks in Indonesia and Korea will be able to quote the local currency pair, enabling businesses and other users to reduce their exposure to exchange rate risks and costs associated with bilateral transactions. This will ultimately contribute to promoting trade between Indonesia and Korea, as well as deepening the financial markets in local currencies in both countries.
"In our ongoing commitment, we are excited to announce our strategic initiative to promote wider use of local currencies in bilateral transactions through the Local Currency Transaction (LCT) framework, which is expected to be implemented in 2024. After the LCT Framework implementation, cross-border trade between Indonesia and Korea can use direct quotations of local currency exchange rates provided by the Appointed Cross Currency Dealer (ACCD) banks under the LCT framework," said BI Governor Perry Warjiyo in a media release.
