S. Korea, Indonesia launch local currency framework

Bank Indonesia (BI), the Bank of Korea (BOK), and the Ministry of Economy and Finance (MOEF) introduced on Friday a new framework to encourage the use of local currencies for cross-border trade between Indonesia and Korea.

The new initiative is based on a Memorandum of Understanding (MoU) signd in May 2023 and an agreement on Operational Guidelines finalised in June 2024, as per a statement released by the BOK.

This framework represents a significant step in the ongoing efforts to enhance the utilization of local currencies in trade, strengthening bilateral financial cooperation between the two nations.

Under the new framework, Appointed Cross Currency Dealer (ACCD) banks will be empowered to facilitate current account transactions between Indonesia and Korea using their respective local currencies.

This system is expected to reduce costs for businesses and other users engaged in this trade. Key features of the initiative include the promotion of direct quotations between the Indonesian Rupiah and the Korean Won, as well as the relaxation of relevant rules and regulations to encourage the use of local currencies.

The overarching goal of this initiative is to boost trade between Indonesia and Korea, minimise exposure to exchange rate risks, and enhance transaction efficiency in both countries.

To support the implementation of the Rupiah-Korean Won exchange under this initiative, BI and BOK have selected specific banks in both countries to serve as ACCDs, ensuring a smooth transition into this collaborative financial framework.

Attribution: Bank of Korea report

Subediting: Y.Yasser