Indonesia, RoK to use local currencies for transactions

Bank Indonesia Governor Perry Warjiyo (right) shakes hands with Bank of Korea Governor Rhee Chang-yong (Photo:kompas.id)

Jakarta (VNA) – Bank Indonesia (BI) and the Bank of Korea (BOK) on December 10 embarked on a groundbreaking collaboration aimed at utilising local currencies for financial and economic transactions.

The initiative, referred to as a Local Currency Transaction (LCT) framework, is slated for implementation by 2024. The objective of this venture is expected to streamline cross-border payment settlements in trade and to minimise the exposure to exchange rate risks and costs for businesses and other users.

The two banks signed a memorandum of understanding in Seoul in May to lay out a framework for KRW-IDR transactions for direct investment, as well as other functions.

BI Governor Perry Warjiyo affirmed that the initiative aims at encouraging the use of local currency through the LCT framework.

According to him, through the implementation of this LCT cooperation framework, trade between Indonesia and the RoK can use direct exchange rates provided by Appointed Cross-Currency Dealers (ACCDs). This will provide more options for businesses and increase transaction efficiency while strengthening bilateral financial cooperation between the two countries.

BOK Governor Rhee Chang-yong highlighted the strategic role of Indonesia in the global supply chain, particularly in advanced sectors like batteries and electric vehicles. The LCT framework is expected to further fuel this trend. The use of local currencies in transactions is anticipated to bolster macroeconomic stability and financial cooperation between Indonesia and the RoK.

Although the LCT initiative between BI and BOK is the first of its kind, it is not the first time a local currency transactionframework has been implemented. BI has previously rolled out similar frameworks with other Asian countries, including Malaysia, Thailand, Japan, and China./.