Indonesia, South Korea Agree to Use Local Currency for 2024

Jakarta – Bank Indonesia (BI) and the Central Bank of South Korea (BOK) on Sunday agreed to encourage the use of local currency transactions/LCT. Perry Warjiyo, Governor of BI stated that the implementtaion of LCT between both countres will start in 2024. 

"The implementation of the LCT cooperation, trade between countries can use direct exchange rate quotations provided by banks Appointed Cross Currency Dealer (ACCD)," Warjiyo said in a statement on Sunday. 

"So, it provides options for the business world in carrying out trade transactions and increases transactions efficiency," Warjiyo added. 

Warjiyo hopes that expanding the use of local currency will strengthen macroeconomic stability. Also, this collaboration will strengthen bilateral financial cooperation between the two countries.

On the same occasion, BOK Governor Rhee Chang-yong said that Indonesia is a country that plays an important role in the global supply chain for advanced sectors, such as batteries and electric vehicles. 

Then, South Korean business interest in Indonesia also continues to show an increase. 

With this background, he hopes that the implementation of the LCT framework can have a positive impact on economic development, through increasing bilateral trade and the use of the local currencies of the two countries. 

He also hopes that Indonesia's success in implementing the LCT cooperation framework with several countries can also be applied with South Korea. 

As information, as a first step in implementation, BI and BOK agreed to develop an LCt framework in an Operational Guidelines. 

This initiative is a follow-up to the signing of a Memorandum of Understanding on cooperation in the use of local currency between the two central banks which was agreed in May 2023. 

In its implementation, the LCT framework will facilitate the settlement of cross-border payment transactions in the trade area and is expected to reduce exchange rate risk exposure and costs for business actors and other users. 

The two central banks are committed to implementing the LCT cooperation framework in strengthening cross-border trade, enhancing regional financial market stability, and deepening local currency markets in the two countries. 

This initiative is also in line with financial integration efforts of a number of countries in the region to facilitate wider use of local currencies.