Trade transactions between Indonesia and South Korea will start to use rupiah and won as substitutes for the US dollar.
This agreement was made at a meeting between Bank Indonesia (BI) and the Bank of Korea, on the sidelines of a panel of finance ministers and ASEAN Plus Three central bank governors in South Korea.
BI Governor Perry Warjiyo and Bank of Korea Governor Rhee Chang Yong officially signed the agreement in the form of a memorandum of understanding between the two countries. This collaboration marks an important achievement in strengthening financial cooperation between the two countries.
“This agreement will encourage the use of each country’s local currency in bilateral transactions between Indonesia and South Korea, such as current account transactions, direct investment, and other economic and financial transactions that will be agreed upon by the two authorities,” wrote an official statement on the BI website, quoted on Tuesday 2nd May 2023.
BI said that business actors can take advantage of this collaboration to reduce transaction costs. Entrepreneurs can reduce their exposure to exchange rate risk in conducting bilateral transactions between the two countries through the use of direct exchange rate quotations between the won and the rupiah in interbank trade.
The two central banks emphasised that they would continue strengthening this cooperation through information sharing and regular discussions. BI and the Bank of Korea note that this collaboration will make a significant contribution going forward.
“The wider use of each country’s local currency for bilateral transactions will ultimately contribute to promoting trade between Indonesia and South Korea, as well as deepening financial markets in local currencies in both countries,” said BI.