FX.co ★ Indonesia and South Korea to launch cross-border settlement in 2024

South Korea and Indonesia have come to the conclusion that it is more convenient to use their national currencies in cross-border settlement than the US dollar. The idea will take effect starting next year.

On December 10, Bank Indonesia and the Bank of Korea announced the next step in the promotion and widespread use of local currencies in cross-border settlement.

At the meeting, they agreed to set up operational guidelines for the framework before launching it in 2024. Analysts suppose that it will simplify trade settlements between Indonesia and South Korea in national currencies, as well as reduce currency risks and costs for businesses. The countries will be able to settle the exchange rates of their national currencies, thus contributing to the development of national financial markets.

BI Governor Perry Warjiyo highlighted that this strategic initiative would enhance the efficiency of transactions, strengthen macroeconomic stability, and foster financial cooperation between the two countries. The South Korean central bank agrees with this, noting that Indonesia's role in the global supply chain in the field of batteries for electric vehicles could hardly be overestimated. Against this background, South Korea’s interest in Indonesia in terms of business is steadily growing.

In addition, the Indonesian authorities have a successful track record in conducting transactions in local currencies with other countries. That is why a similar scheme launched between South Korea and Indonesia is expected to be effective. The central banks of both countries committed themselves to making every effort to achieve this goal. The creation of operational guidelines for the framework will be the first step.