‘Bury’ US Dollar, Indonesia and South Korea Agree to Dedollarization

JAKARTA – After Malaysia, Thailand, Japan, and China, now Indonesia has started cooperation with South Korea to encourage trade and investment transactions with each country’s local currency without using the US dollar.

Bank Indonesia (BI), Bank of Korea (BOK), and the Korean Ministry of Finance agreed on a Local Currency Transaction (LCT) cooperation framework to encourage the use of local currencies Rupiah-Won for trade transactions between Indonesia and South Korea today, Friday (30/8/2024).

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The move is a follow-up to the Memorandum of Understanding (MoU) signed in May 2023 and the operational framework agreement in June 2024.

“The Indonesia-South Korea LCT framework will be implemented effectively starting September 30, 2024,” wrote BI’s official statement.

The implementation of the LCT framework between Indonesia and South Korea is an important achievement in bilateral financial cooperation between the two countries.

The LCT framework will strengthen the interconnection of Appointed Cross Currency Dealer (ACCD) banks in facilitating current transactions between countries using local currencies.

This cooperation also encourages direct exchange rate quotation between IDR and KRW as well as relaxation of the provisions needed to encourage the use of LCT.

“Going forward, the implementation of the LCT framework will encourage increased bilateral trade transactions, reduce exposure to exchange rate risk, and increase transaction efficiency,” BI explained.

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