UAE, Indonesia Sign Pact To Boost Trade With Local Currencies

In a significant move to bolster economic ties, Khaled Mohamed Balama, Governor of the Central Bank of the UAE, and Perry Warjiyo, Governor of Bank Indonesia, have inked a Memorandum of Understanding (MoU) aimed at enhancing trade relations through the promotion of local currency use in bilateral transactions. This strategic partnership underscores a robust growth trajectory in non-oil trade between the UAE and Indonesia, which has seen a remarkable doubling from 2017 to 2023, reaching over AED16 billion.

The MoU establishes a comprehensive framework designed to facilitate the settlement of cross-border trade transactions using the UAE Dirham and the Indonesian Rupiah. This initiative not only simplifies trade activities between the two nations but also introduces measures to support hedging and liquidity management in AED-IDR transactions. The agreement is poised to significantly reduce transaction processing costs for businesses, marking a pivotal step in fortifying bilateral financial cooperation.

Both central banks commit to a collaborative effort towards the gradual implementation of this framework, with an overarching goal of fostering financial market development. This endeavor is expected to spur economic growth and enhance financial stability in both countries. Khaled Mohamed Balama expressed optimism about the agreement's potential to pave the way for increased business opportunities within the banking and financial sectors, thereby stimulating trade and investment expansion.

Perry Warjiyo echoed similar sentiments, highlighting the importance of local currency transactions in promoting financial stability and resilience. He emphasized that this cooperation would deepen financial integration and fortify economic relations between the UAE and Indonesia, especially in addressing external vulnerabilities.

This groundbreaking collaboration between the Central Bank of the UAE and Bank Indonesia sets a new benchmark in international financial partnerships. By prioritizing the use of local currencies for bilateral transactions, both nations are taking significant strides towards achieving economic resilience and stability, benefiting businesses and economies at large.

With inputs from WAM