Indonesia, UAE sign agreement to use local currencies for trade

Image credit: WAM

The central banks of the UAE and Indonesia have signed an MoU, paving the way for the establishment of a framework that promotes the use of local currencies for bilateral trade between the two countries.

The agreement between the Central Bank of the UAE (CBUAE) and Bank Indonesia (BI) defines a framework that facilitates the settlement of cross-border trade transactions in local currencies – the UAE dirham and the Indonesian rupiah.

“This agreement constitutes a strong basis for strengthening future partnerships between both parties, laying the ground for more business opportunities in the banking and financial sector and supporting trade and investment growth,” said Khaled Mohamed Balama, governor of the CBUAE.

CBUAE said the MoU also outlines the types of eligible transactions and allows for developing the conditions to support hedging and liquidity management activities in dirham and rupiah.

The central banks agreed to promote the use of national currencies by supporting the gradual implementation of the framework, which aims to develop financial markets to support economic growth and financial stability.

Dirham-rupiah trade is expected to help reduce transactional costs for businesses while strengthening bilateral financial cooperation. The partnership between the two countries witnessed significant growth in non-oil trade, doubling between 2017 and 2023 to reach more than Dhs16bn.

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