Indonesia and South Korea set to launch local currency trade in 2024

Indonesia and South Korea have finalized operational guidelines for a new local currency transactions (LCT) framework slated to begin in 2024, marking a significant step towards stronger financial integration between the two nations. The initiative will enable direct trade transactions between the Indonesian Rupiah (IDR) and the South Korean Won (KRW), streamlining cross-border payments and reducing foreign exchange risks associated with trade.

The LCT framework is a result of a memorandum of understanding signed in May by Bank Indonesia (BI) and the Bank of Korea (BOK). This agreement is set to foster economic stability within Asia’s financial landscape by minimizing dependency on major currencies like the US dollar for bilateral trade settlements.

Both central banks have expressed their commitment to this initiative, which is expected to bolster trade promotion, deepen financial markets, and stabilize regional economies. Banks will provide quotes for IDR-KRW currency pairs, thereby diminishing forex risk and costs associated with currency conversion.

BI Governor Perry Warjiyo has highlighted the potential benefits of more efficient bilateral trade under the new framework. BOK Governor Rhee Chang-yong has also emphasized the contribution this collaboration will make toward macroeconomic resilience.

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