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BI joins three other central banks to boost local currency transactions
The agreement between Band Indonesia, Bank Negara Malaysia, Bangko Sentral ng Pilipinas and Bank of Thailand was inked on the sideline of a meeting among ASEAN finance ministers and central bank governors in Chiang Rai, Thailand.
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The Bank Indonesia (BI) logo. (Shutterstock.com/Harismoyo )
B
ank Indonesia (BI) and the central banks of the Philippines, Malaysia and Thailand signed on Friday a deal on a local currency settlement (LCS) framework in an effort to boost the use of local currencies for their respective bilateral trade transactions.
The agreement between BI, Bank Negara Malaysia, Bangko Sentral ng Pilipinas and Bank of Thailand was inked on the sideline of a meeting among ASEAN finance ministers and central bank governors in Chiang Rai, Thailand.
Three letter of intent (LoI) were signed by the participating central bank governors, including BI Governor Perry Warjiyo.
“The agreement reflects a mutual interest among the four central banks and as part of the effort to establish an LCS framework in the four countries,” said BI spokesman Onny Widjanarko as quoted by tempo.co on Friday.
He said the LCS framework was expected to facilitate more efficient economic and financial activities among the four countries and expand the use of existing LCS frameworks, based on an agreement signed in 2016 by the central banks of Indonesia, Malaysia and Thailand.
Since then, the three countries have encouraged the use of local currencies for their bilateral trade transactions.
Indonesian transactions that use the Thai baht increased to US$13 million in the first quarter of 2019 from $7 million in the same period, last year, while transactions using Malaysia’s ringgit reached $70 million in the first quarter of 2019, up from $6 million in the same period in 2018.
“The cooperation will benefit business players by reducing transaction costs and more efficient trade settlements,” Onny said, adding that such transactions would also reduce the countries’ dependency on the US dollar and subsequently the impact of external pressures.
He also said the agreement was expected to encourage the use of local currencies among ASEAN members and accelerate financial and economic integration among Southeast Asian nations. (bbn)
