The United Arab Emirates and Indonesia took a significant step towards boosting trade ties by signing a Memorandum of Understanding (MoU) on May 10th, 2024. This agreement, signed by the Governor of the Central Bank of the UAE, Khaled Mohamed Balama, and his Indonesian counterpart, Perry Warjiyo, paves the way for increased use of local currencies in bilateral transactions.
The MoU comes on the heels of impressive growth in non-oil trade between the two nations, which doubled between 2017 and 2023 to surpass AED 16 billion. This new framework will establish a system for settling cross-border transactions in the UAE Dirham and Indonesian Rupiah, as mutually agreed upon by importers and exporters. The agreement also outlines eligible transactions and paves the way for developing mechanisms to support hedging and managing liquidity in both currencies.
This collaboration marks a significant step forward in strengthening financial ties between the UAE and Indonesia. Businesses can expect to benefit from reduced transaction processing costs as a result of the agreement. The MoU also outlines a plan for the central banks of both countries to work together to promote the use of their local currencies. This initiative extends beyond facilitating trade; it aims to develop financial markets in both nations, ultimately fostering economic growth and financial stability.
“This agreement lays a strong foundation for even stronger partnerships between our nations,” stated Khaled Mohamed Balama. “It will create new business opportunities in the banking and financial sectors, and support further growth in trade and investment.”
Perry Warjiyo, Governor of Bank Indonesia, echoed this sentiment, highlighting the agreement’s potential to deepen financial integration and strengthen economic ties between the two countries. “Local currency transactions will contribute to financial stability and resilience, and foster deeper financial markets to address potential external vulnerabilities,” he said.
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