On Friday (25/08), Indonesia, Malaysia and Thailand reached an agreement to advertise the usage of national currencies in transactions between the countries. Bank Indonesia (BI), Bank Negara Malaysia (BNM) and Bank of Thailand (BOT) issued a joint statement saying that three memorandums of understanding (MoUs) have been signed. These agreements will establish cooperation to advertise local currency transactions between the three countries.
Expanding this cooperation is according to Indonesia’s priorities during its ASEAN Chairmanship in 2023, which include the mixing of economic sectors in ASEAN member states. The move comes according to the pace at which Indonesia signed cooperation throughout the tenth meeting of ASEAN finance ministers and central bank governors in Jakarta.
This agreement replaces the previous local currency settlement framework agreements signed by the three central banks on 27 August 2015 and 23 December 2016.
The latest agreement expands the scope of the framework to incorporate more eligible cross-border transactions beyond trade and direct investment. Implementation can be gradual and is predicted to strengthen cross-border economic activity, increase the steadiness of regional financial markets and deepen domestic foreign exchange markets in all three countries.
The latest framework may also work synergistically with cross-border payments efforts to facilitate domestic currency settlements in a more accessible and efficient way. the three countries also plan to make use of national currencies in transactions in financial assets, including government bonds and stocks.
The implementation of the initiatives under this MoU is one other step for Malaysia, Indonesia and Thailand to scale back their dependence and exposure to the US dollar because the dominant currency in financial transactions.
