On Friday (8/25), Indonesia, Malaysia and Thailand had an agreement on the promotion of the use of national currencies in transactions between the countries. Bank Indonesia (BI), Bank Negara Malaysia (BNM) and Bank of Thailand (BOT) released a joint statement saying that three memoranda of understanding (MoUs) have been signed. These agreements will establish cooperation to promote local currency transactions among the three countries.
The expansion of this cooperation is part of Indonesia's priorities during its ASEAN chairmanship in 2023, which includes the integration of economic sectors in ASEAN member states. The move is in line with Indonesia's momentum in signing the cooperation during the 10th ASEAN Finance Ministers and Central Bank Governors Meeting in Jakarta.
This agreement replaces the previous agreements on the local currency settlement framework signed by the three central banks on August 27, 2015 and December 23, 2016.
The new agreement expands the scope of the framework to include more eligible cross-border transactions, beyond trade and direct investment. Implementation will be gradual and is expected to strengthen cross-border economic activity, enhance regional financial market stability, and deepen domestic currency markets in all three countries.
The new framework will also work synergistically with cross-border payments efforts to facilitate national currency settlements in a more accessible and efficient manner. the three countries also plan to use national currencies in financial asset transactions, including government bonds and equities.
The implementation of initiatives under this MoU is a further step by Malaysia, Indonesia and Thailand to reduce their dependence and exposure to the US dollar as the dominant currency in financial transactions.