JAKARTA – The central banks of Indonesia and the United Arab Emirates (UAE) recently signed an agreement to link their respective payment systems.
The newly signed memorandum of understanding (MoU) was one of the partnerships President Joko “Jokowi” Widodo brought back from his official visit to Abu Dhabi, where he met with UAE President Mohammed bin Zayed Al Nahyan (MBZ).
Bank Indonesia said the memorandum aims to align the two countries’ payment systems to make them faster, more efficient, transparent and affordable.
The central bank said the agreement will establish joint mechanisms for sound risk management, promote regulatory cooperation, etc. It also aims to protect the rights and interests of users while complying with existing regulations in each country.
The Central Bank of the UAE (CBUAE) said the partnership is part of the country’s efforts to become a global financial technology and cross-border payments hub.
“Through this cooperation, there is a promising possibility of conducting cross-border payments between the two countries under the local currency exchange framework, which is scheduled to become operational in 2024,” Bank Indonesia Governor Perry Warjiyo said in a press statement.
The memorandum follows an agreement signed last year to promote enhanced cooperation and information exchange on issues such as payment systems.
In May, Indonesia and the UAE signed a memorandum of understanding on local currency transactions in the wake of expanding non-oil trade. The memorandum defines a framework through which importers and exporters can transact in local currencies such as the Indonesian rupiah and the UAE dirham, potentially reducing the two countries’ reliance on the U.S. dollar.
According to government data, trade between Indonesia and the UAE reached $5 billion in 2023. Bilateral trade reached $1.9 billion in the first five months of 2024.
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