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Mumbai, The <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword> and Bank <keyword id="19909773" type="General" weightage="20" keywordseo="indonesia" source="keywords">Indonesia</keyword> (BI) on Thursday signed a Memorandum of Understanding to promote use of local currencies for bilateral transactions. The MoU was signed here for establishing a framework to promote the use of local currencies viz., the <keyword id="20045514" type="General" weightage="20" keywordseo="indian-rupee" source="keywords">Indian Rupee</keyword> (INR) and the Indonesian Rupiah (IDR) for cross-border transactions, <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> said in a statement. <br /><br /> This framework would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of an INR-IDR foreign exchange market. <br /><br /> "Use of local currencies would optimise costs and settlement time for transactions," RBI said. <br /><br /> The MoU was signed by RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword> and Bank Indonesia Governor <keyword id="20862647" type="General" weightage="20" keywordseo="perry-warjiyo" source="keywords">Perry Warjiyo</keyword>. <br /><br /> "The MoU on establishing a framework for cooperation in the area of cross-border transactions in local currencies between <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword> and Indonesia, aims to promote the use of INR and IDR bilaterally," RBI said. <br /><br /> The central bank further said the collaboration marks a key milestone in strengthening bilateral cooperation between RBI and BI. <br /><br /> Use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Indonesia as well as deepen financial integration and strengthen the long historical, cultural and economic relations between India and Indonesia, it added.

RBI, Bank Indonesia sign pact to promote use of local currencies for bilateral trade

<ul class="summary-list"><li>Indonesia appears to be the latest country to jump on the de-dollarization bandwagon. </li><li>The island nation has launched a National Task Force to promote local-currency transactions. </li></ul><p>The international campaign against the dollar's dominance of global trade and investment flows is pulling more countries in - Indonesia is the latest to join the movement.</p><p>The island nation has announced it's formed a National Task Force to widen the use of local currency transactions (LCT) with partner countries, <a href="https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_2524523.aspx" target="_blank" rel="noopener">according to Indonesia's central bank</a>. </p><p>"Bank Indonesia is confident that the National LCT Task Force will be an effective coordination forum to strengthen policy synergy between government ministries and agencies in an effort to increase the use of local currencies in bilateral transactions between Indonesia and major trading partners," Governor of Bank Indonesia, Perry Warjiyo said in a press release.</p><p>The move will also help promote efforts to increase the stability of the rupiah, and enhance the resilience of domestic financial markets, the central bank said.</p><p>"LCT implementation is expected to contribute to export-import activities, investment, and cross-border payment transactions, including cross-border QRIS, as well as facilitate securities trading moving forward," it added. </p><p>Indonesia's move is the latest among a series of actions by nations from China to Russia and India to to move away from the dollar in global transactions, a movement that's come to be called de-dollarization. Beijing and New Delhi have initiated trade arrangements to be settled in their respective currencies, while the BRICS bloc has been looking at the possibility of a shared tender.</p><p>De-dollarization is an "irreversible process" that's gaining momentum, Russian president Vladimir Putin said in a video address at the BRICS summit last month.</p><p>While some experts perceive de-dollarization efforts as a threat to the greenback, others have dismissed the movement as a nothingburger. </p><p>Most recently, <a href="https://markets.businessinsider.com/news/currencies/dedollarization-former-finance-minister-zimbabwe-economic-disaster-dollar-africa-brics-2023-9">Zimbabwe</a> expressed interest in joining a bank founded by the BRICS group of emerging nations – sparking chatter it wants to de-dollarize. But that could result in an economic "disaster," the country's former finance minister said.</p>

The de-dollarization drive is spreading wider - Indonesia is the latest nation to join the anti-buck movement

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Oli Scarff/Getty Images</span></p></div><p></p></div></div></p><ul class="summary-list"><li>After suffering months of capital outflows, policy makers from emerging markets attending IMF-World Bank meetings in Indonesia had a message for leading economies: current monetary and trade policies risk undermining us all.    </li><li>The International Monetary Fund-World Bank meetings wrapping up on Sunday gave central bankers and finance ministers from around the world a chance to meet face-to-face in Indonesia.</li><li>Poorer and populous emerging markets have been particularly vulnerable to the escalating U.S.-Sino tariff war and rate rises by the U.S. central bank.</li></ul><p>NUSA DUA, Indonesia (Reuters) - After suffering months of capital outflows, policy makers from emerging markets attending IMF-World Bank meetings in Indonesia had a message for leading economies: current monetary and trade policies risk undermining us all.    </p><p>The International Monetary Fund-World Bank meetings wrapping up on Sunday gave central bankers and finance ministers from around the world a chance to meet face-to-face in Indonesia, whose rupiah currency hit a new 20-year low this week.</p><p>Poorer and populous emerging markets have been particularly vulnerable to the escalating U.S.-Sino tariff war and rate rises by the U.S. central bank. Investors dumped assets seen as riskier, sparking painful currency plunges that have punished countries from India to recession-hit South Africa, as well as triggering crises in Turkey and Argentina.</p><p>"We are all aware that the normalization of the monetary policy in the U.S., combined with their fiscal policy and trade policy ... are all creating a systemic impact to the whole economy in the world," Indonesian Finance Minister Sri Mulyani Indrawati said in an interview during the meetings in Bali.</p><p>The Federal Reserve's nearly three-year-old tightening cycle has in part prompted a global shift in capital away from emerging markets and after three hikes this year, it foresees another December rise, three more next year, and one in 2020.</p><p>A senior Fed official in Bali said the rate rises were right for domestic policy and ensuring they were gradual and predictable was "the best solution" for minimizing unintended volatility in emerging markets.</p><p>In a bid to support the rupiah, Bank Indonesia has raised rates five times since mid-May and intervened regularly, but still the currency has lost nearly 11 percent this year, leaving it at the weakest levels since the 1998 Asian financial crisis.</p><p>Bank Indonesia Governor Perry Warjiyo said that the 150 basis point rate hikes since mid-May aimed to keep Indonesian assets attractive enough for foreigners to stay invested, but calibrating this in the current environment was hard.</p><p>"The risk premia are very difficult to incorporate because risk premia are responding to geopolitical, responding to trade tension," Warjiyo told a panel in Bali.</p><h2>"Spillover" risks    </h2><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>AP Photo/Jorge Saenz</span></p><p class="caption">Locals walk by an exchange office in Buenos Aires, Argentina, Friday, June 29, 2018. According to officials the Argentine Peso devaluated more than 50% to the dollar during 2018.</p></div><p></p></div></div></p><p>Finance ministers for developing nations in the Group of 24 economies urged major economies to reform the global trading system, rather than discard it.</p><p>The G24 statement, issued on the sidelines of the Bali meetings, said all emerging markets were "adversely affected" by excessive capital flow volatility.</p><p>While many countries shared common fears, Indrawati said it was difficult to forge cooperation to counter the risks.</p><p>"It's not really clear how the world is going to coordinate more effectively, especially when each country has their own domestic issues," she said.</p><p>The Philippine peso has shed nearly 8 percent this year and its deputy central bank governor, Diwa Guinigundo, said the IMF and other global institutions should advise advanced economies on the potential negative consequences of their moves.</p><p>"It's the spillovers that we are concerned with ... the spillover could have effects from one market to the other, from the financial market to the real market," said Guinigundo.</p><p>He said while it was good for policymakers to be ahead of the curve in tightening, they should take account of the growing clout of emerging markets. "It should also be emphasized that ASEAN+3 (China, Japan, Korea), we account for a good bulk of the world's population and GDP."</p><h2>"Either all are winners or all are losers"</h2><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Business Insider</span></p></div><p></p></div></div></p><p>IMF Managing Director Christine Lagarde urged members at the meeting to "de-escalate" trade tensions and work on fixing global trade rules. She also warned against adding currency to the trade conflict, saying this would hurt global growth as well as "innocent bystander" nations, including emerging markets that supply commodities to China.</p><p>Egyptian Finance Minister Mohamed Maait said policy makers in developed countries should understand that if their actions hurt other countries it would have knock-on effects.</p><p>"You need me. I am a market for you, I am an opportunity for you," Maait told Reuters. "I don't believe there will be a winner and a loser. Either all are winners or all are losers."</p><p>Indeed, market ructions have now cascaded through to developed markets with Wall Street seeing a six session slide until a rebound on Friday, amid fears over the trade war between China and the United States.</p><p>However, other than having effective monetary policies, developing markets can do little to cope with the impact of rate hikes and trade battles, said Jacob Frenkel, chairman of JPMorgan Chase International.</p><p>"When elephants fight, the grass suffers."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/what-caffeine-does-body-brain-2017-3">Here's what caffeine does to your body and brain</a></h3>        <div>                    </div>    </div>

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RBI, Bank Indonesia sign pact to promote use of local currencies for bilateral trade

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The de-dollarization drive is spreading wider - Indonesia is the latest nation to join the anti-buck movement

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