The Central Bank of the UAE (CBUAE) and the Bank of Korea (BOK) have renewed the Bilateral Local Currency Swap Agreement, as part of efforts to strengthen bilateral trade and financial cooperation.
According to the statement, the agreement was signed by HE Khaled Mohamed Balama, Governor of the CBUAE, and Mr. Juyeol Lee, Governor of BOK.
The renewed agreement will come into effect from April 13, 2022, with the possibility of further extension by mutual consent.
As per the reports, bilateral currency swap agreements are made to minimize the cost of borrowing in a foreign currency and to protect against exchange rate risk. Further, it helps central banks to diversify their foreign exchange reserves which brings stability to local currency.
The BOK said in a statement that, “Under the five-year deal, the two countries can exchange 6.1 trillion won ($4.96 billion) for 20 billion dirhams ($5.4 billion) or vice versa to help secure funds to settle payments linked to their trade and brace for volatility in financial markets.”
Mr. Balama stated that the agreement with the Bank of Korea contributes significantly to the development of economic and financial markets in both countries.
The CBUAE Governor further added that “the renewed agreement reflects the desire to enhance our bilateral cooperation on financial matters, particularly on trade and investment, and to strengthen financial stability.”
The UAE is one of South Korea’s major trading partners in the Middle East. South Korea buys about 6 percent of its crude oil imports from the country, as per the reports.
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