Seychelles and UAE sign agreements for creating framework to use local currencies in settling cross-border transactions

Governor Khaled Mohamed Balama of the Central Bank of the UAE and Governor Caroline Abel of the Central Bank of Seychelles exchanging the MOU. (CEntral Bank of the UAE)

The Central Bank of Seychelles (CBS) and the Central Bank of the United Arab Emirates (CBUAE) recently signed two memorandums of understanding (MOU) to enhance the use of local currencies in settling cross-border financial, commercial transactions, interlinking payment and messaging systems between the two countries.

According to a joint press communique from the CBS and CBUAE, the MOUs were signed in Abu Dhabi, on July 18, by the governor of the CBS, Caroline Abel, and for the CBUAE, by governor Khaled Mohamed Balama.

Through the first MOU, a framework will be set up to promote the use of local currencies in settling bilateral commercial transactions, develop the exchange market and facilitate bilateral trade and direct investment, remittance settlement, and financial market development.

It will also include several elements to facilitate the settlement of commercial transactions in the UAE Dirham and the Seychelles Rupee in accordance with the laws and legislation in each country.

Under the second MOU, both parties will consolidate cooperation and mutual benefit from the services of instant payment platforms, electronic switches and messaging systems, by directly linking them with the regulatory requirements in the two countries.

This includes interlinking the Instant Payments Platform (IPP), which the Central Bank of the UAE is developing within the Financial Infrastructure Transformation Programme, and a similar platform in Seychelles. Additionally, interlinking between systems and electronic switches to facilitate mutual acceptance of local cards and processing of their transactions, to exploring the possibility of linking messaging systems and cooperation in the field of FinTech and Central Bank Digital Currencies.

The governor of the CBS said that for small open island economies like Seychelles, the importance of an effective and efficient financial system to facilitate trade cannot be overemphasised.

"In this regard, the MOUs just signed between our two central banks, guided by the relevant and applicable laws to safeguard the soundness and integrity of our respective financial systems, can assist this endeavour. The agreement to develop and gradually implement the necessary framework to promote the use of our respective national currencies, the UAE Dirham and the Seychelles Rupee, in cross-border transactions can further facilitate trade relations between stakeholders across the two jurisdictions," she added.

Abel said with CBS spearheading efforts to modernise and develop the Seychelles national payment system, in line with the government's digital economy agenda, the opportunity to collaborate on interlinking its payment and messaging systems will facilitate the processing and settlement of cross-border financial transactions between the two countries.

"We look forward to learning from the experiences and expertise of the Central Bank of the UAE as we endeavour to keep pace with developments within the global payment landscape and further leverage technology and innovation for more seamless processing and settlement of payments, including cross-border payments," she added.

Meanwhile, Balama said, "The signing of the Memorandums of Understanding reflects the Central Bank's keenness to expand its relations with regional and international counterparts, to enhance UAE's economic and commercial partnerships globally."

He added that: "The use of the two countries' currencies for cross-border financial and commercial transactions reflects the growing trade, investment, and financial cooperation and contributes to reducing costs and saving time in settling transactions. This helps in developing the foreign exchange market in the UAE Dirham and the Seychellois Rupee, to enhancing trade exchanges, investments, and remittance between the two countries."