JAKARTA, Jan. 30 (Xinhua) -- Indonesia's Central Bank is strengthening the promotion of the use of local currency transactions (LCT) with its major trading partners as part of its commitment to be less dependent on U.S. dollars.
Bank Indonesia Governor Perry Warjiyo said Tuesday that the authority would expand the utilization of LCT policy to India and Saudi Arabia, after China and South Korea.
"We will keep expanding the use of local currencies. With the LCT mechanism, Indonesia's macro stability will continue to be strongly maintained, because one of the fundamental factors, namely the stability of the rupiah exchange rate, can be more stable as it does not depend on the supply of dollars. This will also support trade and exchange rate stability in the region," Warjiyo said in a press conference in Jakarta.
LCT is a cross-border payment scheme where bilateral trade and investment transactions between countries in Southeast Asia no longer require dollars as the sole payment system, but instead to use the local currency of each country in the region.
So far, six Southeast Asian countries -- Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam --have agreed to pay transactions using local currencies. Brunei, Cambodia and Laos are reported to join soon.
The utilization of local currency in transactions and payment systems in the region became one of the priority issues raised during the 2023 Association of Southeast Asian Nations (ASEAN) Summit last May under Indonesia's chairmanship.
It is considered that the de-dollarization will reduce global risks to ASEAN countries as well as accelerate the transformation of the digital economy and develop a stable financial sector in the region.
Bank Indonesia recorded a sharp growth trend of LCT throughout last year. As of December 2023, the value of LCT transactions had reached 5.9 billion U.S. dollars, which increased by 55.2 percent from December 2022. ■
