Taking advantage of Indonesia’s Chairmanship, BI Invites ASEAN Countries to Use Local Currency

Bank Indonesia is bringing a special agenda in taking advantage of the 2023 ASEAN Chair. One of them is by inviting ASEAN countries to use local currency in transactions or local currency transactions (LCT) during Indonesia’s 2023 ASEAN Chair. So that each ASEAN country does not need to convert to dollars United States in bilateral trade.

Executive Director of the International Department of Bank Indonesia, Rudy Brando Hutabarat, said that the use of LCT was one of the three priority agendas brought by Bank Indonesia at the ASEAN Finance Ministers and Central Bank Governors Meeting (AFMGM) which was held some time ago.

Two other priority agendas are encouraging the policy mix for monetary matters, and the use of payment system connectivity between ASEAN countries, such as QRIS.

Rudy believes that the use of LCT will reduce dependence on the US dollar. So that it will reduce the cost of bilateral transactions between regional countries.

“Because of the use of LCT, transactions are now more efficient. So from transactions not only current transactions, for example with Malaysia, they don’t first convert to US dollars and then ringgit, but they can immediately convert to rupiah,” he explained.

So, he added, cost efficiency would also help raise the productivity of Asean countries. As a result, economic growth in each country will also be boosted.

“And, this makes transactions efficient. If transactions are efficient then productivity will increase. If productivity will increase, then of course the economic growth of regional countries will increase,” he added.

Thus, added Rudy, the use of LCT will diversify currencies in transactions. As a result, the price of a product will be more resilient in the face of fluctuations in the currency exchange rate against the US dollar. “So as we know, if diversification is carried out, the risk will decrease,” concluded Rudy.