Bank Indonesia (BI) announced that they are finalizing a cooperation agreement on the use of local currency transactions or Local Currency Settlement (LCS), including cross-border payments with South Korea and India. With the use of the LCS, trade, investment and other transactions between Indonesia and cooperating countries can directly use the currencies of each country, no longer using the United States (US) dollar.
BI Deputy Governor Dody Budi Waluyo explained that he would continue to expand the use of LCS, both for trade, investment and cross border payments with many countries in the world. In the near future, Bank Indonesia will cooperate with the monetary authorities of South Korea and India, including cooperation on cross border payments.
Cross border payment is a financial transaction that allows the payer and recipient to be in different countries. This system also makes it easier for tourists to make transactions because there is no need to exchange physical money into the local currency. For your information, BI has also entered into cooperation agreements to “leave” the dollar with five other countries, namely China, Australia, Singapore, Malaysia and Japan.
Dody explained that as of February 2023 Indonesia’s trade value from LCS transactions had reached USD 1.2 billion or 4% of trade transactions. As for between Indonesia and Thailand, trade transactions using LCS have reached USD 600 million or 3% of the total value of trade transactions. The largest non dollars in Indonesia’s international trade transactions are with China and Japan, which are already close to USD 2 billion.