De-dollarization gains momentum, Indonesia joins the movement.

 

"Will this have an impact on ASEAN members?"




The global campaign aimed at reducing the dominance of the U.S. dollar in international trade and investments continues to attract more countries. Indonesia has recently joined this movement, as confirmed by Indonesia's central bank. 


The nation has established a National Task Force with the objective of expanding the use of its local currency in transactions with partner countries. According to Perry Warjiyo, the Governor of Bank Indonesia, "Bank Indonesia is confident that the National LCT Task Force will serve as an effective coordination platform to enhance policy alignment among government ministries and agencies, with the goal of increasing the utilization of local currencies in bilateral transactions between Indonesia and its major trading partners."


This initiative is expected to contribute to the stability of the rupiah and strengthen the resilience of the domestic financial markets, as highlighted by the central bank.



The implementation of Local Currency Transactions (LCT) is expected to have a positive impact on various aspects, including export-import activities, investments, cross-border payment transactions (including cross-border QRIS), and the facilitation of securities trading in the future, according to the statement.


Indonesia's recent move aligns with a broader trend where nations, from China to Russia and India, are gradually reducing their reliance on the U.S. dollar in global transactions. This trend, commonly referred to as "de-dollarization," has seen Beijing and New Delhi establish trade arrangements settled in their respective currencies, while the BRICS bloc has explored the possibility of a shared currency.


Russian President Vladimir Putin emphasized that de-dollarization is an "irreversible process" gaining momentum in a recent video address at the BRICS summit.


While some experts view de-dollarization efforts as a potential challenge to the dominance of the U.S. dollar, others consider it a less significant development.



Recently, Zimbabwe has indicated its interest in becoming a member of a bank established by the BRICS group of emerging nations, leading to speculation that it aims to reduce its reliance on the U.S. dollar. However, the country's former finance minister cautioned that such a move could potentially lead to an economic crisis.



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