Government Assesses Impact of Massive Use of LCT in ASEAN

Armfalcon.com, JAKARTA — The government through the Ministry of Finance and Bank Indonesia is currently studying the impact of massive use of local currency or Local Currency Transaction (LCT) in ASEAN trade. This was stated by the Head of the Center for Regional and Bilateral Policy of the Fiscal Policy Agency (BKF) of the Ministry of Finance, Nella Sri Hendriyetty.

“We are also analyzing what fiscal policies can support the implementation of this Local Currency Transaction (LCT) so that it can boost trade volume in ASEAN,” Nella said in a virtual webinar in Jakarta, Wednesday (3/5/2023) .

Indonesia, as Chair of ASEAN 2023, encourages cooperation in the use of local currency in bilateral or LCT trade transactions. It is hoped that the use of the local currencies of ASEAN countries will strengthen the stability of the currencies of each member country and reduce dependence on the United States (US) dollar.

This step is an anticipatory strategy to maintain economic stability and ASEAN neutrality in the midst of global economic challenges and conflicts that continue to occur in the world.

In addition, it is hoped that the use of local currencies will also create diversity in the composition of foreign exchange reserves and provide additional protection to ASEAN member countries against the risk of currency volatility and increase the region’s economic strength.

In order to achieve this goal, continued Nella, ASEAN will form a task force to formulate a transition process for the use of ASEAN countries’ local currencies in intra-ASEAN financial transactions.

Even so, the use of the US dollar in providing foreign exchange reserves in Indonesia and several other ASEAN member countries is currently still very dominant. This means that ASEAN needs to work together to create a strategy to gradually reduce dependence on the US dollar.

“However, it is impossible for ASEAN member countries to suddenly abandon the US dollar in trade transactions outside ASEAN. This will trigger the anger of the superpower country and have the potential to cause geopolitical problems,” said Nella.

source: between