Bank Indonesia and Government Encourage the Use of Local Currency
KONTAN.CO.ID - JAKARTA. The strengthening of the national economy requires the support of macroeconomic stability, especially from the aspect of foreign trade and investment.
Coordinating Minister for Economic Affairs Airlangga Hartarto stated, that as an effort to strengthen this macro stability, one of them is the use of local currency in transactions between Indonesia and partner countries or local currency transaction (LCT) which has great potential.
“The use of local currency in transactions between Indonesia and partner countries is very relevant for us to encourage at this time. Maintaining exchange rate stability is crucial to support the strengthening of the national economy,” said Airlangga in his written statement, Tuesday (5/9).
Meanwhile, Indonesia has formed a National Task Force (Satgas) to encourage the increased use of local currency in transactions between Indonesia and partner countries (Local Currency Transaction /LCT). The formation of this task force involves 10 institutions and ministries (K/L).
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Airlangga stated the memorandum of understanding that was signed marks the importance of strengthening cooperation and coordination across ministries/institutions (K/L) domestically to increase the use or utilization of the LCT scheme.
He said, the agreement by 10 K/L leaders, also witnessed by President Joko Widodo, is a manifestation of good governance and a commitment, cooperation, and synergy among K/L leaders and all stakeholders to promote the use of LCT.
The LCT scheme, previously known as Local Currency Settlement (LCS), is a transaction settlement carried out bilaterally by each business actor using their local currency.
In line with the needs and development of the use of local currency in transactions between Indonesia and partner countries, the LCS framework is being developed into LCT.
The transaction value and number of LCT actors continue to grow positively whereas from January to April 2023 it reached US$ 2.1 billion. Meanwhile, transactions in 2022 reached US$ 4.1 billion, or 5 times larger than the total transactions in 2020 of US$ 797 million. The number of LCT actors also increased significantly from 101 customers in 2018 to as many as 2,064 customers as of April 2023.
The momentum of signing the memorandum of understanding in the series of ASEAN Summit is in line with Indonesia's Chairmanship in ASEAN 2023. The LCT scheme is also a priority agenda of Indonesia's Chairmanship in ASEAN 2023.
The establishment of the ASEAN Task Force LCT and ASEAN Framework LCT is one of the Priority Economic Deliverables (PED) in the ASEAN 2023 Chairmanship, especially in the recovery and rebuilding pillar.
In addition, the memorandum of understanding becomes the legal basis for the establishment of the National LCT Task Force as a manifestation of national collaboration to promote the use of LCT.
The National LCT Task Force has a role in coordinating and formulating recommendations, and/or policy synergy to increase the use of LCT in direct trade and investment transactions, banking and financial market transactions, and payment transactions between Indonesia and partner countries.
“The establishment of the National LCT Task Force, hopefully, will accelerate the utilization of LCT. And it can also increase our collective awareness and readiness towards the use of LCT especially for business actors and benefit the strengthening of the national economy,” said Airlangga.
The signing of the memorandum of understanding was carried out by the Coordinating Minister for Economic Affairs along with the Coordinating Minister for Maritime Affairs and Investment, Minister of Finance, Minister of Foreign Affairs, Minister of State-Owned Enterprises, Minister of Industry, Minister of Trade, Governor of Bank Indonesia, Chairman of the OJK Board of Commissioners, and Chairman of the LPS Board of Commissioners.
