BI intensifies the use of local currencies in trading to maintain rupiah stability

Tribunnews.com reporter, Seno Tri Sulistiyono

TRIBUNNEWS.COM, JAKARTA – Bank Indonesia (BI) is intensifying the use of local currency or Local Currency Settlement (LCS) in bilateral trade, especially in the ASEAN region.

This move is designed to ease pressure on the rupiah against the US dollar.

The executive director of the head of the international division of Bank Indonesia, Doddy Zulverdi, said that bilateral transactions in local currencies are not a must for economic operators.

However, Doddy said the government is providing incentives for economic actors who implement LCS, which it is hoped economic actors will be more interested in using the local currency in every trade.

“We’re also trying to work with the government. We have an agreement, the government is currently working on a study to incentivize economic actors to use this LCS,” said Doddy during a discussion titled Impact of Expanded Local Currency Settlement Implementation. What is the fate of the rupiah ?, Thursday (23.09.2021)

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According to him, BI will continue to expand LCS transaction cooperation with other countries, particularly Indonesia’s trading partners.

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It should be noted that currently four countries have implemented LCS with Indonesia, namely the central banks of Japan, Malaysia and Thailand, most recently Bank Indonesia in cooperation with the Chinese Central Bank or the People’s Bank of China (PBoC).

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“There are still many of our main partners, in East Asia there is Taiwan, South Asia is India, in the Middle East there is Saudi Arabia, Southeast Asia there is still the Philippines, and Australia too, which is still in our region. We will still have the region don’t leave, ”he explained.

On the same occasion, Mukhamad Misbakhun, Member of Commission XI of the House of Representatives, stated that the introduction of the LCS would not only ease pressure on the rupiah’s exchange rate against the US dollar, but also strengthen the Indonesian economy.

“This will also have an impact on our trade, our trade flows in ASEAN will be stronger, the costs will be lower. What BI is doing in expanding the LCS should be seen as a positive signal, ”he said.

Misbakhun stated that the steps taken by Bank Indonesia were also in line with the coordination between Bank Indonesia Supervision Agency (BSBI), which is the DPR’s representative in overseeing the independent body.

The openness of the supervisory authority in coordinating and discussing with the FREP has given rise to various policies that are seen as suitable for overcoming economic problems.

“Once we know the BI guidelines and provide input, BSBI will make this material available for future Bank Indonesia guidelines,” he said.

“In my opinion, the regulator offers ideal and appropriate benefits from the academic, political and macroeconomic sides,” Misbakhun continued.