ASIATODAY.ID, JAKARTA — Indonesia is accelerating efforts to reduce its reliance on the U.S. dollar in cross-border trade and investment, with the central bank pursuing local currency settlement agreements with India, South Korea, the United Arab Emirates and Saudi Arabia after reporting strong growth in transactions with China.
Bank Indonesia (BI) said interest in local currency transactions (LCT) has surged following recent agreements with the People’s Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA), reflecting a broader trend among emerging economies seeking alternatives to dollar-based settlements.
“Several countries have shown significant interest after our agreements with China and Hong Kong,” Senior Deputy Governor Destry Damayanti said during an Economic Update 2026 forum on June 25.
India is among the most advanced candidates, with negotiations already underway toward a formal agreement. South Korea is also being actively pursued, while discussions with the United Arab Emirates and Saudi Arabia remain in progress, she said.
The expansion comes as countries across Asia and the Middle East explore ways to diversify payment systems and reduce exposure to currency volatility linked to the dollar.
According to Bank Indonesia, local currency transactions between Indonesia and China reached approximately US$9 billion in May alone. Total transactions from January to May climbed to US$22 billion, equivalent to around IDR392 trillion (US$22 billion).
Governor Perry Warjiyo said direct settlements in Indonesian rupiah and Chinese yuan have reduced the need to use the U.S. dollar as an intermediary currency in bilateral trade and investment.
“We will continue strengthening currency diversification while encouraging banks and businesses in both countries to expand the use of rupiah and renminbi,” Perry said.
Indonesia has emerged as one of Southeast Asia’s most active proponents of local currency settlement frameworks, viewing them as a tool to lower transaction costs, reduce exchange-rate risks and strengthen financial resilience.
If agreements with India, South Korea, the UAE and Saudi Arabia are finalized, Indonesia’s local currency network would extend across some of Asia’s largest economies and key Middle Eastern trading partners, further advancing its strategy to lessen dependence on the dollar-dominated global financial system. (AT Network)
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