JAKARTA – Diversification of the use of local currencies in international transactions or local currency settlement (LCS) brings a number of positive impacts. This strategy is very useful to avoid the pressure caused by relying too much on certain currencies in foreign economic activities.
As stated by the Minister of Finance (Menkeu) Sri Mulyani when giving her first speech in a series of G20 meetings.
"For Indonesia, the initiative with several bilateral partner countries, such as Malaysia, Thailand, Japan, and China in using more diverse currencies or using the LCS is an important step to increase direct transactions and also facilitate increased trade and investment," Sri Mulyani said through G20 virtual channel Wednesday, February 16.
The Minister of Finance emphasized that the implementation of the LCS was to reduce dependence on a certain currency, especially the US dollar. By doing so, this will increase the stability of trade and investment, including for Indonesia and countries in ASEAN.
According to the Minister of Finance, the LCS scheme is very likely to reduce transaction costs.
"Traders and investors no longer need to exchange their currency into US dollars which has the potential to cause pressure on the value of certain currencies," she said.
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Furthermore, the Minister of Finance expressed his appreciation to the central bank which is at the forefront in implementing this diversification of transaction tools.
“I appreciate Bank Indonesia's efforts to use LCS since 2018 and now it has expanded to become a global agenda. What we do can create a safety net for financial transactions between countries and reduce the level of risk vulnerability to the global economy and become more stable," she explained.
In fact, the former boss of the IMF and World Bank revealed that the benefits generated through the LCS scheme are very relevant to the spirit of the G20 promoted by Indonesia, namely Recover Together Recover Stronger.
“The SCS is very relevant to the priority agenda of the G20 Presidency of Indonesia. In the finance track, we seek exit strategies to support recovery with a more diversified currency, which we hope can support macroeconomic stability and a stronger recovery process, not only for several countries but also globally," concluded Minister of Finance Sri Mulyani.
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