JAKARTA - Finance Minister Purbaya Yudhi Sadewa said the use of direct transactions in yuan and rupiah can reduce Indonesia's dependence on the US dollar. The strategy is also considered to help maintain the rupiah exchange rate.
The government will use the Local Currency Transaction or LCT scheme in transactions with China. Through this scheme, payments are made using the respective currencies of each country without first being converted into US dollars.
"They pay yuan, I receive rupiah here, interbank and interbank central," said Purbaya at the Presidential Palace Complex, Jakarta, Thursday, July 23.
According to Purbaya, the use of the renminbi is important because China's financial market has a large absorption capacity. The government is also preparing to issue Panda Bonds in this currency.
Purbaya said diversifying funding to China, Japan, and Australia would reduce the government's dependence on dollar-denominated financing.
He also mentioned the bilateral currency exchange agreement or Bilateral Swap Agreement between the Indonesian and Chinese central banks worth around 50 billion US dollars.
"De facto it seems that our reserves have increased by 50 billion dollars," he said.
Purbaya said the instrument could be used to reduce the need for dollars in transactions between the two countries.
When asked about the impact on the exchange rate, he estimated that the rupiah tends to strengthen because the demand pressure on the dollar has decreased.
"The rupiah will tend to strengthen due to pressure from the dollar," he said.
He emphasized that the strategy is part of an effort to maximize the available instruments to maintain the exchange rate. The implementation of local currency transactions is carried out by Bank Indonesia, while the Ministry of Finance utilizes it in financing policies.
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